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10 mistakes entrepreneurs make in purchasing

Procurement is not only participation in tenders, but also simply the purchase of goods necessary for a business. Purchasing departments or managers play an important role in a company’s business processes. And this area requires strategic planning. We decided to translate the material of European buyers about the most common mistakes in this industry. The information will be useful for Russian entrepreneurs as well.

Going over budget
In fact, entrepreneurs often exceed purchasing limits. This occurs most often at the beginning of the fiscal year. Because when the year starts, there is a lot of cost, and then an overall ineffective procurement management is superimposed on it.

The easiest way to solve the problem is by planning a budget for the month. This makes it easier to keep yourself within limits, constantly control costs and cut purchases somewhere.

Lack of supplier relationships
Suppliers regularly update business processes, offer new products and solutions for the benefit of customers. If you do not engage in dialogue, then your company will pass it by. It is clear that if your supplier does not have many customers, then managers will find a way to contact you.

But if there are hundreds of customers, then try to find out about the new conditions yourself, follow the mailing list and the suppliers’ social networks.

Buy and not bargain
It is a mistake to think that the prices in the catalog are etched in stone. Negotiate and try to negotiate a cost that includes your shipping and receiving costs.

If you’re looking to establish long-term relationships with suppliers, look for ways to lower your price through repeat orders or promise early payments. But try not to haggle for each order, but to offer mutually beneficial terms to suppliers.

Impulse buying
Yes, there are such purchases in the business world, and not only among supermarket visitors. Sometimes executives think that such a purchase is good at the moment, but they forget about strategic planning. In the long term, such an acquisition could upset the balance.

Consider the big picture, because impulse buying will not allow you to consider all sides of the business. For example, the price will be better, but the quality will not. Take your time, but build the procurement process in such a way as to take into account all the interests of the business.

Refusal to innovate
Too often, even the most diligent managers forget to ask if suppliers have the ability to simplify their purchasing processes. Therefore, it is important to regularly communicate with suppliers and refine your “Wishlist”. On the other side, they can listen and offer convenient solutions.

No technical match
Buyers pay including production costs. Therefore, specialists should make purchases after all processes are brought to technical compliance.

For example, production plans to reach new volumes, which are real only on new machines. At such moments, it is undesirable to purchase components for old machines, if soon they will no longer work.

Failure to comply with commercial terms
The purchasing department must always respect the commercial interests of its company. Unfortunately, this does not always happen. A business has bank guarantees, loans, costs, and they all affect prices for customers. Therefore, it is necessary to purchase in such a way that prices correspond to the company’s budgetary policy.

No compliance policy
We wrote that in Russia compliance is perceived somewhat differently than in the West. But in general, it is better to arrange all processes so that the regulatory authorities have no complaints about prices, reports and counterparties. That is, you will have to develop principles of work that are ethical at all stages of the transaction.

No teamwork
In some companies, departments are independently purchased for their work. It can happen like this. that the purchase would affect the work of another department, although this was not obvious.

Therefore, all participants in the procurement should clarify the opinion of their colleagues during their procurement. This will help avoid conflicts within the company and uneven budget distribution.

Ignoring software
Today software works for almost any line of business. If you start using software for purchasing, you will shorten the transaction time and teach you how to optimize prices for goods and services. All this together will reduce your budget, which is spent on buying everything you need for your business.

Avoid these mistakes if you want to optimize company costs and make procurement as efficient as possible.

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