While sometimes painful, budgeting is one of the most important aspects of financial management in the corporate world. With a procurement budget, your organization can use an outline—indicating what you can afford and can’t afford—to develop a more accurate and efficient purchasing strategy.
In years past, the role of procurement wasn’t associated with the budgeting process. Now, as the business world continues to shift, procurement professionals are becoming more involved with budget development.
But procurement focuses on more than just purchasing. Various functions are at play, including logistics, marketing, IT, strategic sourcing, and shipping and receiving tasks. Without a detailed procurement budgeting outline, these functions become inconsistent and your company finances can take a quick downturn—making it all the more important to ensure your procure-to-pay budget is balanced.
Here are some key elements to consider when planning and managing your procurement budgeting strategy.
Determine the Goods and Services You Need
In every procurement process, your organization must purchase what’s necessary to run the business. To initiate your procure-to-pay budgeting strategy, make a list of all the goods and services your company requires to successfully operate.
For example, if you host corporate events, ensure you’ve sourced printed programs, name tags, and other supplies. In the same manner, you’ll need to create a list of all the expected attendees.
Once you’ve determined the what, you’ll need to prepare the how—how many programs to print? Do they need to be specific dimensions? Should they need to arrive by a certain date? How much will they cost? And so on…
Assess Your Vendor Options
Next, you should source for potential vendors.
Though you might already have a reliable list of suppliers, it always helps to reassess your options to assure you’re getting the best price for the highest-quality goods.
Perhaps this is your first chance to source new vendors. If so, you’ll need to keep things like price, customer service, reputation, and turnaround time in mind. While this may demand considerable research time, it’s well worth it to find the highest-quality vendor that aligns with your procurement budgeting strategy.
A helpful list to follow is Carter’s 10 C’s of Supplier Evaluation, which rates vendors on a scale of 1 to 5 according to each outlined area. Then, you can better determine your organization’s needs, understand how your vendors can meet them, and choose the right one for your business.
Utilize Technology For Better Decision-Making
When optimizing the procurement budgeting strategy, it’s crucial to make sure everyone is on the same page. With so much to consider, proper planning and application from both procurement and financial departments are crucial to ensure your company is meeting the necessary goals.
Fortunately, utilizing technology can guarantee everyone stays informed and up to date with any budget adjustments. The best place to start is by finding a platform that offers comprehensive tools to digitize your procurement process and increase visibility into your budget control. This lets your team track key spending data and stay on top of any budgeting changes.
Not only will this ensure costly orders don’t get completed without approval from management, but it adds a layer of protection to the purchase process. So, no matter how complex your budgeting plans get, your procurement and finance departments can maintain peace of mind.
Sticking to Your Budget
Setting a procurement budget can be challenging and time-consuming. Especially as your business grows, so does the role of budget planning. With more employees and departments in the mix, the demand for higher costs is inevitable—thus, it becomes all the more important is to create a real-time budget for the necessary operating costs throughout your organization.
As you develop your procure-today budgeting system, consider the goods and services your company requires, take time to vet your vendor options, and utilize any technological solutions that ensure best practices and streamline the budgeting process.