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Procurement vs. Purchasing Explained

  • By ProcureDesk
  • November 25,2022
  • 10 min read

Procurement vs. Purchasing Explained

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From Batman and Robin to Luke and Leia– everyone knows dynamic duos can accomplish more together than apart. Even though the procurement world isn’t a fairytale, businesses still have a need for a powerful force that will help guarantee success. ProcureDesk is a proactive, reliable sidekick that will stick by your side no matter where the supply chain takes you. This business bestie is here to stay.

ProcureDesk offers a straightforward process to simplify all your purchasing and procurement functions– including supplier selection, competitive bidding, negotiating contracts, and managing supply chain risks. Visibility across all of your contacts means you’ll be better equipped to meet your company’s specific internal needs. ProcureDesk makes creating a personalized procurement and purchasing strategy simple, so you can easily meet your business objectives.

In this article, we’ll take a deep dive into procurement vs. purchasing and nail down the definitions and differences between the two. We’ll discuss the benefits of automating the purchasing or procurement process and show you just what ProcureDesk has to offer. Keep reading to have procurement vs. purchasing explained.

Procurement vs. Purchasing

If you know that procurement and purchasing are related, but are unclear on how, you’re not alone. Many people assume the purchasing process and procurement are the same. While definitely related, procurement and purchasing are not identical. Let’s think of these processes as siblings, not twins.

What is procurement?

Let’s begin with sibling #1– Procurement.

Procurement focuses on gathering potential vendor information and striking a deal to get the best price and value for your company. While procurement technically encompasses “purchasing”, we will differentiate between the two for the sake of this article. In this article, we’ll define procurement as focusing on the strategic planning of the purchasing process, including meeting company goals, managing the supply chain, building and maintaining a good relationship with suppliers, and keeping records of every aspect of the process. A greater look into the procurement cycle can be found below.

The Procurement Process

Procurement can be divided into three main sections: sourcing, purchasing, and payment.

Each of our three sections consists of multiple steps, which we’ll cover in the following paragraphs.

Steps of the Procurement Process Include:

1. Identifying the goods and services needed (Sourcing)

This step might not be as straightforward as it seems at first glance. While identifying goods and services can be as simple as restocking previously purchased items, it could also include gathering a detailed list of new items needed for a rebrand.

This first step of procurement sourcing includes determining details such as amounts, sizes, and specifications of products to make sure your company gets exactly what is needed for the end product or service.

2. Submit a purchase requisition (Sourcing)

Now that you know what exactly you need to buy, the next step is to submit a purchase request for said items. Once a request is placed, the company is notified of what is needed, how much, and by when.

Your company then reviews the request and decides whether to approve it or not. If they agree the goods and/or services are needed, the request is approved, and the procurement process can continue.

3. Find and assess potential vendors and suppliers (Sourcing)

Goods have been identified and purchase requests approved. Now comes the work of finding the best vendor for your needs–one that can give you what you need to your exact specifications. Factors companies consider when choosing a vendor are price, quality of the product, shipment details and speed, and the reputation of the supplier.

While price undoubtedly is a major factor, it is important to make sure the vendors and suppliers you choose reflect the ideals your brand represents. For example, an animal rescue organization might find it important that the suppliers from whom they receive their cleaning supplies are vegan and cruelty-free.

4. Negotiate price and/or terms (Purchasing)

Similar to assessing vendors and suppliers, this first step of purchasing requires companies to determine what specifications rank highest in importance and try to negotiate to achieve those terms.

Price negotiations, discounts for non-profits, sped-up delivery– many things can be haggled. Finding the balance between quality, delivery, and price can be tricky, so it’s a good idea to get multiple bids to see which vendor can best fit your budget and needs.

5. Submit purchase order (Purchasing)

Now that you and the supplier have hammered out a deal, it’s time to submit a purchase order. The purchase order allows you to detail to the supplier what exactly you expect to receive. Once the supplier receives your request, they’ll gather your order and prepare it for delivery.

6. Receive goods and/or services (Purchasing)

After acquiring goods and services, it’s time to review what you received. This is your chance to check your purchase order expectations against the actual product. Hopefully, the supplier delivered what was expected and everything checked out. However, if there is something you are unsatisfied with, the next step, three-way matching, will help you see at what point something got lost in translation.

7. Three-way matching (Payment)

This portion of the payment process allows you to compare paperwork. Three-way matching checks the purchase order against the supplier’s invoice and goods received to make sure all three match. If everything is in order, the procurement process can continue to the approval and payment of the invoice. If there are discrepancies, they need to be resolved before payment.

8. Approve invoice (Payment)

Three-way matching protects against fraud, saves companies time and money, and maintains correct records. Approving the invoice means everything matches and the sale can continue.

9. Arrange payment (Payment)

If everything checks out, the approved invoice will be paid. Automated accounts payable can help ensure payments are sent on time. If there is an issue, payment can be delayed, paid partially, or canceled altogether.

10. Record keeping (Payment)

Staying organized and keeping receipts, invoices, purchase orders, negotiated terms, and deals is extremely important. Managing your records and keeping them secure will benefit you when filing taxes when it’s time to reorder goods, or in the case of a company audit.

Types of Procurement

Now that we have an understanding of what procurement is, let’s discuss the three types of procurement we see in the corporate world– direct procurement, indirect procurement, and services procurement.

What is purchasing?

Now that we’ve thoroughly met the first sibling, let us introduce you to sibling #2– Purchasing.

Purchasing is the act of buying goods and services. Although purchasing and procurement are often used interchangeably, they are not the same. As stated earlier, purchasing is one element of the procurement process

To save you from having to scroll up to re-read what we’ve covered already, here is a simple review of the parts included in the purchasing process.

Steps of the Purchasing Process Include:

Key Differences

Procurement is strategic and focuses on long-term goals and overall outcomes and is fueled by corporate strategy.

Unlike procurement, purchasing focuses on short-term goals and meeting the correct terms of a sale, like price, delivery specifications, vendor comparisons, etc.

Key Similarities

Because they are related, both procurement and purchasing are part of the overarching purpose of supply chain management. A properly managed supply chain makes both the procurement and purchasing processes run smoothly.

Tips for managing procurement and purchasing processes and making the supply chain run smoothly include:

  1. Effective planning
  2. Using real-time data to track inventory and sales
  3. Making the most of automation services to save you time and money along the way

Automating Procurement and Purchasing

So you want to improve your company’s purchasing and procurement process through automation, huh?

To make the most of our before-mentioned business bestie, ProcureDesk, we first need to identify what issues companies run into when relying on traditional forms of procurement.

Traditional procurement and purchasing methods include hard copies of requests, purchase orders, receipts, and invoices, which were managed with emails, phone calls, and spreadsheets.

Problems with traditional purchasing and procurement processes include:

Fortunately for all, you readers out there, automation and procurement software from ProcureDesk can help solve each of these issues. 

Who could benefit from automating procurement and purchasing processes?

Any company looking to streamline its procurement process would benefit from automation. Success can be seen in many industries including:

  1. Healthcare
  2. Biotech
  3. Tech
  4. Hospitality
  5. Non-profits
  6. Construction and more

How ProcureDesk can Help

So, what exactly does ProcureDesk have to offer? ProcureDesk’s software offers a proactive approach to both the procurement and purchasing process. Benefits include improved efficiency, cost savings, reduced errors, effortless tracking and storage, and improved supplier and vendor relationships.

Benefits of procurement services with ProcureDesk

Improved efficiency

ProcureDesk software allows you to process invoices faster in one, central location. In fact, companies who choose ProcureDesk reduce their time spent creating and submitting purchase orders and invoices by as much as 50%! ProcureDesk utilizes an automated matching engine for faster reconciliation of invoices, purchase orders, and receipts.

You’ll be able to streamline operations and employ effortless requisition creation and simplify processes through punch-out catalogs. With ProcureDesk, you can give your employees the power to approve small purchases, speeding up the approval process.

Not only does the mobile app allows you to approve orders on the go, it automatically sends the purchase order to the vendor, saving you time and effort. ProcureDesk also integrates with your favorite programs like QuickBooks, Xero, bill.com, and more.

Cost savings

ProcureDesk offers a 3C Cost Control Framework that teaches strategies that will help reduce annual costs by 5-8% on average. Companies who use this software can implement tighter spending controls with integrated purchasing that help control spending, close books faster, and improve cash flow planning. 

Reduced errors

Nobody is perfect and human error is something we can count on. Automation streamlines the entire procurement process and risk mitigation. With ProcureDesk, let the system drive user cost accounting defaults so you never need to wonder where the cost should be booked.

Automated 3- and 2-way matching means you never have to struggle with invoice matching again. ProcureDesk reconciles the purchase order with the invoice so you don’t have to.

Effortless tracking and storage

Digitally track, manage, and store all your purchase orders in one place. No more overflowing filing cabinets or lost invoices. Stop chasing invoices and capture invoices in a single place with the supplier portal, email, and e-voicing. ProcureDesk’s Optical Character Recognition (OCR) engine extracts the invoice data and matches it to the correct purchase order automatically, giving you peace of mind.

Improved supplier and vendor relationships

ProcureDesk helps customers with building supplier relationships and supplier relationship management. Our program offers real-time communication, which helps your company make payments on time– meaning your suppliers will love working with you.

It’s time to ditch the spreadsheets and get instant cash flow visibility without spending hours tracking orders. Let ProcureDesk give your company a competitive advantage by upping your procurement strategy through automation. The central dashboard easily tracks invoice and purchase data, such as approved and pending purchases.

ProcureDesk Offers

As your business bestie, ProcureDesk takes care of its customers– we have a whole list of offers and guarantees including:

  1. 14-day free trial
  2. Personalized demos to determine what plan would be best for your needs
  3. A 30-day money-back guarantee means no stress sign up
  4. ROI guarantee: If you don’t see an immediate reduction in the time spent on processing purchase orders and invoices, then the first month is on us.
  5. Non-profit discounts of 10% off

ProcureDesk Pricing and Plans

Tiered plans and monthly and annual options with available add-on modules mean your ProcureDesk experience is catered to your needs, and you won’t be paying for features you don’t need. Click here to get more details about ProcureDesk pricing and available plans.

What ProcureDesk Customers are Saying

Don’t want to take our word for it? You don’t have to! Check out testimonials and reviews from real ProcureDesk customers:

  1. Click here to read about ProcureDesk case studies
  2. Customers gave ProcureDesk a 4.9/5 star rating on Capterra and 4.8/5 stars on GetApp
  3. Hundreds of growing companies love ProcureDesk including:
  4. Electric
  5. Clade Therapeutics
  6. Boston Materials
  7. 1859, and more

Key Takeaways

Procurement vs. Purchasing

Procurement encompasses the entire process of gathering information, vetting suppliers, purchasing goods and services, and approving and paying invoices. Procurement is a largely strategic process that requires planning and research and focuses on long-term goals and corporate strategy.

Purchasing is a key element in the procurement process that focuses on short-term goals such as the price and delivery time of goods and services. Purchasing includes negotiating terms, submitting purchase orders, and receiving and inspecting goods. 

Automation with ProcureDesk

Automation can help the supply chain run smoothly and therefore improve both procurement and purchasing. Companies that use ProcureDesk will experience improved efficiency, cost savings, reduced errors, effortless tracking and storage, and improved supplier and vendor relationships.

ProcureDesk is a powerful tool for any business looking to gain a competitive advantage and take a proactive approach to managing purchase orders and invoices. Think of it as your one-stop shop to simplify the procure-to-pay cycle. ProcureDesk software offers everything you need to manage and streamline the entire procurement process. Start your free trial or check out a demo today!

What you should do now

Whenever you’re ready… here are 4 ways we can help you scale your purchasing and Accounts payable process.

  1. Claim your Free Strategy Session. If you’d like to work with us to implement a process to control spending, and spend less time matching invoices, claim your Free Strategy Session. One of our process experts will understand your current purchasing situation and then suggest practical strategies to reduce the purchase order approval cycle.
  2. If you’d like to know the maturity of your purchasing process, download our purchasing process grader and identify exactly what you should be working on next to improve your purchasing and AP process.
  3. If you’d like to enhance your knowledge about the purchasing process, check out our blog or Resources section.
  4. If you know another professional who’d enjoy reading this page, share it with them via email, Linkedin, Twitter.