# How to Calculate Your Procurement Savings

by Emily Weller

In business, the term “procurement” refers to the cost of purchasing goods and services needed to run your company. Choosing vendors and suppliers is a key part of procurement. Drawing up contracts with those vendors allows you to set the price you’ll pay and what you’ll receive in return. Procurement savings is the money your business doesn't spend on goods or services, compared to what you spent for the same purchases in previous years.

1. Review your suppliers and vendors and evaluate the costs associated with each from year to year. If you adjust contracts annually, you may be able to save money. For example, you might find a less expensive paper supplier one year. After coming to an agreement with that supplier, compare the cost of the paper from the new supplier to the cost of paper from your current supplier. You may also opt to save money on supplies by splitting suppliers. For example, you could order white copy paper at a lower cost from your old supplier and colored paper or notepads for less from a new supplier.

2. Examine how your company uses supplies and services that you purchase during the year and develop ways to reduce consumption. For example, evaluate how much paper your company uses each year and develop ways to reduce paper consumption, which will result in savings. If you find that each employee uses three reams of paper per year, calculate the cost. If a ream of paper is \$10 and you have 300 employees, you spend \$9,000 on paper a year. If your employees reduce paper use to one ream a year each, you only spend \$3,000 on paper, a savings of \$6,000.

3. Streamline costs and look at the difference in price. Manually placing multiple orders for the same item during the year costs your company in terms of time and money, as you must pay an employee for the time spent working on each order. Switching to automatic orders may save you money. Additionally, changing your payment method may save money. Look at how much it costs to cut a check versus using a credit card to determine potential savings on your procurement orders.