5 Bad Purchasing Habits Every Entrepreneur Should Avoid


Do you ever catch yourself repeating the same bad purchasing habits that kill your budget? I am talking about die-hard habits such as buying things on impulse to cheer yourself up, or,   even worse, purchasing new inventory without doing a proper inventory check! The sad reality is that bad spending habits are more likely to stunt the growth of your promising business.

Like Tony Robbins once said, “If you always do what you’ve always done, you’ll always get what you’ve always got.” Put differently: When it comes to your business, you’re likely to get the same results if you don’t improve the purchasing process. And this involves making improvements in several areas, not just one.

You may be asking yourself, “What needs to change before the finances of my business   improve?” Well, first, you need to change your mindset then the rest will follow.

Let’s explore the following purchasing habits that should be avoided.

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1.Purchasing excessively on credit

purchasingIt’s normal for entrepreneurs to kickstart their businesses using credit cards, business loans, overdrafts, etc. There’s nothing wrong with using credit to finance your business. The problem lies in abusing credit – a habit that will set you back.  For instance, using credit for frivolous purchases, such as restaurant bills, bar bills, and clothing is a big no-no.

If you don’t get out of swiping your credit card for small unnecessary purchases, your credit card balance may balloon, which could mean you won’t have access to credit when your business seriously needs it. Furthermore, as interest on your credit card compounds every month, paying it off becomes difficult for you, and might take longer than you anticipated.   Money that you could have invested somewhere else in your business will go towards servicing debt.

2.Failure to record all company purchases

Some entrepreneurs start off on the right foot.  During the early days of running their business, they’d religiously record all the day-to-day transactions such as sales, received payments and purchases. But as record keeping requires a more concerted and deliberate effort, along the way they would stop recording. They then assign record keeping to an employee who would not be as consistent as required.

Daily recording of company purchases is imperative for the growth of your business. However, how often you record versus how you record these transactions is what separates failure and success.

Having a journal where all purchasing transactions are recorded doesn’t mean accessing purchase reports will be quick. Only computer software can allow you to access purchase order reports in the blink of an eye.   And, you can’t just use any software, it has to be a user-friendly purchase order software like Paper-based purchasing journals increase the likelihood of errors and take time and space to keep.

3.Failure to plan for purchases

Does your business purchase or sell goods from time to time? If that’s the case, then it’s important that you have a purchasing plan or strategy in place. According to Small Business, planning for purchases helps businesses achieve their objectives better than businesses that purchase on a whim. Generally, the strategy would outline crucial areas such as the mission of your business, competitors’ strength or weakness and your company’s objectives, but they don’t have to be that detailed.

Your company can have a simple purchasing plan that highlights your short and long-term goals and how much it costs to achieve them. You can then list the descriptions of all the necessary products, where to buy them, their quantities, and when you’d buy them. This plan will help you to set up a monthly budget, which is also a great thing to have in your business.

4.Not creating budgets

Making monthly purchases for your business without using any budget whatsoever is a huge red flag. And if your business has never used any budget at all, you have more reason to worry. Creating a budget will provide a guideline for expected income and expenses and help you achieve your financial goals.

Indeed, creating budgets is not always comfortable as it requires hours of sitting down and reviewing your expenses to see which ones have increased and which ones haven’t. So, where do you begin drafting a budget? You’ll need to tally all your monthly costs. See which ones have more ROI than the others. Expenses that you should always keep an eye on include: Fixed costs such as rent, insurance, car payments, salaries, etc. Then take a close look at your variable costs too. Examples include telephone bills, advertising costs, fuel, and so on.

5.Not tracking purchases

How does your company currently track purchases? I am asking this question because I know that tracking purchases while your company still uses paper-based purchase orders can be nightmarish. What’s the difference?

A Paper-based purchase order system:

Let’s say your receptionist is responsible for placing orders. Every time there is a need for packaging material at your warehouse, the warehouse manager picks up the phone and tells the receptionist how many packing materials the warehouse needs. Then the receptionist scribbles down the needed quantity and drafts an email that she sends directly to your supplier.

Because you have been doing business with the same supplier for years, you feel there’s no need for quotations and requisitions. All it takes is just one email requesting that the supplier delivers 100 packaging materials and 5 boxes of brown tape. While you’ll be copied on this email this doesn’t mean you can track the entire purchasing process in real-time. Once the supplier delivers, he submits the invoice (which may be inflated) for payment. Your finance guy asks you to authorize the payment and thereafter processes it. Just like that, money would leave your bank account without you being in control of your company’s spend.

Automated Purchase Order system:

When your business uses a purchase order software such as, the purchasing process will be totally different. For starters,  your receptionist will not just place an order through an email. She’d find out how many packing materials are needed, how many are available and how much they cost. Then, she would send a purchase requisition with an attached quotation to you to reject or approve. As is a web-based purchase order, you’d be able to do this quite easily irrespective of where you are. enables decision-makers to comment on or amend the purchase order to suit their budget. This way your business will always spend sparingly and you’ll always have sufficient financial resources to meet any arising purchasing needs.

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