Sunday, November 8, 2015

Purchasing System for a Small Business

Every organization needs goods & services to run its business.  Arranging those goods &  services from external sources is called purchasing. A purchase department buys raw material, spare parts, services etc. Sometimes these are available in local market and sometimes these  need to be imported or manufactured from a workshop.

Depending upon the nature of business purchase manager needs some expertise/technical knowledge to discharge his/her duties well. Purchasing is one of those vital functions which can make or break an organization. It has to be done with great responsibility. The objective of a purchase department is to buy required items at minimum price. Also, it should avoid a stock out situation at all cost.

 Following are few tips for small businesses to perform this function right:

·         First understand what  exactly you need to buy i.e. specifications/detail of the required product/service. This way you will protect yourself from ordering substandard or wrong stuff.

·        Get three or more quotations from different suppliers.

·         Make a comparative statement to select the right supplier.

·         Always negotiate price.

·         Try to get some credit.

·         Always try to find out why one supplier is economical than other.

·         Place order to a supplier with good repute.

·         Place order on time. Delaying may hamper some business operations.

·         When placing order mention complete specifications on the purchase order.

·         Maintain a minimum stock to avoid disruption in business operations. Items which are not readily available their stock should be more than the ones available on short notice.

·         Maintain good relationship with your suppliers.

·         When selecting a supplier keep all his/her term & conditions in mind.

·         Determine the exact quantity to be ordered. Buying too much will block your funds and ordering too little may create a stock out situation.

·         Upon receiving the goods, thoroughly inspect the items to ensure these are as per your purchase order.

·         Pay the supplier only when you are satisfied with the quality.

I hope you found the above helpful. Please feel free to comment.

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