Small businesses struggle without procurement

Having a procurement function forms an essential part of business for small firms, just as much as large corporates, according to new research.

Not only does procurement help firms to cut costs and control their spending, but it also enables labour intensive processes to be reduced, Wax Digital suggest.

Management and other professional staff in 260 UK businesses were quizzed on what the tipping point is for introducing procurement into their organisation.

Three quarters said it was required when turnover reached £50 million, while 77% suggested that procurement is needed when a firm has 100 supplier contracts.

Another marker for 72% of respondents was when more than 500 invoices per month are being processed.

When asked why procurement processes were introduced, 68% said it was too reduce rising costs while 45% wanted to cut labour intensive processes.

Interestingly, around half of businesses said that procurement was implemented as a reactive responsive to something negative that had happened, compared to 31% who deemed it a proactive move.

Of those quizzed in the study, 825 had experience of introducing procurement processes into a company for the first time, and listed spend analysis, contract management and supplier relationship management among the main reasons for introducing it.

Introducing new processes is not without difficulties though, as more than a third of those questioned said it was difficult to convince senior management to buy-in to the idea.

Others pointed to the cultural changes that need to be managed and to a lack of internal knowledge, both factors that can slow how a business does procurement.

Adopting a more professional approach to recruitment can help a business to streamline performance and control spend.

For smaller firms operating on tight margins, having greater financial control can enable the development of clear growth plans.

Alternatively, a business can undertake an independent business review to focus on its forecasts, assets, finances and growth plans to ensure the post practical approaches are being used.

Such an approach can have a huge influence on long-term strategy and refinancing, as clear plans for the future can be developed.


By Phil Smith


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