Shopping for Accountants (Procurement Process & Quotes)

This week we talk about shopping! Accountant’s have all kinds of rules about buying things. We are going to talk about one in this exciting video!

VIDEO SUMMARY

In this video, I am going to be talking about shopping from an accounting perspective, and I am going to reveal the most important procurement rule.

So we are going to talk about shopping. And I am going to reveal in this video, the most important thing you can do, to make yourself better at shopping. So accountant’s have a whole set of rules around buying things. And the goal of all these rules is to ensure that businesses are making the best purchases. And this is a whole field of study called procurement, or purchasing, or supply chain.

This is a very deep field. You can get entire degrees in supply chain. But I am just going to focus on one rule, and in my opinion, this is the most important rule in procurement. Here is the rule: “Get three quotes.” Now this sounds simple, but most people don’t fully understand the significance of this statement. So I want to spend a little time talking about what this really means and why it’s important. Because if you can understand this, you can create enormous amounts of value.

So what do I mean by get three quotes. If you are going to make a significant purchase, you want to shop around for the best value. So you have an item in mind, and you are going to want to go to three different suppliers and find out their prices. Now you don’t want to call people up and get a verbal quote over the phone, because that is likely going to change when you show up in person. You need something written down, or you can print something out from someone’s website. You need the actual dollar amount on a piece of paper, and you need three of them to compare prices.

Now you might be saying, what is the big deal. It seems like a simple thing. But so few people actually do this. And the reason is because we are all so busy. We have so little time, and it takes effort to get these three quotes. So what often happens, is a person will go into a store, get the first price that seems reasonable, and make the purchase, so they can move on with their life.

And I can relate. I just went through this in my personal life. So I really love my car, and it has a really nice paint job. Two weeks ago, I walked out of my office and found the side of my car all banged up. Luckily, I have insurance, but it is still going to be a significant purchase to repair. So I went about getting three quotes. So I go to the first body shop and I get my first quote. They are professional and they give me a reasonable price. So then it hits me, I really don’t want to spend the time going to all these other body shops and getting more quotes. Can’t I just take this reasonable offer, and get on with all the other stuff I need to do today. But I said NO. I am going to get three quotes. So I spent half a day driving around and getting three quotes to repair my car. And it was really quite interesting. All three body shops gave me three different ways to fix my car. Ultimately, I chose the third body shop I visited. And I am so glad that I took the time to thoroughly research this purchasing decision.

What is really going on here is you are gathering knowledge. The more information you have, the better decisions you make. So in the example with my car, as I am going to each shop, I am learning about the prices in the market, I am learning about the different ways they are going to fix the car. So by the time I get to the last body shop, I can speak really intelligently about what I want. And when you are negotiating prices, the person with the most knowledge of the situation, usually wins. The reason why car repair shops so often can rip people off, is that they have all the knowledge and the customers have very little. But if you can come in with a complete understanding of the prices, you can be very confident in your purchase. With this purchase, I am so confident with the purchase. I am confident I got a great price. I am confident I will get a good quality repair job. I am confident the repair shop is not ripping me off, and my insurance company is not ripping me off.

So the biggest complaint of this rule is “I don’t have the time.” Most people don’t want to waste half a day driving around and getting quotes. And that’s okay. You can make the business decision to focus more on saving time, than having a good purchasing process. But if you do that, do not kid yourself that you are good at shopping. Because you are not. You are probably leaving money on the table. And my first response to people who complain about not having the time, is to tell them, “Buy less stuff.” I think people just buy too much stuff. I constantly walk into businesses that have so much stuff lying around they never use. People have garages full of items they don’t need. If you buy less stuff, you will have more time to make good purchases on the things you really need.

And to be honest, you can even go more hard core than this on high dollar value purchases. When I first bought my car, I studied the car market for 6 months. I tracked the sales prices of every similar car that sold in my area over a six month period. I knew that market so well. So when I did find the car I wanted, I knew exactly what I was willing to pay for it. Now I realize this is a little over board, but I am just a crazy accountant. But I just want to get across this central idea. Shop around before you make a purchase. This small thing, can have a huge impact on your business and on your personal life.

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Neither Zach De Gregorio or Wolves and Finance Inc. shall be liable for any damages related to information in this video. It is recommended you contact a CPA in your area for business advice.