Business owners can sometimes overlook the importance of streamlining their procurement processes to ensure they are having the best deal possible on whatever it is that they need.
A streamlined procurement process can even have an impact on whether your business makes or loses money in the long term, so it’s important to not only learn how to set up such a process but also how to maintain it.
Here are 7 key steps of the procurement process you should follow when doing business with suppliers and vendors. These steps will help you save time and money in the long run.
1. Request For Proposal
The first step in buying a good or service is requesting a proposal from qualified suppliers. In a request for proposal document, you lay out what you’re looking for and give all potential suppliers an equal opportunity to respond.
Remember that a request for proposal document differs from a Request for Quotation (RFQ) in that it doesn’t set any restrictions on price or delivery time. However, it should include details about what you want and how many units of each thing you need.
2. Evaluation Process
In evaluation, a team or an individual will review and compare all proposals received against specific pre-determined criteria. Evaluation might be done in one of two ways.
The first way is by using pre-defined objective criteria, for example, price and delivery date, and the second one is by using subjective criteria, for example, technical merit. This step is used to narrow down candidates until you are left with only one supplier.
Tracker intelligence has all of this streamlined for its user. If you want to find new work opportunities and secure your place in the public sector, they will provide you with a procurement framework with long-term value.
3. Contract Negotiation and Development
Before a contract is signed, everyone will have strong opinions about what should be included in it and which details can be worked out later. Save time and reduce headaches by holding negotiations over written documentation.
Asking specific questions before, during, and after these negotiations will help you get past vague statements and ensure that all parties know where they stand at all times.
These questions will come in handy if there’s ever a breach of contract as well because they help outline exactly what was promised and who promised it.
4. Project Implementation
Before you can implement a project, you first have to acquire it. The project management team evaluates bids and awards contracts. This is another important step in managing projects because if you don’t manage projects well through their lifecycles, your business can incur considerable costs and other problems.
Best practices indicate that once a contract is awarded, a final acceptance date should be agreed upon by the included parties. This ensures there are no misunderstandings between buyer and seller about what has been ordered or delivered.
It also helps prevent disputes from arising after goods or services have been received. Once an agreement has been reached, each party must sign off on it before work begins. If changes occur later on during implementation, these must also be signed off on by both parties, so there aren’t any surprises down the road.
5. Oversight and Monitoring
Keeping the oversight and monitoring your bids for the contracts is very crucial, as it prevents time and money from being wasted on unprofitable or unnecessary contracts. Now that you have all of your contracts in place, it’s essential that you oversee and monitor their work carefully.
Staying educated with invoices, keeping track of payments, and initiating procedures when issues occur will ensure that you’re only spending money on valuable processes and services. It also allows you to identify potential problems early on so that they can be resolved before they become costly roadblocks.
6. Receive Invoices and Process Payment
It is important for finance teams to be able to monitor and report on supplier payment practices. This will help you improve receivables management in the future, as well as enable you to identify slow payers and decide whether or not they are worth keeping as suppliers.
It is good practice to let a supplier know when their payments are outstanding for more than 30 days and make arrangements with them. You should also ensure that invoices are paid within two working days of receipt by setting up an electronic funds transfer (EFT) system.
If your business has a large number of suppliers, it may be best to use an outside service provider who can handle all of these transactions electronically.
7. Close-Out Process
After an order has been received and accepted by both buyer and seller, it is time to establish a close-out process that will ensure follow-through on all points discussed. The close-out process is essential in ensuring ongoing trust between buyer and seller as well as regular future business.
Close-outs can take place at decided times, for instance, once a quarter, or after a specific transaction amount. Close-outs can also be done via phone or email if face-to-face meetings are not possible for some unavoidable reasons.
Regardless of how close-outs are conducted, they should always involve three key people. One from each side of the deal (buyer and seller) as well as someone from finance. All three parties should discuss what went right during negotiations and any issues that arose during negotiations.
This information will help create a more efficient process in future deals with other companies. Any outstanding issues should be resolved before signing off on final documents, so there are no misunderstandings later on down the road.
Lessons Learned
After you’ve completed the 7 previous steps and a successful project has been delivered, it’s time to reflect on how you can improve your future projects. Use these lessons learned during all phases of the procurement process.
Here are some examples:
- What went well?
- What challenges did you face?
- How could you have handled them better?
- What should be changed for your next project?
- Which tools worked best?
- Which tools didn’t work as well as expected?
After you have got the answers to all these questions, you can go on to follow these techniques or change some of them. All the above-mentioned steps ensure a streamlined procurement process and you should follow these steps in order to get maximum results.