How to create a company purchasing process
“In your personal life everything was user friendly and easy, until you got to work where everything was complicated and hard, that had to change.”
-Aman Mann, CEO Procurify
At Procurify, we’ve been on a 4 year long mission to understand and build a better spend culture for organizations of all sizes. Our goal: to help companies understand the best purchasing practices that fit their organization’s unique needs.
After talking with hundreds of companies around the world, we realized that organizations have the same general problems when it comes to their purchasing process. While there is no one process to fit all situations, we’ve found that most pain paints revolve around the same common issues.
The biggest challenge with managing a company is setting up the right processes that keep operations running smoothly. We’ll explain the things we’ve learnt about improving spend culture over the years including some shared research based on the numerous companies we’ve spoken to, what led us to build a solution in the first place, and a few things you should consider when you’re starting to look for a better way to manage your spend culture.
What are common challenges with the purchasing process?
1. Companies have no Purchasing Process
When companies are small or starting out they generally just push the role of managing the spend culture onto the owner or department heads of the company, accountant/bookkeeper or just randomly figure out where spending went later on. While this might seem more efficient, it actually causes quite a few problems.
Not having a purchasing process causes a lot of confusion to where money is going and more importantly why it was spent in the first place. Organizations with a mismanaged spend culture inadvertently create unnecessary bottlenecks or have difficulties reining in costs and getting finances in line. The people who try to manage company purchasing without a system in place end up with a lack of focus as they work on getting through non-value added tasks such as procuring goods or services, paying invoices, managing reimbursements or trying to figure out budget situations.
2. Companies have a Manual Process
A lot of organizations, especially companies that have grown beyond a small business, realize they have to create some sort of system to manage company spending and usually end up with ad hoc solutions. Handling purchases or expenses usually involves an email to a department head or owner, a phone call, or an in person discussion to discuss goods or services. Usually organizational spend culture is a combination of different of communication methods managed on a spreadsheet.
Manual purchasing processes usually gets the job done until they don’t because they are prone to human error. Spending can easily slip through the cracks, double ordering commonly occurs, reimbursements are mismanaged, invoices are not paid properly, people don’t get what they need on time, or key stakeholders have no idea how much of their budget they’ve spent. The spreadsheet(s) to manage company spending usually takes on a life of its own as purchasing needs increase or the company grows in size.
3. Companies have a solution that is difficult to use
Solutions are meant to solve problems not cause more. A lot of solutions for companies are just not a good fit. Solutions designed for people is an important part of ensuring ideas are accepted within organizations. A lot of companies pick products based on features and are frustrated when their team fails to use the tools given to them.
Just like with any process, your spend culture should focus on the mission critical functions and evaluate solutions based on the core needs of your organization. A lot of companies we’ve talked to have been discouraged by unnecessary long implementation cycles, failed adoption of solutions, or just feature overload. What should be simple actions now require extensive training.
Why was Procurify created in the first place?
In your personal life everything is user friendly and easy, but when you get to work everything becomes complicated and hard.
A lot of software used at work wasn’t designed for people, but designed to meet feature checklists. People we talked to were fed up with how complicated their tools were and they hated certain products that were supposed to make tasks easier but just ended up causing more problems.
Thanks to the companies, and people behind them, that push the status quo there are better ways of getting things done. We wanted to take that same innovative spirit and bring a design first approach to an antiquated and often ignored part of business operations: the purchasing process.
Procurify started by studying the common problems associated with company purchasing and by working in collaboration with industry professionals, our clients, and a people focused design and development team we are constantly working to improve a solution for the end user. Even today, we won’t sell you process before we understand your organization’s business operations. We want to know how you’re already doing things and what you want to improve so we can empower your team with the best practices for your organization.
It all started with our first client: Asco Aerospace. In its early days, the company was primarily a subcontractor for aircraft construction titan Airbus. In the ensuing decades ASCO has grown into a renowned international company with locations in Germany, Canada and the Unites States and an impressive roster of clients that includes giants Bombardier, Boeing and Embraer.
Working with a world class organization to understand their process set a strong foundation for Procurify and we’re constantly learning as we talk and continue to help more organizations.
What should I look for when looking for a purchasing system?
Over the years we’ve spoken to hundreds of companies across different industries around the world, and while every company is different, we’ve found some common themes with the purchasing process.
One key takeaway: Successful solutions are usually not feature based.
Solutions are supposed to make someone’s job easier and purchasing solutions are no different. Most companies we’ve spoken to have had purchasing solutions that were way too complicated or were trying to get by on solutions that weren’t powerful enough to get the job done. To be successful with implementing a purchasing process you need to really understand your company’s spend culture (or have an idea of the type of Spend Culture you want to build) and find a solution that best serves the mission critical parts of your desired process.
Once you have an understanding of your company spend culture you can start to plan where you want to take it. You will need to think about the process changes you’re looking to put into effect and understand how those processes will fit in with your organization.
To help you understand the basic framework for what you’ll need to setup your organization’s purchasing process, I’ve outlined the 5 things you need to understand to really improve your company’s spend culture. The goal here is to gain a basic understanding of how your company is spending, so you can figure out the keys to implementing a solution that will actually be adopted by your company.
5 Questions you need to ask to understand your Spend Culture
- Who makes purchase requests? Everyone, Department Heads, Executives
- Who is responsible to approve company purchases? Sign off on Contracts, Expenses, Purchase Orders, etc.
- How do you want to setup your chain of approval? Different spending levels based on department and job function, Everyone can make purchases without approval, The boss has to approve everything.
- Who is going to handle purchasing? Centralized Purchasing, Everyone is responsible for making their own purchases, Responsibility of a designated person at each department
- How do you want to keep a record of your spending? Box of receipts, Leave it to the accountant, Electronic Filing System.