When running a start-up, you have multiple commitments pulling you in different directions. Of course, access to finance, manpower and business leads all tend to come at the top of the to-do list, and as a result other functions, such as procurement, are an afterthought.

As well as being an afterthought, procurement can be unfortunately viewed in a negative light – it is seen as simply a task of getting the lowest possible price.

As such, many start-ups will not think about implementing good buying practices from the offset, but rather improvise until either they hire someone to control spend or a mistake is made. However, implementing a uniform practice for buying could help your profit and loss account, and be the difference between ceasing to trade and survival.

As a small business you may have size on your side, but SMEs and microbusinesses still need to adopt a ‘big business’ mindset, and one way to achieve this is by implementing procedures such as standard buying practices. This helps to control cost and provide accountability, enabling all purchases to be tracked and monitored, leading to easier reporting. This is vital as a business grows and more revenue streams need to be accounted for.

Procurement is not a difficult concept and should be valued much the same as marketing or sales. Knowing how to get the best deal is an important part of doing business, so applying this logic and taking the time when it comes to spend could help your small business make savings you haven’t previously managed to take advantage of.

Below are some of the ways you can implement procurement best practice without having to hire a professional or create a bespoke procurement department.

1.       Don’t forget the rule of three

When it comes to good financial management, the rule of three is key. When you need a quote – be it for buying in stationery or sourcing a copywriter – always get three quotes for the job.

This is for two reasons: firstly, it can help you evaluate the fair price for the job, and secondly it will put to rest any suspicion you may have about the price or quality of the job you’ve been quoted for. For a time-pressed start-up, getting three quotes may seem like overkill, but taking the time to evaluate multiple options will help identify any erroneous quotes you may have been given.

2.       Rule setting is good

When it comes to money, don’t be afraid to set rules. For example, be prepared to set buying thresholds so the senior team know who is responsible for buying what. If the business needs to buy something that is more than £250, make sure one dedicated senior person signs it off. This assigned team member will then recognise if there is any duplication, and can map out business needs against cashflow.

Establishing rules such as spending thresholds is a good idea

3.       Remember the art of negotiation

A quintessential flaw of being British is our inability to haggle on price – we often accept the given price and won’t ask for a discount. However when working in a start-up, cash is tight, so push yourself to ask the question and you might get a better result. Suppliers will be working at a profit, so don’t be afraid to ask if they can give you a better deal. They want to make the sale and so may be willing to reduce their mark up.

4.       Scratch your suppliers’ backs and they may scratch yours

Building relationships with key suppliers will be vital for start-ups. Additionally, this is also an area where start-ups can use their size to their advantage, by enticing suppliers with better deals than they might be able to get from larger customers.

As seen in the news recently, bigger companies, including household names can sometimes bully their smaller suppliers as they rely on them wanting to work with a known brand, but this does them no favours in the long run as it’s harmful to their reputation and the longevity of their supplier relationships.

As a start-up, you can be far more flexible than your larger peers. For example, one way to build goodwill is by paying suppliers within 30 days. The sooner you pay them, the happier they will be and may be prepared to give you favourable rates in the future as you’re securing their cashflow. Collaborative working such as this puts you in a strong position as a business if you ever need to call in any favours.

A bit of quid pro quo never did anyone any harm

In addition to building these strong relationships, start-ups need to think strategically about how they work with suppliers. Never work exclusively with one supplier as this could cause supply and demand issues later on, so allow yourself to always have a backup.

In addition, think about how you can entice suppliers to work with you in the first place. If your contract is relatively small and you don’t think they will be interested in the scale, why not offer a long-term contract (for example, two years). This will guarantee them income for the period of time, which is an attractive offer.

This also works on the basis that after two years, your business may have grown so the contract would in fact increase, and puts you in a strong position for renegotiation. You can also offer performance payment (early delivery bonuses or reduced price if the delivery is late, for example) which can help buoy suppliers. This works for both parties as budgets can be made, along with a regular guarantee of deliveries.

5.       The bigger, the better

The key to achieving economies of scale is by buying in bulk to help achieve more bang for your buck. However, as a start-up your size sometimes penalises you as you simply can’t afford to buy the quantities needed to achieve a discounted rate. If this is the case, see if you can partner up with any other local businesses, as you may be able to build a consortium between yourselves and therefore have the spend to achieve the savings.

Common resources (such as paper, computer hardware, office space etc) are needed by all businesses, therefore joining together to get the best deal is common sense, and does not involve overly close  collaboration which could divulge confidential information you’d rather not share.

6.       Every little helps…

For any new business, getting the best deal possible is vital to safeguard cashflow. Start-ups can put in place good procurement procedures without hiring a specialist and can make savings by following the above advice. The thing to remember is to understand the terms and conditions of the purchases you make and keep suppliers on side, as this way you can react to supply and demand while growing your business in a collaborative manner.