Sachin Sharma, founder of ProcureDesk, shows how to build a procurement policy in three steps: set approval thresholds using the Pareto principle (80% at department level, top 20% spend to CFO), create a preferred vendor list to consolidate buying, and define documentation rules based on your organization type.
If you just joined a company which has no procurement policy or have a procurement policy that is not working and you are the person responsible for setting one up, this video is for you. So in this video I'm going to walk you through what are the three main things you need in a purchasing policy. Here's two things we normally see. Either people have a purchasing policy and it's like a 40 page document nobody reads, or they don't have a purchasing policy. Those are the two extremes and what you need to do is find a balance between these two. If you're joining me for the first time, I'm Sachin Sharma. I'm the founder of procuredesk where we help growing companies automate procurement processes. So let's jump right in. Number one is you want clear approval thresholds. The reason for a procurement policy is cost control. And to control that cost you need to make sure right people are looking at it, whether they want to check for budgets, they want to make sure they have the authority to purchase and so on. So most people line up setting up approval policies that are very complex. Everything goes to a cfo, everything goes to an owner. Problem is it slows down there. What you want to look at is what are the major purchases that we need to control. So follow the Pareto principle here. The 80, 20, you want 80% of the transactions approved at a department level and 20% of the transactions which contributes to 80% of the spend to be approved by a CFO. And that's kind of the way to think about it, to keep it simple. So that's first one clear approval threshold. Number two is you want to have a preferred vendor list. And the reason you want to have that is if you have preferred vendor list, people can buy from those vendors. What you don't want is five vendors for the same item. People buy office supplies from Staples, people buy it from Amazon, people buy it from, you know, Office Depot, you name it, right? It's just all over the place. So if you have a preferred vendor list where you are getting preferred pricing, you want a process or a system like Procuredes where they can actually go simply click what they want to buy and the system automatically routes them to the right vendor. But at least to bear in start with, list your key vendors and what other things people can buy from them, whether it's product or service. Number three is set up clear documentation requirements depending on where you are. Like for example, if you're a non for profit or charter schools, you can, they have very clear grant requirements. Everything should be tied to a grant so that you can define whether it's a restricted or unrestricted grant. Or you might have requirements for you need to have three bids for everything because your grant requires it. If that is the case, then that should be clearly stated and when that is required. So for example, if it's more than $500, you need to have three bids assigned. So clearly define those requirements upfront. So just a clear, quick recap. If you do not have a procurement policy or you have a procurement policy that people don't follow, do these three things set up a clear threshold for approval, Set up a preferred vendor list, and number three is set up clear document requirements. Now, if you're just getting started, click on the link below. We have added a link to our purchasing policy template that you can just use and get started with. And if you have any help or need any help, you know, click on one more link below and talk to one of our product specialists. We can help you with that as well. Thanks for joining me today and I'll see you in the next video.
