For small businesses, the most important financial success factor is obviously sales. The more you sell, the more you make, the bigger your company grows etc…

If all goes well, you will grow into an SME (Small/Medium Enterprise). At this point the way you do things will need to change or mature, in order to keep growing – it’s no longer just about sales now.

Smart SMEs realise early on that managing spend well, can have an equally impressive impact upon the P&L as sales does. 

So where do you start?

Appointing a dedicated purchasing/procurement resource is the logical step, as they will bring much needed process improvements and accountability to your organisation to help you manage spend better. You will also benefit from their negotiation expertise, making sure you get better deals with your suppliers (but that goes without saying).

Unfortunately, it is not quite as simple as hiring someone and letting them get on with it. You need to ask yourself the following questions:

• Will your staff be prepared or willing to listen, learn and change their current behaviours and processes?
• Does your business have the right tools in place to assist the procurement manager in their role?

More often than not, the answer will be no. As your business matures it is important to understand that behavioural and system changes will be needed in order to accommodate the growth in order to keep things on the up. The procurement manager needs support and assistance from the rest of the business in order to do their job properly and if they do not receive this then you are effectively abandoning them on a desert island in the middle of your organisation’s sea.

So… what is the answer?

1. Senior Management need to lead by example – especially where process or behavioural changes are implemented. If they do not follow new ways of working, then how can their team be expected to? Remember the saying “do as I say not as I do…” – has this ever led to a positive outcome? If for example, your senior managers refuse to ‘slum it’ in a Travelodge, their teams certainly won’t want to either. 

Senior managers are often reluctant to involve procurement when it comes to selecting or negotiating with suppliers as it was previously their responsibility alone. Nobody wants someone new coming in and telling them they are doing their job wrong. Unfortunately, if procurement is excluded by senior managers (or worse, set up to fail), then their subordinates are not likely to pick up the phone to procurement either.

2. Ensure spend is categorised appropriately – it does not necessarily need to be a complex relational database or IT system and it does not need to be exact (sadly it often isn’t, but that’s business). Goods and services naturally fall into a departmental categorisation initially i.e. Marketing will handle the marketing requirements, HR will manage the HR requirements etc., but a trick is being missed here which only gets bigger the more your business grows. Categorising spend based on commodities and not departments will reveal similar types of purchases across your business (e.g. print). You will often find that you have a lot more buying power than you realised in certain areas of spend, and an opportunity to leverage this power by combining/unifying requirements from different departments. Often the toughest obstacle here is actually collecting the spend data from each department, as each team will no doubt be capturing the information in a different style or manner (or sometimes not at all!), but trust me it will be a lot easier to address and put categorisation rules in place now then to wait until later on down the line as your business inevitably becomes even more fractured and complex.

Taking these simple steps will not only fill your new procurement manager with joy, as mentioned before, but you will also reap the benefits of their expertise a whole lot quicker.

So, please don’t leave your procurement manager on that desert island throwing bottles into the ocean…let them do the job you are paying them to do. Their aim is to help. Not hinder.