Procurement is an important aspect of any company, but when you’re a small business, there can often be a lot riding on big spends such as these.
Whether you’re buying goods or hiring services, getting the most for your money and ensuring you receive good quality or value pays dividends when you invest the time upfront to get it right in the beginning.
We asked our in-house Procurement expert, Kevin McLoughlin, for his run-down on everything you need to tick off when considering Procurement. Kevin is our Director of Procurement here at Opus Energy, so we couldn’t think of a better person to lead us through the process.
It may seem like there’s an overwhelming amount of information in order for you to cover your back, but Kevin has broken it down into the crucial chunks that you need to work through.
His biggest tip? “It’s all about asking questions…”
- Requirements – can you articulate exactly what you need?
- Volumes – how many?
- Service – how long for?
- When do you need it?
- Who can help? Your Finance, HR, Operations employees can all help provide data
- Not sure where to start? Eradicate any uncertainty.
- Consider different scenarios: 6 month price vs 12 month price, or 100 vs 200 vs 300 units
- Send a questionnaire/“Request for Information” (RFI) to potential suppliers to find out what they offer
- Know what you want? Send out a Request for Proposal (RFP) to potential suppliers asking for a price
- Getting a renewal? Consider what has changed, what you need this forms the basis of a contract renewal negotiation
- Show me the money… Obtain 3 quotes (for spends over £500 or £1000) for good discipline:
- Multiple quotes help Identify alternative suppliers in case you’re let down.
- A benchmark ensures peace of mind that you’re paying a fair market rate
- Helps avoids being overcharged or warning that a price is too good to be true
- Transparency – making sure everything is understood
- Do you understand how you’re being charged?
- Have all costs been listed?
- Do you need all the services offered?
- Have you requested a reduction?
- Is there a… discount for bulk purchase?
- Discount for longer contract?
- Discount for early payment as below?
- The Devil is in the detail. Check your contract terms – the following terms can often be negotiated in particular:
- Are you getting what you asked for?
- What’s the term (minimum period)?
- Termination (how and when, avoid evergreen terms such as auto rollovers)
- Additional Charges (what are they? Are they necessary?)
- Sort out liability – it should work both ways (set a cap, contract value or annual value)
- Definitions – are they clear?
- Exclusivity – ensure any exclusivity won’t cause future issues
- Agreed changes – get it in writing
- And how will you be paying for that?
- Some companies will offer a discount if you pay promptly perhaps moving from 30 to 14 days
- Use Company Credit Cards for large purchases security against bankruptcy/non delivery
- The finer details: expenses and travel
- Provide a clear policy – what is/isn’t covered (check against HMRC rules)
- Travel – set up an account with a hotel chain – the receptionist/PA can manage and you gain management visibility of travel spend, with an efficient process for employees who won’t have to expense
- Don’t forget – quarterly business/supplier reviews
- Who are your biggest suppliers?
- How often do you meet them?
- Are they meeting your needs?
- Are you getting the best out of them?
- Do they offer free services you’re not using?
It may seem like a lot of questions, but follow this check-list to the letter and you can better ensure that you will always be getting a fair – and most importantly, risk-free – deal.