Author: Brett Knox
December 10, 2024 - 3 MIN. READ
Buying goods and services outside of established processes comes with a cost. In addition to potentially spending more, employees who engage in rogue spending reduce visibility over your buying activities.
Unchecked rogue spending can quickly escalate, driving up costs and decreasing your profit margins. Rogue spending can also lead to inefficiencies, such as delays in procurement or missed savings opportunities.
These effective strategies eliminate rogue spending and regain control of your buying process.
Curb Rogue Spending With Centralized Buying
With centralized buying, employees submit requests to a person or team. It ensures that all buying goes through an authorized employee who can then apply best practices and buy the goods or services from a pre-approved supplier.
This approach defines clear roles and permissions for everyone in your organization and creates a streamlined process to follow when goods or services are needed. Plus, having a single employee or team handle all your purchases results in a comprehensive track record of your buying activities, which is ideal for auditing and compliance.
Pre-Approve Products, Services, and Suppliers
Centralized buying can sometimes result in a backlog of purchase requests for your team. Even without a backlog, submitting a request and waiting for approval can slow down procurement.
To speed up buying, you can authorize some employees to purchase goods and services if certain conditions are met. These conditions include:
- Buying from a list of pre-approved suppliers.
- Selecting goods or services from a list.
- Ordering the product or service via a preferred buying platform.
Redundancy
According to recent research, 73% of businesses are implementing dual-sourcing strategies. Buying from multiple suppliers ensures you always have a backup solution if an item is out of stock or would take too long to ship. You can also turn to a backup supplier if prices go up unexpectedly.
Once you have a list of pre-approved products, services, suppliers, and buying platforms, you can build redundancy into your contractor buying process by identifying alternatives for all these solutions.
Building redundancy strengthens your procurement process, but tracking spending ensures consistent oversight and accountability.
Track Your Spending
A company culture that doesn’t hold employees accountable for their buying activities leads to rogue spending.
Whether through centralized buying or a reporting process for purchases made by employees, increasing visibility into spending can reduce unauthorized spending.
Tracking costs with precision and reaching out to employees who tend to overspend holds them accountable and creates an incentive for seeking the most affordable option when buying a product or service.
Plus, tracking costs will reveal some trends in your contractor buying activities. For instance, you could identify the areas where you spend the most, your most frequent recurring purchases, and where you tend to experience long lead times.
This information can be a helpful basis for negotiating new contracts with your suppliers, budgeting for your buying activities in advance, and exploring bulk buying options for your most frequent purchases.
Ensure Contract Information Is Easily Accessible
Negotiating with suppliers is a great way to cut costs. However, rogue spending often results in purchases outside of contract terms, preventing you from taking advantage of the prices and terms you negotiated.
Make contract information easy to access for the employees who make buying decisions. If you’re providing employees with a list of pre-approved suppliers, organize this list to reflect the suppliers who offer the best prices and terms.
When tracking spending, ensure you’re paying negotiated prices. You can also reach out to suppliers and discuss price adjustments if you accidentally overpay for goods and services for which you negotiated discounts. Ideally, your supplier partners should catch these mistakes and automatically apply the prices and terms from your contract.
Build a Better Buying Process With Raiven
Don’t let rogue spending get in the way of your profit margins. These effective strategies are easy to implement and will help organize your buying activities.
You can further centralize your buying through a group buying program like Raiven. Besides getting better visibility into your contractor buying process, you’ll benefit from pre-negotiated discounts on all the parts and materials you need, including emerging products available in our electrification store.
Discover the benefits of participating in a premier purchasing program like Raiven. By leveraging the collective buying power of its members, Raiven secures exclusive discounts on automation controls, panels, conduit, EV charging stations, load shedding, tools, lighting, wire, and more. And there’s no more negotiating with individual suppliers.
Gain access to pre-negotiated discounts of 7%-30% from industry-leading manufacturers and distributors, including Alpscontrols, ChargePoint, EnelX/Juicebox, Ferguson, Grainger, Graybar, HD Supply, Home Depot, Lowe’s, Office Depot, Sunbelt Rentals, Schneider Electric, and more!
Raiven is the go-to partner for electrical contractors, providing unbeatable prices on equipment, parts, and maintenance supplies. Our intuitive purchasing platform streamlines procurement for maximum efficiency. Other key benefits:
Curb rogue spending and save time and money with Raiven. Visit Raiven to learn more about the many perks of our contractor group buying program.
Summary: Does rogue spending result in higher costs and reduce visibility over your buying activities? It’s time to build a better buying process with these five proven strategies.
