Most entrepreneurs start a new year determined to make changes that will bring benefits. One of the areas of your business it could pay to take a good look at is purchasing. Sometimes we set up procedures, and get into habits, that are great at the time but may not continue to be the best way to do things as the business develops. Here are some questions that might help you recognise where this might be the case.
Having the Optimum Number of Suppliers
Are you buying just what you need, or are there some things you could do without that are eating into your profits? Can you prioritise what you need most and what could wait for a month or more? Could you reduce the number of suppliers you deal with so that you buy more from a few and could negotiate discounts for larger orders?
On the other hand, are you at the mercy of one major supplier, and have you thought what you could do if that one let you down for any reason? Having more than one supplier of the goods you need to buy gives you both back up and bargaining power.
Benefits of a Buying Consortium
Have you considered going into a consortium of buyers that place regular orders together? Companies that do this can share the burden of regular reviews and market testing for more economical ways of purchasing. They can also share due diligence reports on the supply chain to help with compliance with the new anti-bribery laws. When new suppliers are coming on board, a consortium has more negotiating power on price, terms and conditions than any individual SME.
Stock Management Procedures
Do you have procedures for checking goods on delivery before signing for them or noting that they haven’t been checked on the delivery note with the signature? Do you manage your stock so that you don’t have to hold more than you need at any one time?
If you have good relationships with your suppliers they may come up with ideas to help you. It’s in their interests to keep you happy and coming back for more. Some will even hold stock for you to be delivered as needed.
Benefits of Buying or Leasing
Sometimes it’s more economical to lease a major item than buy it. It can change your tax situation, so remember to discuss this with your outsourced bookkeepers. You only need to buy the advisory time of your accountant if they feel it necessary.