How many times have you purchased something on impulse and later on realized it was a waste of money? We’ve all probably been there a time or two in our lives. While you can very well do as you please with your own finances, when it comes to managing company finances, impulsive, haphazard purchases could ultimately lead to financial demise.
Yes, it’s true you have to spend money to make money and invest in the business for it to grow, but if you don’t think the purchase through carefully you’re putting the future of your business on the line. Below are a few steps you can take to make more efficient purchasing decisions:
Define the Need
The first thing you need to do before making a decision is define the need of the company. What is it that needs to be accomplished? What void needs to be filled? In order to ascertain the real needs of the company you may need to converse with management. Talking with supervisors or human resource staff can give you an in-depth understanding of where the needs are in the company.
For example, the owner of a manufacturing company may not be aware that the production process is wasting a lot of time and resources. However, the production manager would be able to provide this information. The manager would be able to provide suggestions on feasible solutions, such as MPS software (Master Production Scheduling software) that would allow for the production team to stay on task and access pertinent work order information.
Establish a List of Criteria
Once you’ve determined that there is in fact a real need within the company, the next step is to determine what criteria you need the product or resource to have in order to fulfill the need. Using the example above, if it is agreed that scheduling software is needed to maximize the production process, what features does this software need to encompass? Do you only need scheduling? Would you like features that allow staff to access work order information? Would you prefer an application that is cloud based?
Again, working with management or even the workers on this list of criteria will ensure that you’re making a purchase that is not only necessary, but that will actually benefit those who will be utilizing or benefiting from the product. Creating a list of “must haves” and “would like to have” can help you in finding the best solutions for the business.
Check the Budget
Now that you know there is a need and know exactly what type of resource you need to invest in, can you afford it? Though you may have a need for something, if purchasing it is going to put you in the red, you may need to look at other solutions. Review your budget to see what you have available to spend. To determine if you have enough, it may be necessary to do a bit of research to determine the going rate for what you’re looking to buy. If you have an accountant, this would be a good time to consult with them to evaluate your budget and determine what you can spend.
Research Your Options
After you’ve determined what you have to spend on your purchase, you’re ready to begin research. You don’t just want to purchase the first product that comes your way, but the Internet can be resourceful in helping you compare features and costs. As you review various suppliers review the features and compare them to your “must haves” list and your budget. Try to narrow it down to at least two or three choices and then bring the options back to your management team to discern which the best option is.
Making a purchase for your company is a lot like making a purchase for your household. The only real difference is that the funds you’re utilizing are not simply your own, these funds are necessary for maintaining and operating your business and as such impulsive purchases could result in poor finances. By utilizing the above mentioned steps in your decision making process you are sure to have a much simpler time making a purchase that will benefit your business now and in the future.