In every business, a certain number of purchases must be made. Even companies that primarily offer online services must acquire computers, office supplies, and relevant software while food service companies may buy ingredients multiple times a day and those who sell physical products must purchase components and materials with which to produce their inventory. Every one of these company purchases needs to be logged and included in overhead and budget calculations. Additional departments and franchises create more avenues for miscellaneous expenditures and add greater complexity to the task of tracking every way money enters or leaves the company. When struggling to unify all company financial data, a centralized procurement strategy is the solution.
What is Centralized Procurement?
Like many business terms, centralized procurement is exactly what it sounds like, but the details may need illumination. Companies that employ centralized procurement have a procurement or purchasing department and all purchases made by any employee or in the company name are routed through this department. This method allows for every order to be checked, vendors to be verified, and each financial transaction to be carefully recorded and shared with the finances department. This is an excellent way to decrease inefficiency, redundant purchases, opportunities for abuse, and time spent by other teams on buying for their departments.
Who is the Strategy For?
Medium to large businesses have the most to gain from centralized procurement because it streamlines an important set of data and exchanges that might otherwise be scattered among several departments and dozens of teams. When budgets and purchases become too individual, there is a greater margin for mistakes, corruption, and things the finances department just never hears about. Data centralization as a whole is a good choice for businesses on the rise who want to keep all their ducks in a row, and procurement is no exception. There’s no need to settle for sloppy record keeping and imprecise estimates of spending. By processing every purchase through the same system, the finances of all departments can be easily tracked, balanced, and optimized.
Where and When to Centralize
For larger companies with far-flung locations, purchasing will need to be considered on a local scale as well as a centralized one. While a central procurement department and shared database are still key to keeping complete tabs on the finances, a personal representative at each location is a great way to ensure you’re not missing out on discounts and deals with local vendors as well as national ones. Some implementations have suffered from impersonal purchase processing and delays but these problems can be easily dealt with when planned for ahead of time. Make sure that your procurement team takes care to consider the individual needs of every department and location, including local laws, bargains and environmental conditions.
Centralizing for Small Business
It’s never too early to start centralizing your purchases, finances, and data as a whole. Even if your company is not yet large enough to dedicate an entire position to tracking purchases, a centralized procurement system can still help keep track of all the little necessities your company needs to launch. From product components to new equipment, don’t let your finances get sloppy straight out of the gate. Keeping unified records is a great way to prepare for the time when your company is big enough to need an entire department just for managing procurement.
Whether you’re an international business unifying company-wide expenses or a startup hoping to establish clean business practices, centralized procurement is an excellent strategy to take up. The amount of investment and reorganization necessary depends on your company, but the positive effect does not. When your finances department knows where every dollar is spent, they can start optimizing budgets and working with procurement to fine-tune expenditures.