Does Procurement Fall Under Finance And Why Is It Important?

Procurement is a vital aspect of any business, playing a crucial role in securing raw materials, goods or services. However, where exactly does it fall under the organizational structure? Is procurement considered as part of finance or is it an independent department? In this blog post, we will explore this question and delve into why understanding the relationship between procurement and finance is essential for the success of any organization. So let’s dive right in!

What is Procurement?

Procurement is the process of acquiring goods and services. In order to get the best possible deal, procurement professionals oftentimes work with different departments in a business, such as marketing, sales, or finance. Procurement can be important for a variety of reasons: it can help save money, ensure compliance with regulations, and improve customer service.

Procurement is often divided into two main categories: internal procurement and external procurement. Internal procurement involves purchases made by a company within its own boundaries (for example, purchasing supplies from a supplier within the company). External procurement involves purchases made by a company outside of its own boundaries (for example, purchasing goods from a supplier abroad).

The main motivations for buying goods or services are economic (to save money) or social (to fulfill customers’ needs). Companies use different techniques to achieve these goals: they can negotiate discounts with suppliers; award contracts to the lowest bidder; or set minimum requirements that all potential suppliers must meet.

Procurement is an important part of many businesses because it helps manage costs and improve customer service. For example, by negotiating better deals with suppliers, companies can save money on their products. By enforcing contracts and setting minimum standards for suppliers, companies can ensure that their products are of high quality and compliant with regulations.

The Role of Procurement in the Organization

Procurement is the process of acquiring goods and services, both internally and externally. It can be broken down into three main categories: acquiring goods, awarding contracts, and managing procurements.

Acquiring Goods: This category includes activities like identifying needs and issuing requests for proposals (RFPs). RFPs are open to all potential suppliers and allow companies to compare their proposals.

Awarding Contracts: The goal of this category is to find the best supplier for the specific needs of the organization. Contracts can be negotiated between companies or awarded through a bidding process.

Managing Procurements: This encompasses everything from contract tracking to ensuring that contracts are fulfilled on time. It’s essential to ensure that procurement is done correctly in order to avoid costly mistakes down the road.

The Benefits of Properly Executing Procurement Activities

Procurement is an important process in any company, as it allows companies to purchase the necessary supplies and materials needed to operate. Proper procurement can also save a company money, as it can avoid duplicate purchases and other mistakes. In addition, procurement can help improve communication between different departments within a company, as well as with suppliers. Furthermore, proper procurement can ensure that the products that are purchased meet the needs of the company and its customers.

The Risks of Poor Procurement Practices

Procurement is the process of acquiring goods and services. It can be divided into two categories: strategic procurement and operational procurement. Strategic procurement is where a company identifies its needs and buys goods or services that will help it achieve its goals. Operational procurement is where a company buys goods or services that are needed to run its business.

There are many risks associated with poor procurement practices. One risk is that a company may not get the best possible deal on the products or services it needs. This can lead to higher costs, lower quality, and lost opportunities. Another risk is that a company may not be able to get the right product or service for the right price. This can lead to delays, wasted resources, and missed deadlines. Finally, poor procurement practices can create conflict between departments within a company, which can lead to reduced efficiency and productivity.

Conclusion

Procurement falls under finance because it is the process of acquiring goods and services for a business. It is important because without procurement, businesses would not be able to get the necessary supplies they need to run their operations. Procurement can also play a role in helping businesses save money by finding better deals on products than they might find elsewhere.