Procurement vs Purchasing: What’s the Difference?

Many people use the terms “procurement” and “purchasing” interchangeably. But despite their similarities, they play very different roles in business. One focuses on transactions — like placing orders and processing payments — while the other drives the strategic process of sourcing suppliers and negotiating terms.

In this guide, we’ll break down the differences between procurement and purchasing, clarify how each fits into the procure-to-pay cycle, and explain why the distinction matters. The challenge for most organizations isn’t just knowing the difference — it’s understanding how balanced they are between tactical purchasing and strategic procurement.

That’s why we developed the Procurement Maturity Assessment, to provide companies with a framework for assessing their current position and a roadmap for transitioning to a more strategic and efficient approach.

What is purchasing? The purchasing definition

In a business, purchasing is the act of acquiring a good or service, typically involving immediate day-to-day transactions between sellers and buyers. 

This often includes how a procurement manager goes about ordering and paying for goods and services. For example, by creating and fulfilling purchase orders and arranging payment for goods.

The purchasing  process involves:

• Submitting spend requests and routing them for approval
• Creating and issuing purchase orders
• Receiving and checking goods or services against the order
• Attaching packing slips or receipts for recordkeeping
• Passing completed purchases to the accounts payable team for payment

What is procurement? The procurement definition

Procurement, on the other hand, goes beyond individual transactions. It’s the process of strategically sourcing and purchasing the goods and services a company needs to meet its business objectives — often from third-party vendors or suppliers.

An effective procurement strategy can do many things. For instance, it can save a company money by negotiating favorable terms and pricing. It can also ensure supplier quality, efficiency, and timeliness.

Procurement managers often work under constraints — limited budgets, scarce resources, and the need to balance multiple priorities. Their responsibilities include:

• Sourcing activities and supplier evaluation
• Negotiation and vendor management
• Selecting goods and services that align with company goals
• Approving purchase requests across the organization
• Overseeing receipt and quality of goods and services

In short, purchasing is about executing transactions, while procurement is about making strategic decisions that shape the organization’s ability to grow and compete.

What’s the difference between procurement and purchasing?

Good question. Essentially, you perform both procurement and purchasing when a company needs to acquire goods and services. But these two functions have different focuses and different methods for achieving their respective end goals.

Here’s a handy table that explains the differences between procurement and purchasing:

Purchasing is typically more focused on the short-term and is more transactional. It involves tasks such as ordering, raising purchase orders, receiving, and arranging payment. Purchasers are often looking to get items for the best price rather than the best overall value.

Procurement is a more long-term, holistic approach to acquiring goods and services for the business. It involves tasks such as sourcing vendors, negotiating and closing contracts, and record keeping. Unlike purchasing, procurement considers the overall value of the transaction, not just the price. It’s focused on building mutually beneficial relationships with suppliers.

Total cost of ownership: an important consideration

Total cost of ownership (TCO) and value creation is an important concept in procurement.  TCO is the cost of the item plus the cost to operate it over its useful life. Instead of just looking at the price of an item, TCO factors in things like shipping, training, and maintenance. Procurement also considers other factors, such as risk mitigation, compliance, supplier relationships, and cost savings, when considering what vendors to buy from and do business with.

To summarize, purchasing focuses on short-term needs and cost minimization when purchasing goods and services and procurement focus on long-term value creation for the business.

Let’s take a closer look at the difference between procurement and purchasing and the roles that these two important functions play in business.

Steps in the procurement process

The procurement process involves much more than just handing over the company credit card and paying for a purchase. For example, an effective procurement strategy includes everything involved in the procuring process, from identifying which goods and services an organization requires for growth, through to maintaining the right documentation and records.

The 10 steps of procurement

1. Identify the goods and services your organization needs

Determine which goods and services your organization needs to be productive and efficient.

2. Submit a purchase request

Submit a purchase request to your finance team. It’s important that finance team looks over all purchase requests to make sure that purchases are necessary and within budget.

3. Assess and select your vendors

Come up with a list of a few vendors you’d like to work with. Assess potential vendors based on factors such as price, quality, item availability, payment terms, and business operations and capabilities.

4. Negotiate price and terms

Once you’ve chosen a vendor you’d like to work with, negotiate the price and terms. Vendors may offer things like volume discounts, flexible payment plans, product warranties, or other services. You should work to reach a mutually beneficial agreement.

5. Create a purchase order

Create and submit a purchase order. Purchase orders outline the prices, quantities, and product specs for each item that you order. This is an important document so don’t lose it!

6. Wait for your order to arrive

Once your order has been prepared and shipped, all that’s left to do is wait for it to arrive.

7. Inspect and receive order

Once your order arrives, make sure to inspect it to make sure it’s the right product that you ordered and that the quality is good. If everything looks good, you can receive it in your system.

8. Conduct three-way matching

A three-way match is comparing the purchase order, the goods receipt, and the supplier’s invoice to make sure everything is correct and matches.

9. Approve the invoice and arrange payment

If everything looks good and the paperwork matches, you can approve the invoice and arrange payment to the vendor.

10. Conduct record keeping

Make sure all the paperwork (the purchase order, receipt, and invoice) are all properly stored and recorded for future reference.

Keep in mind, however, that how a company shapes its internal procurement process influences factors like the company’s size, industry, available human resources, and organizational structure.

Why is procurement important in business?

Procurement is important in business because it directly impacts a company’s profit margin. For an organization to be profitable, the cost of procuring goods needs to be less than the amount it sells those goods for, minus whatever costs are associated with processing and selling them.

Enacting the best procurement procedures will ensure that the buyer (i.e. the company) is acquiring goods and services at the best possible price at all times.

In addition, procurement is linked to several core business functions within an organization. Therefore, it should always be considered a critical part of any organization’s corporate strategy.

Procurement touches on each of these components.

Procurement in business: an example

For instance, procurement and corporate identity are intertwined. If your business is building (or has built) its identity around an environmentally conscious ethic, for example, then your procurement strategy should reflect this decision. However, for this to be successful, policies must be in place to ensure you are sourcing from companies with similar ethics, or that you are sourcing materials that are not environmentally hazardous.

A company’s procurement strategy should also be shaped with its market placement, company capabilities, and management issues in mind. It’s essential that a company has the right people in place to put into action the beliefs and philosophies you want to govern your business by. Handling vendor relationships, then, should reflect company philosophy.

What are the steps in the purchasing process?

As a function, purchasing is a subset of procurement. And as such, the purchasing process sits inside the procurement process.

However, unlike procurement-related tasks outlined above, you shouldn’t tailor the steps explicitly related to purchasing to suit the size and scope of each individual vendor you are purchasing from. This is a fundamental step of good purchasing and makes your process more streamlined. Ultimately, your purchasing process should employ routine best practices across all vendors.

The 6 steps of purchasing

1. Acknowledge your purchase order

Communicate that you have received the purchase order and confirm that all information, including prices, quantities, and items, is correct and ready for fulfilment

2. Send an advance shipping notice

Send an advance shipping notice (ASN) that provides all the details about the pending delivery. The ASN typically lists all the contents of the shipment and any additional details.

3. Collect and file your goods receipt

Once you have received your order, collect the receipt and file it properly with your other finance and accounting information.

4. Conduct invoice recording

Process and record your invoice with your financial information and records.

5. Perform a three-way match

Compare the purchase order, the goods receipt, and the supplier’s invoice to make sure everything is correct and matches.

6. Pay the vendor

If everything looks good, pay the vendor based on the agreed upon payment terms.

Automating procurement and purchasing with e-procurement software

Procurement and purchasing are both part of the procure-to-pay (P2P) process — the complete cycle of identifying, acquiring, and paying for goods and services. In short, procurement drives supplier selection and contracts, while purchasing executes the order and payment.

To help you visualize how procurement and purchasing support one another throughout this cycle, here’s when these two functions get involved in the procure-to-pay cycle.

Procurement steps in the procure-to-pay cycle

• Identify goods and services required
• Approve purchase requests
• Procurement
• Identify suppliers
• Sending inquiries (RFQs and RFPs)
• Receipt of quotes from suppliers
• Negotiate pricing and terms
• Select vendors

Purchasing steps in the procure-to-pay cycle

• Acknowledge purchase orders
• Advance shipment notice
• Receive goods
• Inventory management
• Invoice recording
• Three-way match
• Payment to supplier

Automating procurement and purchasing tasks with e-procurement software streamlines the entire procure-to-pay process — reducing errors, improving compliance, and delivering measurable cost savings.

To understand where automation has the most impact, it helps to look at how procurement and purchasing fit into the procure-to-pay process. Procurement typically handles the front end — identifying needs, sourcing suppliers, and negotiating terms — while purchasing manages the back end, including purchase orders, receipts, and payments.

Here’s how the steps break down:

Procurement steps in the procure-to-pay process

1. Identify goods and services required

2. Approve purchase requests

3. Identify suppliers

4. Send inquiries (RFQs and RFPs)

5. Receive quotes from suppliers

6. Negotiate pricing and terms

7. Select vendors

Purchasing steps in the procure-to-pay process

1. Acknowledge purchase orders

2. Send advance shipment notice

3. Receive goods

4. Manage inventory

5. Record invoices

6. Conduct three-way matching

7. Approve and send payment to supplier

Procurement and purchasing software eliminates overspending, reduces manual errors, and provides the financial visibility organizations need to scale — delivering savings in both time and money, no matter the size of your business.

How do you keep track of all purchasing activities

Keeping track of purchasing activities is essential for accurate financial records, compliance, and smarter decision-making. Manual filing is no longer enough — today’s organizations need real-time visibility into purchase orders, invoices, and payments.

• Centralizing these records in your procurement and purchasing software ensures:
• Every transaction is documented and searchable
• Receipts and invoices are automatically matched to purchase orders
• Data flows directly into your accounting system for accurate reporting

This reduces audit risk, eliminates duplicate work, and keeps finance teams confident they’re working with complete, up-to-date information.

Procurement and purchasing: where they intersect

Ultimately, purchasing is one step within the broader procurement process. Procurement covers strategy — sourcing, negotiating, and managing suppliers — while purchasing executes the transactions that bring those agreements to life. The terms are often used interchangeably, but recognizing the difference is important: procurement sets the direction, and purchasing carries it out.

Knowing the difference is only part of the journey. The real question is: where does your organization stand today? Are you stuck in reactive purchasing, or building toward proactive, strategic procurement? Our Procurement Maturity Model can help you answer that by benchmarking your current processes and showing the path forward.