What is procurement?

Procurement and finance are closely linked, but they serve different purposes within an organisation.

Finance is concerned with managing the organisation's money, including budgets, cash flow, income, expenditure and financial reporting. Procurement, on the other hand, focuses on how the organisation spends that money and whether it is getting the best possible value from its purchasing decisions.

For example, a finance team might identify that an organisation spends £30,000 a year on IT support, but procurement would look at whether that represents good value, what alternative suppliers are available, whether the current contract meets the organisation's needs and whether there are opportunities to improve the arrangement or reduce costs.

The two functions should work closely together, but having a good understanding of your finances doesn't necessarily mean you're getting the best deal from your suppliers. That's where procurement can make a difference.

Procurement covers much more than the process of obtaining quotes or running a tender. It starts with understanding what an organisation needs and continues throughout the relationship with the supplier.

This might involve reviewing existing expenditure to understand where money is being spent, identifying opportunities to consolidate purchasing or renegotiate existing agreements, researching the market to understand what suppliers can offer and making sure that purchasing decisions are based on a fair assessment of cost, quality and suitability.

It also involves putting appropriate processes in place so that decisions are made consistently, suppliers are properly assessed and contracts are managed effectively once they have been awarded.

The level of formality will depend on the organisation and what it is buying. A small VCSE purchasing stationery doesn't need the same process as an SME appointing a new IT provider, but both can benefit from taking a considered approach rather than simply choosing the first option available.

Procurement is often associated with large businesses and public-sector organisations, where dedicated teams manage significant budgets and complex purchasing exercises. However, the principles are just as relevant to SMEs and VCSEs, particularly where budgets are limited and every pound spent needs to work as hard as possible.

For VCSEs, reducing unnecessary expenditure can mean having more money available to support the services and communities they exist to help. For SMEs, better purchasing decisions can improve margins, reduce operating costs and free up money to invest elsewhere in the business.

There are also opportunities beyond simply reducing costs. Understanding the supplier market, having appropriate contracts in place and managing supplier relationships can improve the quality and reliability of the goods and services an organisation receives.

In many cases, organisations continue using the same suppliers for years without reviewing what they're paying or considering whether the arrangement still represents good value. Others may have several departments or individuals purchasing similar goods and services independently, missing opportunities to negotiate better prices or simplify their arrangements.

Taking a more strategic approach to procurement helps identify these issues and gives organisations a clearer understanding of where improvements can be made.

Having effective procurement arrangements doesn't mean introducing complicated procedures or creating unnecessary administration. In fact, for SMEs and VCSEs, the aim should be to keep things proportionate and make the purchasing process as straightforward as possible.

That could mean reviewing a handful of existing supplier contracts, introducing a simple process for obtaining and comparing quotations, developing a procurement policy or getting some support with a particular tender exercise. Even relatively small improvements can make a meaningful difference over time.

The important thing is having someone look at purchasing from a commercial perspective, rather than treating it as an administrative task that simply needs to be completed.

HTT Commercial Advisory provides independent procurement consultancy and practical support to SMEs and VCSEs that want to improve the way they buy goods and services.

Whether you need help understanding your expenditure, identifying opportunities to save money, putting appropriate procurement processes in place or managing a particular purchasing exercise, we can work with you to understand what you need and provide support tailored to your organisation.

You don't need to employ a dedicated procurement professional or commit to an expensive consultancy arrangement to benefit from better procurement. HTT Commercial Advisory provides access to the experience and support you need, when you need it.