Procurement Best Practices: 14 Strategies to Improve your Purchasing Process

Procurement covers the complete lifecycle from identifying needs through supplier selection, contract negotiation, purchase authorization, and performance management. Mid-market companies often reduce costs through effective procurement while preventing compliance issues and freeing finance teams from manual work.

This guide covers the five-stage procurement process, essential best practices for teams at companies with 50-500 employees, and how to select technology that fits your current stage without overbuilding.

What is procurement?

Procurement covers the complete lifecycle from identifying what you need through supplier selection, contract negotiation, purchase authorization, and performance management. This includes establishing specifications, forecasting needs, researching suppliers, and negotiating contracts. The difference between procurement and just buying stuff is that procurement creates a repeatable system.

Without structured procurement, every purchase becomes a unique fire drill requiring custom approvals, emergency vendor vetting, and panic when invoices arrive without corresponding purchase records. Teams spend hours chasing down who approved what and why the company is paying three different prices to the same supplier across different departments.

The five-stage procurement process

These stages prevent the chaos of ad-hoc purchasing and give visibility into spending before money goes out the door rather than after.

1. Need identification

Someone on the team identifies a business need requiring external goods or services, including basic justification. Teams need to know what problem they're solving and why they can't use existing resources. This prevents the common issue of ordering something that seems useful but doesn't actually solve the underlying problem.

2. Requirements definition

The vague need gets translated into specific requirements including quantities, quality standards, delivery timelines, and budget constraints. For a simple example, "we need new laptops" becomes "15 laptops with 16GB RAM, specific processor requirements, delivery within 30 days, budget of $25,000." Clear requirements prevent ordering equipment that doesn't meet actual needs.

3. Purchase order creation

Formal purchase orders document the authorized purchase and create both legal commitments and audit trails. This is where companies create the paper trail that prevents "mystery invoices" appearing three months later when nobody remembers who approved the purchase or why.

4. Receipt and verification

Before approving payment, someone verifies that what was ordered actually arrived. Many companies skip this step and pay for goods they never received or services that weren't completed. This verification catches problems before payment goes out rather than discovering issues months later during reconciliation.

5. Invoice processing and payment

Invoices get matched to purchase orders and receiving documentation before authorizing payment, then companies pay on agreed terms to maintain supplier relationships. This three-way matching ensures companies only pay for authorized purchases that were actually received.

Benefits of setting up procurement best practices

The benefits of proper procurement extend beyond just saving money, though the cost savings alone justify the effort for most mid-market companies:

• Cost savings and spending control: Strategic procurement delivers measurable cost reductions through supplier consolidation, competitive bidding, and volume-based negotiation. Organizations using procurement analytics can achieve up to 20% in savings through better negotiation leverage and smarter supplier selection. Teams aren't just saving money—they're getting better outcomes from vendors who know they need to perform.
• Improved supplier relationships: When companies work with suppliers through clear processes instead of emergency requests and inconsistent payments, suppliers give priority service, better pricing, and work with you on problems instead of enforcing penalties. Good suppliers prefer customers who have their act together because it makes their lives easier too.
• Enhanced risk management: Procurement controls prevent paying for goods never received, committing to contracts without proper authorization, or depending entirely on suppliers that haven't been properly vetted. These controls also create the audit trails needed when the board asks detailed questions about spending patterns.
• Increased process efficiency: Automating procurement processes reduces purchasing time from 20 hours to 5 hours per week for overwhelmed finance teams. Automated workflows enforce consistent policies without requiring constant attention, which means better results with less manual effort.

These benefits compound over time as companies build supplier relationships, accumulate spending data, and refine processes based on what actually works. Better procurement visibility also improves financial statement analysis by providing clearer cost allocation and spending patterns.

Common procurement challenges

Even with the benefits clear, mid-market companies face predictable obstacles when trying to professionalize their procurement function. Here are the most common challenges and how to address them:

• Supply chain disruptions: When a critical supplier suddenly can't deliver, companies without backup options face project delays and emergency sourcing at premium prices. The solution is maintaining relationships with secondary suppliers even when not actively buying from them and building supplier diversification into sourcing strategy from the start.
• Maverick spending: Employees bypass procurement when they view processes as too complicated or a waste of time. If the procurement process takes three weeks to approve a $200 purchase, people will find workarounds. Making compliant purchasing easier than going rogue solves this better than adding more controls.
• Manual processes: Paper-based or email-driven workflows create delays, high error rates, and make it impossible to provide the insights leadership wants. Teams spend their time drowning in administrative tasks rather than doing analysis that could actually improve operations.
• Supplier performance tracking: Without systematic tracking, companies can't tell which suppliers consistently deliver on time and which ones create problems. This becomes a bigger issue as teams scale because relationship management doesn't work when dealing with dozens of vendors instead of five.

Addressing these challenges requires both process improvements and the right technology, which is why the best practices below focus on both elements.

14 essential procurement best practices

These practices are organized by priority for setup, starting with foundational controls and progressing to strategies teams can add as capacity allows.

1. Establish clear procurement policies

Companies need written procurement policies covering authorization limits by position, competitive bidding requirements, purchase order protocols, and ethics standards. A 5-10 page document works for most mid-market teams.

Once you have the policy drafted, get executive approval and distribute to all employees with training on what's changing. Review the policy annually based on what's actually working. The goal is clarity about who can approve what, not creating bureaucracy that slows everything down.

2. Set up strategic sourcing

Strategic sourcing means selecting suppliers based on multiple criteria, not just whoever responds first. A simple scorecard helps evaluate potential suppliers consistently:

• Price (40%): Total cost including shipping, implementation, and ongoing fees
• Quality (30%): Product specifications, reliability, and warranty terms
• Delivery (20%): Lead times, on-time delivery track record, and logistics capabilities
• Service (10%): Responsiveness, support quality, and problem resolution

For purchases over $5,000, research at least three suppliers and document selection rationale. This prevents discovering six months later that choosing a supplier based on price alone created operational headaches that cost more than the savings.

3. Automate high-volume processes

Mid-market teams should start with high-impact, low-complexity processes first. Purchase order creation with dynamic approval workflows makes a good starting point, along with invoice processing that reduces manual data entry. Digital approval routing cuts cycle times without requiring complex implementation.

This builds confidence and demonstrates value quickly without straining limited resources. Teams don't need to automate everything at once.

4. Centralize vendor information

When vendor information lives in email, spreadsheets, and individual employees' heads, companies can't analyze spending patterns or enforce preferred supplier programs. A central vendor database should capture contact information, contract terms, performance history, and tax documentation.

Centralization also prevents the problem of losing critical vendor relationships when an employee leaves and takes all that context with them.

5. Build strong supplier relationships

Meeting top suppliers at least annually helps share business plans and growth trajectories so they can plan capacity. Consistent on-time payment builds trust that leads to better pricing and priority service.

When challenges arise, suppliers who view companies as strategic partners will work with them instead of enforcing contract penalties. According to the 80/20 rule commonly observed in procurement, approximately 80% of spending typically concentrates among 20% of suppliers, making these key relationships particularly valuable to nurture.

6. Conduct regular spend analysis

Monthly spend analysis reveals patterns and opportunities that aren't visible in day-to-day operations. Export all purchasing data and look for:

• Category spending: Group purchases into 8-12 major categories to understand where money goes
• Top suppliers: Identify the 20 suppliers representing the most spend
• Duplicate vendors: Find multiple suppliers serving the same category where consolidation could improve pricing
• Tail spend patterns: Spot many small purchases from numerous vendors that create administrative burden

This analysis typically reveals quick wins teams can capture immediately, like consolidating office supply vendors for better pricing or discovering unused software subscriptions that drain budget.

7. Start competitive bidding processes

For purchases over $5,000, requiring three informal quotes creates healthy competition. Larger purchases over $25,000 benefit from formal request documents with clear specifications.

Simple templates work fine, with two weeks allowed for supplier responses. Compare bids using scorecard criteria and document selection rationale. This formality feels like overkill until the first time it saves 20% on a major purchase or prevents committing to a supplier who can't actually deliver on time.

8. Establish approval workflows

Approval thresholds need to balance control with speed so people don't bypass the system out of frustration. Most mid-market companies use a structure like this:

• Under $500: Manager approval
• $500-$5,000: Director approval
• $5,000-$25,000: CFO approval
• Over $25,000: CFO plus CEO approval

The key is making these workflows fast enough that employees have no reason to avoid them while maintaining enough control to prevent unauthorized commitments that create financial exposure.

9. Implement three-way matching

Three-way matching ensures companies only pay for goods that have been ordered and received. The process compares three critical documents before authorizing payment:

• Purchase order: What was authorized and at what price
• Receiving report: What actually arrived and in what condition
• Supplier invoice: What the company is being billed for

For purchases over $1,000, requiring purchase orders creates the foundation for matching. Receiving checklists help verify quantity and quality, and any discrepancies should be investigated before payment. This control is tedious but prevents paying for goods never received or paying twice for the same delivery.

10. Track supplier performance

Systematic performance tracking replaces the informal "I think this supplier is pretty good" assessment with actual data. Create scorecards for key suppliers that measure:

• On-time delivery: Percentage of orders arriving by promised date
• Quality defect rates: Percentage of shipments requiring returns or corrections
• Responsiveness: Average time to respond to issues or questions
• Accuracy: Invoice and shipment accuracy rates

Share scorecards with suppliers quarterly, recognizing top performers and creating improvement plans for underperformers. This data-driven approach shows which suppliers are delivering value and which ones are creating problems.

11. Standardize purchase orders

Purchase orders should be required for all purchases over $1,000, including vendor information, items, quantities, prices, delivery dates, and approver signatures. Sequential numbering helps track orders, and strict "no PO, no payment" policies enforce compliance.

This standardization creates the audit trail needed for tax compliance and gives spending visibility before money goes out the door. For more on building effective purchase order systems, proper workflows prevent payment errors and improve vendor relationships.

12. Negotiate strategic contracts

Most mid-market companies accept supplier pricing without negotiation, but even basic preparation typically yields savings on contracts over $25,000. Before entering negotiations:

• Perform total cost analysis: Include implementation, training, ongoing support, and switching costs
• Map supplier constraints: Understand their capacity limits, minimum order requirements, and payment preferences
• Benchmark market pricing: Research what similar companies pay for comparable services
• Identify partnership opportunities: Look for multi-year commitments or payment term improvements that create mutual value

During negotiations, lead with data rather than opinions and frame supplier constraints as negotiable variables rather than fixed limitations. This approach turns one-sided pricing discussions into collaborative problem-solving.

13. Reduce maverick spending

Compliant purchasing needs to be easier than going rogue. Simplified approval workflows with 24-48 hour turnaround for small purchases remove the main reason people bypass the system. Pre-approved supplier catalogs with online ordering make authorized purchases convenient, while clear policies with realistic timelines set proper expectations.

Expense tracking helps identify non-compliant purchases by department, which reveals root causes rather than just symptoms. The best way to reduce maverick spending is making the procurement process so simple and fast that employees have no reason to avoid it.

14. Commit to continuous improvement

Procurement requires ongoing refinement based on what's actually working. Quarterly reviews should cover cycle times, cost savings, compliance rates, and supplier performance to identify what needs attention.

Annual policy reviews keep authorization limits, approved supplier lists, and competitive bidding thresholds aligned with how the business operates. This prevents the procurement function from becoming rigid and unresponsive to actual needs.

Key procurement metrics to track

Tracking the right metrics helps determine if procurement improvements are actually working or just creating more busywork. Focus on these core indicators:

• Procurement cost as percentage of revenue: Track how much it costs to run the procurement function relative to company revenue. Mid-market teams should aim to keep overhead low while delivering meaningful value.
• Annual cost savings: Measure savings achieved through better vendor management, competitive bidding, and supplier consolidation. Most companies realize measurable improvements within the first year of implementing structured procurement.
• Purchase order cycle time: Monitor how long standard purchases take from request to approval. Target 3-7 days for routine purchases, with faster times for urgent needs and appropriate review periods for larger commitments.
• Maverick spend rate: Calculate the percentage of spending happening outside approved procurement processes. Keeping this below 10% indicates good process adoption and control.
• Spend under management: Track what percentage of total spending flows through managed suppliers versus ad-hoc purchases. Companies typically start around 40-50% and can work toward 60-75% as procurement processes mature.
• Procurement ROI: Measure the value delivered relative to the cost of running the function. Effective teams typically achieve returns of 5:1 to 10:1 through a combination of cost savings and time efficiency gains.

These metrics give the data needed to demonstrate value to leadership and identify where the procurement function needs attention.

Top 5 procurement software platforms

For companies with limited IT resources and no dedicated procurement team, integration with existing accounting systems and realistic implementation timelines drive software selection more than feature lists.

Ramp

Ramp's procurement platform lets employees purchase what they need through intake orchestration that simplifies requesting, approving, and purchasing. The platform handles expense management alongside procurement in a unified system, which reduces tool sprawl for finance teams.

Features:

• Automated approval workflows with dynamic routing based on budget, department, or spend threshold
• Real-time visibility into spending before it happens rather than discovering surprises when invoices arrive
• Quick implementation timeline with many teams realizing benefits within weeks
• Unified platform handling both procurement and expense management

Pricing: Plus Plan starts at $15 per user per month, plus a platform fee based on team size, making it accessible for mid-market companies.

Procurify

Procurify provides procurement management with documented QuickBooks integration. The platform links purchase orders to approval history and syncs with accounting systems.

Pros:

• Documented QuickBooks Desktop and Online integration
• Mobile app for approvals when managers are traveling
• Budget tracking to prevent overspending

Cons:

• Analytics capabilities are basic compared to enterprise platforms
• Smaller supplier network limits pre-integrated vendor options
• Implementation typically requires 4-8 weeks for full deployment

Pricing: Starts at approximately $599/month based on user count and feature requirements.

Coupa

Coupa targets upper mid-market through enterprise segments with procure-to-pay workflows. The Coupa Advantage program provides pre-negotiated vendor discounts, though this limits negotiating flexibility with those suppliers.

Pros:

• Complete procure-to-pay workflows from requisition through payment
• Supplier collaboration portals for vendor communication
• Pre-negotiated discounts through Coupa Advantage program

Cons:

• Implementation typically takes 3-6 months and requires dedicated project resources
• Quote-based pricing without public tiers makes budgeting difficult during evaluation
• Feature complexity can overwhelm teams without dedicated procurement staff
• Better suited for companies at 300-500 employees with enterprise-scale operations

Pricing: Quote-based pricing. Expect $2,000-$5,000+ monthly for mid-market implementations based on market analysis.

Zip

Zip offers modern user experience with consumer-grade interface design. The platform prioritizes speed and simplicity over comprehensive feature coverage.

Pros:

• Consumer-grade interface that improves adoption rates
• Quick setup timelines get teams operational in weeks
• Intake and approval automation reduces manual work
• Simplified vendor onboarding process

Cons:

• Feature set lacks advanced procurement capabilities found in enterprise platforms
• Smaller established customer base limits available references
• Integration capabilities still developing for less common accounting systems
• May require supplementing with additional tools as procurement needs grow

Pricing: Tiered pricing starts around $800/month for growing companies. Specific pricing requires vendor inquiry based on user count.

SAP Ariba

SAP Ariba provides access to a global supplier network with contract lifecycle management. The platform works best for companies with international sourcing needs or existing SAP infrastructure.

Pros:

• Access to global supplier network with millions of vendors
• Deep integration with SAP ERP systems
• Contract lifecycle management for complex supplier agreements
• Strategic sourcing and RFP capabilities

Cons:

• Implementation timelines of 3-6 months require significant project resources
• Platform complexity overwhelms companies without dedicated procurement staff
• Requires global supplier requirements and existing SAP infrastructure to justify investment
• Higher total cost of ownership compared to platforms designed for mid-market

Pricing: Quote-based pricing with implementations typically starting at $3,000+ monthly for mid-market companies.

The software selection decision should be driven by accounting system integration requirements, company size and complexity, and available implementation resources. For more guidance on building your finance tech stack, consider how procurement tools fit with your existing systems rather than evaluating features in isolation.

How to set up procurement best practices

Success depends on phased approaches that demonstrate value quickly rather than attempting complete transformation overnight.

Assess current processes

Start by documenting how purchases actually happen today, not how they're supposed to happen according to policies nobody follows:

• Where do approvals stall or create delays?
• Which spending categories have quality or delivery problems?
• What purchases happen completely outside any formal process?

This assessment typically reveals obvious problems teams can fix immediately, like approval workflows requiring sign-off from people who are constantly traveling.

Define objectives and policies

Draft a procurement policy covering authorization limits, competitive bidding requirements, purchase order protocols, and ethics standards. Keep it to 5-10 pages, get executive approval, then distribute with training on what's changing and why.

Set realistic objectives and baseline metrics before implementing changes. Reducing standard purchase cycle time to 3-7 days and consolidating the vendor base by 10-20% over 6-18 months are reasonable targets for most teams.

Select procurement technology

Choose software based on your current needs and existing systems:

• QuickBooks users (50-150 employees): Prioritize platforms with documented integrations like Procurify.
• Unified spend management needs: Consider Ramp's combined procurement and expense approach.
• Budget planning: Expect $500-$2,000 monthly for 50-150 employee companies, $1,000-$5,000 monthly for 300-500 employee range.

Technology should follow process design, not drive it. Figure out what the system needs to do before evaluating vendors. Understanding the impact on cash flow management helps prioritize which improvements deliver the most value.

Train teams and stakeholders

Provide onboarding training covering procurement policy, how to request purchases, approved supplier lists, and who to contact for help. Create one-page "How to Buy" guides with simple flowcharts.

Conduct annual refresher training on policy updates and celebrate compliance successes rather than just punishing violations. The best procurement system won't help if nobody knows how to use it.

Monitor and refine

Review procurement metrics monthly: cycle times, cost savings, compliance rates, and supplier performance. Identify delays and target improvements quarterly. Conduct thorough annual reviews of procurement policy, internal controls, vendor files, and training programs.

This ongoing refinement prevents the procurement function from becoming rigid and unresponsive to how the business actually operates.

Frequently asked questions

What's the difference between procurement and purchasing?

Purchasing is the transactional act of creating purchase orders and processing payments. Procurement covers the complete lifecycle including supplier selection, contract negotiation, and performance management.

How much should we budget for procurement software?

Budget $500-$2,000 monthly for companies with 50-150 employees, and $1,000-$5,000 monthly for companies with 300-500 employees. Ramp starts at $15/month per user and combines procurement with expense management in one platform, making it a cost-effective option for teams wanting unified spend control without enterprise-level complexity or pricing.

Do we need dedicated procurement staff?

Not necessarily at the 50-150 employee stage. Many companies this size manage procurement through finance managers or operations leaders. You'll know you need dedicated staff when procurement tasks consistently consume more than 50% of someone's time.