To purchase wisely, you have to buy the right amount and quality of goods or materials at the most appropriate time and ideal price from the best supplier. This is why it’s immensely vital that your business has a working and easily actionable purchase policy that could serve as your purchasing team’s guide.
While the specific scope of your purchasing policy should be based on your particular needs and purchasing processes, at the very least, it must ideally include the following:
- The main authority or purchasing officer that could make decisions and cooperate with other departments when purchasing goods or materials.
- The specific items that could be purchased.
- The payment methods.
- The exact budget and spending limits per item, per order, at a given period, etc.
- Particular requirements for supplier bids or competition and how they’re chosen
- The kinds of contracts that the purchasing team could enter into with suppliers or bidders.
- Your company’s position if there’s a conflict of interest.
- Your company’s position on accepting gifts.
- Your company’s position on personal loans from the bidders and suppliers.
- The specific information that needs to be kept confidential. This is especially important if your company develops intellectual property.
- The procedure for handling legal questions and issues.
- The specific processes and tools required to be used for the purchasing process. For instance, if you use cloud-based, would it be fine for someone to create a purchase order manually and would it still be valid?
If you have a small business or are just starting out, your purchasing policy would be relatively straightforward, easy to review, and maintain. While if you already have an established or big business, you will need a more extensive and detailed purchase policy.
Failing to dedicate ample time and effort in creating a clear purchase policy and overall system for purchasing, you’ll soon find your operating costs skyrocketing due to an increase in expenses and a decrease in your profit margins. By ensuring that all your costs are tracked and controlled, you’ll be able to do business as usual and remain competitive.