Accounting technology / Glossary / Procurement

What is procurement?

Definition

Procurement is the set of activities an organisation uses to acquire the goods and services it needs: deciding what to buy, finding and choosing suppliers, negotiating prices and contracts, approving purchases and placing orders. It controls spending before it happens, while accounts payable deals with the invoices and payments that follow.

Also calledpurchasingsourcingstrategic sourcing

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Controls: Spending before it happens
Main output: Approved purchase order or contract
Hands over to: Accounts payable

How procurement works

Procurement has a strategic side and an operational side. Strategic sourcing analyses where money is spent, runs tenders, negotiates contracts and manages supplier relationships and risk. Operational purchasing handles everyday requests: an employee asks for something, the request is checked against budget and policy, approved, and turned into a purchase order with an existing or new supplier. The purchase order then supports the three-way match when the invoice arrives. Finance cares about procurement because it is where commitments are made: spend that bypasses it shows up as surprise invoices, off-contract prices and unbudgeted costs. Smaller companies often combine light procurement with cards and spend management. Coupa and Zip run procurement for larger companies, Payflows covers intake, vendor management and payments, Payhawk adds purchase requests to its spend platform, and Vertice negotiates software contracts.

Common questions

What is the difference between procurement and purchasing?+

Purchasing is the transactional act of ordering and buying. Procurement is wider: it also covers deciding what to buy, choosing and managing suppliers, and negotiating contracts.

What is the difference between procurement and procure-to-pay?+

Procurement covers sourcing, requests, approvals and ordering. Procure-to-pay is the full process including receiving goods and paying the invoice through accounts payable.

Why should finance care about procurement?+

Because that is where spending commitments are made. Good procurement controls catch unbudgeted or off-contract spend before the invoice arrives, rather than after.