Your complete guide to the purchasing process

A purchasing process ensures your organization acquires the goods and services it needs to operate effectively without exceeding its budget. It’s essential to maintaining control over business spend, supplier relationships, and protecting your bottom line. Because of this, it’s imperative for purchasing teams to optimize their workflows. With this in mind, leaders are seeking strategic, data-driven approaches to improve purchasing operations. 

What is a purchasing process?

A purchasing process is a series of steps that an organization uses to buy and acquire goods or services. It’s the part of the procurement process that specifically covers the transaction between the buyer and seller. 

While procure-to-pay workflows tend to encapsulate several factors like order planning, strategic sourcing, and supplier relationship management, a purchasing process looks solely at the movement of finances. At this step, buyers tend to keep short-term goals and immediate business needs at the forefront of their minds.

During the purchasing process, teams aim to optimize each order, considering factors such as quantity, location, timing, price, warranty, and payment terms. They also emphasize stretching each dollar as far as possible to maximize order value throughout the process.

8 key steps in the purchasing process

It’s worth taking a closer look at how your organization performs in the following eight steps when optimizing your workflow. Here’s more information on each of these steps:

1. Identify business needs

Before you can build an effective purchasing process, you need to know your organization’s exact business needs. This insight tells you where to focus your attention when strategically sourcing the goods or services your organization needs to run an efficient business. 

At this step, it’s important to take into consideration purchase requests for everything from office supplies and IT equipment to hiring services. 

2. Define requirements

Once you’ve dialed in your organization’s needs, the next step is defining each order’s requirements. To do this, review aggregate data and speak with stakeholders to understand their needs. You’ll want to account for factors like desired brands, item quantities, order frequency, and budgets. Then, document these order requirements in a purchase requisition.

It’s also worth breaking down order requirements per team. Not only does this allow you to plan for organization-wide needs accurately, but it also enables you to identify widespread purchasing habits. You can then use this data to find savings opportunities by consolidating orders. 

3. Evaluate suppliers

Because most purchasing processes don’t typically focus on building long-term supplier relationships, buyers often make vendor selections through a decentralized process. They might work with a variety of suppliers, depending on which offers the best deal. 

You should consider multiple factors when evaluating potential suppliers, such as reputation, delivery time consistency, lead time, and financial stability. Each of these factors could impact your order, depending on the supplier you work with. 
 

Here’s another tip for this step of the process: It can be hard to recognize tail spend during supplier evaluation because teams may source from outside of preferred purchasing channels. If you don’t have visibility into these instances of rogue spend, it’s harder to get an accurate sense of your total spend. However, solutions like Amazon Business’ Guided Buying (a Business Prime feature) can steer your buyers toward pre-approved suppliers for spot-buys and unplanned purchases, which reduces maverick spend.

4. Negotiate terms and pricing

Once you’ve narrowed down a list of potential vendors, send a request for proposal (RFP) to learn which ones can offer the most cost-effective and efficient contracts. Based on the RFP results, you can negotiate for more favorable agreements and optimal pricing. 

However, it’s much more difficult to get the best prices without spend analysis and visibility. This insight reveals exactly where buyers allocate each dollar, which allows you to identify trends and understand your organization’s overall needs. Amazon Business also features in-depth analytics and reporting tools, which help you uncover real-time data that gives you a stronger position for contract negotiations.

5. Create and approve purchase orders

When you’re ready to finalize an agreement, the next step is to create a purchase order (PO) that outlines order details. It captures factors like the type of goods or services, quantity, delivery conditions, and discounts. Depending on your organization, several procurement department stakeholders may need to review and sign off on the document, so make sure you allow sufficient time for PO approvals. 

After your team finalizes the PO, send it to the supplier so they can begin working on your order. While you wait on them, keep the PO number on hand to track the order’s movement through every step of its lifecycle. This insight gives you more control of vendor compliance so you can make sure the vendor meets the agreement terms.

6. Receive and inspect items

After the vendor delivers the goods or services and before you release payment, take the time to inspect the order and ensure it matches PO specifications. This step is especially important if you’re ordering raw materials that your teams need to keep manufacturing processes running. Without these goods, your operations can slow or stop entirely. 

For this step, most organizations have quality control checks that align with internal policy, so a standardized process is key. It promises that all team members who review orders use the same checks when inspecting items. A standardized process also streamlines this quality control workflow. That way, if there is an error in the order, you can let the supplier know as soon as possible and reconcile the mistake. 

7. Process payment and reconcile

Once the order passes your quality control checks, you’ll send the PO and supplier invoice to your accounts payable (AP) team for invoice processing. They’ll then two-way match these documents to verify that the invoiced amount aligns with the contracted agreement and PO. During this stage, it’s crucial to pay close attention to detail since you face an increased risk of overpayments or underpayments if an error slips through the cracks. 

Should your AP team spot a mistake, you can work it out with the vendor to get a new invoice and make sure you pay the right amount. If the documents match, AP schedules and releases payment, which closes out the purchasing process with the supplier. 

One of the most common problems during this step is human error, which results from manual tasks. It’s easy to miss mistakes when AP teams review tons of invoices, POs, and supplier receipts by hand every day. Additionally, manual workflows are inefficient because they can slow your operations, hurt your profits, or risk non-compliance with your vendor’s contracted payment terms. 

Automation, however, can resolve both of these problem areas. A great solution automatically two-way matches invoices and POs to verify accuracy so correct invoices instantly move forward for payment. Automation can also help rid this part of the purchasing cycle of costly inefficiencies, allowing your AP teams to work faster.

8. Monitor and report on purchasing performance

The purchasing process isn’t over when your engagement with the vendor wraps up. For every order, you should monitor and report on all areas of the supplier’s performance, including adherence to PO terms and the quality of communication. These data points help you identify reliable vendors. 

Keep in mind, though, that while the purchasing process doesn’t usually focus on supplier relationships, your procurement strategy does. The supplier data you collect during the purchasing process can later help you optimize vendor management for your organization-wide procurement activities.

The benefits of streamlining the purchasing process with automation

Managing payment processes manually can not only be time-consuming, it can also increase the risk of error. By the same token, the lack of scalability might create roadblocks that could slow productivity, risk compliance issues, and prevent teams from focusing on more strategic tasks.

Automating purchasing processes can address these inefficiencies by improving accuracy, speed, and scalability. Here are four key benefits of automating parts of the purchasing process:

• Reduced risk from manual processes: There are fewer opportunities for invoice errors to slip through the cracks when an intelligent solution handles routine steps. 

• Decreased approval bottlenecks: By automating parts of the approval process, teams can eliminate time-consuming steps and lower the possibility of setbacks. 

• Shorter PO processing times: When teams don’t need to track down PO approvals by hand, they can send POs to suppliers faster. 

• More available resources for strategic initiatives: Employees can spend less time on repetitive tasks, leaving them with more time for strategic, value-added activities.

   

These benefits lead to operational efficiency and cost savings—two improvements that can positively impact your entire procurement cycle.

How to automate purchasing

Getting started with purchasing process automation is easy—you just need the right solution. Follow these steps to get started:

• Use approval workflows for spend management: Create structured approval processes that align with your financial policies so you stay on or under budget.

• Set recurring orders for items you purchase often: Set up purchasing schedules for restock orders and use them to negotiate favorable contracts. 

• Leverage Amazon Business Analytics for ongoing procurement optimization: Get real-time data that allows you to strategically iterate on your process for cost savings. 

• Encourage team adoption with customizable permissions: Only grant buyers the access they need for their role to drive compliance and efficiency.

   

The most effective purchasing process is one that runs as smoothly as possible. Automation accomplishes this by freeing up your team to focus on making cost-saving purchasing decisions. That way, you can save your organization’s resources now and watch the industry for signs of transformation and growth later on. 

Future trends that are shaping the purchasing process

Purchasing process optimization is an ongoing, iterative process. Because of this, you should always be on the lookout for the latest e-procurement management technology and trends that can enhance your workflows. 

Keep an eye out for these future trends to optimize your purchasing process:

• Automation tools to reduce risk and streamline operations: Automation procurement software relieves teams of routine tasks so operations run smoother and faster than ever before. 

• Solutions to support resilient supply chains: Organizations that prioritize integrative partners that support secondary and tertiary vendors see stronger supply chain risk management.

• Predictive analysis to remain competitive: By using internal purchasing data analytics and supply chain metrics, organizations can anticipate buying needs and remain competitive. 

• Data to make informed decisions: Real-time metrics give you the power to make precise, data-driven decisions for your purchasing strategy. 

   

Strengthen your purchasing process with Amazon Business

Amazon Business offers multiple advanced automation tools to help save your purchasing department time and resources, allowing you to reallocate your efforts toward improving other parts of the process. 

• Amazon Business Analytics reports: Leverage easy-to-use formats to download reports that help teams quickly reconcile expenses, verify payment details, and ensure accuracy by reducing manual entry.

• My Orders: Get instant access to order history, including product details and delivery status. This centralized view enables quick cross-checking of transactions and supports accurate matching.

• 3-Way Match: Automate the verification process by cross referencing purchase orders, invoices, and delivery receipts—ensuring all data aligns to save time, reduce disputes, and enhance accuracy.

• Managing Your Invoices: Get centralized access to invoices, credit memos, and bulk invoice downloads.

• Business Order Information: Get in-depth details about each transaction for a comprehensive view that boosts transparency.

• Reconciliation APIs: Customize transaction data with line-item details and integrate with expense management systems for increased reconciliation speed and accuracy.

   

Additionally, Amazon Business integrates with over 300 procurement tools, which purchasing teams can use to remain agile in a competitive and ever-changing supply chain. Robust integrations also make it easier for you to adopt solutions that help your organization remain compliant while still letting your buyers purchase from their preferred partners.

In sum, Amazon Business supports organizations that are looking to improve their purchasing process strategy through automated workflows, spend analytics, and policy-driven compliance. Get in touch today to learn how you can regain control and scale your purchasing operations with ease.