Procurement mistakes are part and parcel of growing a successful business. They serve as valuable lessons but they shouldn’t happen all the time. Failure to curb procurement mistakes early on can deplete your budget. Before you know it, you may find yourself out of business, and looking for a job.
Procurement mistakes are often hard to detect. Particularly when your company uses Excel spreadsheets and email to process purchase orders. You can simply avoid this drawback by using an efficient purchase order software product.
Procurement mistakes associated with Excel spreadsheets
Many people still regard Excel as the number one business tool. Nothing could be further from the truth! One disadvantage of using Excel is that it leaves room for human error. In addition, it involves a lot of data capturing. While on the surface it feels easy-to-use, Excel requires more manual dexterity than an easy-to-use purchase order software.
One major procurement mistake
One major procurement mistake could be allowing your employee(s) to fax through a purchase order without getting your approval. In other words, without you verifying the purchase requisition against a quotation. You may reason, “But there are times when approving requisitions instantly is justifiable.” As I’ll show, in the end, you always pay a heavy price for this procurement mistake!
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Other common procurement mistakes:
1. Making snap decisions
Sometimes when an urgent need for purchases arises, you may find yourself making a snappy decision. Let’s say your site manager alerts you about a shortage of building materials. Then you decide to approve a purchase requisition straight away.
You do this because you don’t want to delay the project. You say something like, “Go ahead and buy what’s needed but make sure you send me the quotation and invoice.” Such a snap procurement mistake is going to cost your company dearly.
The odds are that the supplier is likely to,
- Over deliver,
- Under deliver, or
- Overcharge you on the invoice.
Automating your purchasing process would help your company to avoid the above.
2. Accepting a given price as it is
Another procurement mistake you should look out for is accepting the price as it is. Remember that most suppliers are open to negotiations. You should put those negotiation skills to the test!
Doug Bend, Managing Partner at Bend Law Group (law firm) advises that you do this by finding an area of mutual gain between you and your supplier.
Bend advises, “Spend time to discover the supplier’s goals to increase the mutual gains achieved in the agreement.”
In other words, when you try to negotiate price but your supplier doesn’t budge, focus on other areas where you can find common ground. This could include areas such as times of payments, delivery dates, a discount for bulk purchasing, etc.
3.Approving POs without a quotation
A quotation is a confirmation from the supplier about the availability of needed goods. It is also known as a request for quotation (RFQ) or simply, a quote. An employee can request a quote during the early stages of processing purchase orders.
You can inform yourself more about the purchase order process from this blog.
Back to the quotation subject…
Generally, every quotation should have the following details:
- Total cost,
- Cost breakdown,
- Payment terms and conditions,
- Quote expiry date,
- Payment methods, etc.
One procurement mistake you avoid is approving a purchase requisition without a quotation. You may cite time constraints as a top reason why purchase orders are sent without checking quotations. Like when you give only a verbal agreement, hoping to sort out all the necessary paperwork later.
But if this is a norm in your company, you should consider doing something about it.
4.Not using a PO software
Perhaps the biggest procurement mistake of them all is not using a purchase order software. One of the advantages you’ll derive from using a purchase order software is that procurement mistakes caught early. This is because a software like Procurementexpress.com connects purchase order creators and approvers. Approvers would be able to pick up mistakes before the purchase order is sent to the supplier.
Other benefits worth mentioning include the ability to:
- approve purchase requisitions within 20 minutes,
- send a purchase order within 30 minutes, and
- track a purchase order with the supplier within 20 minutes.
In other words, your business would be able to cut processing times. And, what’s more, interesting is that you’d locate purchase order reports much faster. Who would have thought that avoiding procurement mistakes could be this insanely easy?
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