Procurement vs. purchasing:
Knowing the difference can change everything

What’s the difference between procurement and purchasing? It’s more than you think—and knowing it could save your business time, money, and headaches.

Procurement and purchasing might look similar at first glance, but they’re not.

Procurement is strategic, whereas purchasing is tactical. 

But they are both essential.

When you understand how they work, you’ll find new ways to save time, cut costs, and make your processes smoother.

This article will break it down for you. You’ll learn:

• What procurement and purchasing really mean.
• Step-by-step guides to each process.
• How they’re different and why it matters.
• How they work together in the procure-to-pay cycle.

Let’s get started!

What is procurement?

Procurement is a process that ensures your company gets the right goods or services at the best possible value. This is done while also building lasting relationships with suppliers. 

A good procurement strategy ensures your company gets the right goods and services.

Is procurement and purchasing the same? Not quite. Unlike purchasing, which focuses on transactions, procurement involves steps designed to align spending with your broader goals.

• It starts with identifying what your business needs.
• It includes researching and vetting potential suppliers.
• Negotiating contracts is a key part of the process.
• Finally, procurement ensures everything is delivered on time and meets the agreed standards.

This isn’t just about saving money. It’s about creating long-term value, reducing risks, and improving the quality of what your business relies on.

Example:

Imagine you’re an IT director engaged in SaaS procurement looking for the perfect SaaS platform for your company. 

You don’t just pick the cheapest option—you evaluate your company’s needs, research suppliers, negotiate terms, and secure a deal that works now and can grow with your business. 

That’s procurement in action.

It’s strategic, relational, and crucial to keeping your business on track.

Steps in the procurement process

The procurement process isn’t just about picking the first option that looks good. It’s a detailed and strategic process designed to make sure you get the best value while reducing risks. 

Here’s how it all comes together, ensuring each step is optimized for efficiency and procurement visibility:

Step 1: Identifying needs

Every good procurement journey starts here. What does your business really need? This step is about aligning your company’s goals with the right solution.

Example: You realize your team struggles with tracking projects and needs a collaborative SaaS tool to streamline workflows.

Tip: Get everyone involved. Don’t guess what your business needs—ask! A quick survey or brainstorming session with your team can uncover insights you might miss on your own. 

Step 2: Market research and supplier sourcing

Time to hit the market. This is where you research suppliers to find the best fit.

Think quality, cost, reliability, and delivery speed. Doing your homework now prevents headaches later.

Example: You find three SaaS providers and compare their pricing, customer reviews, and additional features.

Tip: Do your homework. Use online platforms like G2 to explore vendor reviews. It’s faster than starting from scratch, and you’ll get a clear view of which suppliers meet your specific needs. 

Step 3: Request for proposal (RFP) or quotations (RFQ)

Now you get formal. An RFP or RFQ helps you understand what suppliers are offering.

This step ensures clarity and gives you options tailored to your needs.

Example: You send an RFP asking vendors to show how their software can handle 200+ users and provide custom integrations.

Tip: ​​Ask the tough questions. Your RFP isn’t just a formality, it’s your chance to test vendors. Include questions that dig into their ability to handle your unique challenges like scaling up quickly or meeting compliance needs.

Step 4: Vendor evaluation and selection

Not all vendors are created equal. This is where you analyze the proposals to find the best mix of cost, value, and reliability.

Example: After reviewing proposals, you choose a vendor with scalable pricing and excellent customer support.

Tip: Score it out. When faced with multiple options, create a scoring sheet. Rate vendors on cost, quality, customer support, and anything else that matters to your business.

Step 5: Negotiation and contract finalization

Time to seal the deal. You’ll negotiate pricing, support terms, and delivery schedules.

A strong contract locks in value and ensures both parties are clear on expectations.

Example: You secure a discount for committing to a two-year deal and ensure it includes training for your team.

Tip: Come prepared. Know what’s negotiable and what’s not. Do your research on standard contract terms in your industry, and walk into negotiations with three non-negotiable priorities. 

Step 6: Order placement and implementation

This is where the wheels start turning. Once the contract is signed, you place the order and begin rolling out the solution.

Example: The SaaS provider sets up your team, configures the system, and offers onboarding sessions.

Tip: Set the tone early. As soon as you place the order, schedule a kick-off meeting. It doesn’t have to be formal, but it should set expectations, clarify roles, and align timelines.

Step 7: Monitoring and supplier relationship management

The process doesn’t stop once the product is delivered. You need to track performance, resolve issues, and maintain a good relationship.

Example: You regularly check system performance and attend quarterly review meetings with your vendor.

Tip: Don’t go silent. Regular check-ins with your supplier, whether quarterly or monthly, keep the relationship healthy. Use these sessions to review performance metrics and brainstorm ways to improve. 

What is purchasing?

Purchasing is where the action happens. It’s the process of acquiring goods or services your business needs right now. Purchasing and procurement are closely related but distinct processes.

Unlike procurement, which focuses on strategy and relationships, purchasing is all about execution. It’s about efficiency: getting the right items, at the right time, for the right price.

• It’s transactional. Purchasing handles the day-to-day buying. Think raising purchase orders, approving requests, and ensuring payments are made on time.
• It’s focused. The goal is simple, fulfilling a need quickly and cost-effectively.

Example:

Imagine your marketing team needs extra SaaS licenses to onboard new hires. The process kicks off with a requisition form. Once it’s approved internally, a purchase order is sent to the SaaS vendor. Soon after, your team is up and running, equipped with the tools they need to succeed. That’s purchasing, efficient, and to the point.

H2: Steps in the purchasing process

Purchasing isn’t just about placing an order—it’s about ensuring every step is smooth, efficient, and error-free. 

Here’s how it happens:

Step 1: Receiving the purchase requisition

Someone in your team identifies a need and submits a requisition for approval. It’s the first checkpoint in the purchasing process.

Example: Your IT team requests 10 new SaaS licenses for onboarding employees, explaining why they’re needed and how they’ll be used.

Tip: Get it right from the start. Make sure requisition forms are detailed and clear including things such as what’s needed, why it’s needed, and when it’s needed. 

Step 2: Approval of the requisition

Not every request gets a green light immediately. The requisition needs to be reviewed and approved by the right people to ensure it fits within budgets and policies.

Example: The finance team checks the request against the department’s budget and confirms the expense is aligned with the company’s goals.

Tip: Don’t let approvals drag. Use automated workflows to send requests straight to the right person and avoid delays. 

Step 3: Requesting and evaluating quotes

Time to shop around. If quotes are needed, this step ensures you get the best deal without compromising on quality.

Example: For the SaaS licenses, the purchasing team confirms pricing with the vendor and explores discounts for a multi-year agreement.

Tip: Cast a wide net. Always get at least three quotes and take time to compare. Price is important, but so are delivery terms, warranties, and hidden extras. 

Step 4: Issuing the purchase order (PO)

This is the official go-ahead. The requisition turns into a purchase order, which acts as a contract between you and the supplier.

Example: The PO is sent to the SaaS vendor, detailing the number of licenses, price, and expected delivery timeline.

Tip: Accuracy is everything. Before you send the PO, double-check every detail such as quantity, price, and delivery timelines. 

Step 5: Receiving goods or services

Now it’s about making sure you get what you paid for. Goods are checked, services are 

reviewed, and any discrepancies are flagged.

Example: The SaaS vendor activates the licenses, and your IT team tests them to ensure they meet expectations.

Tip: Never assume everything’s fine. Use a checklist to confirm items are as ordered or services meet expectations. If something’s off, raise it immediately. 

Step 6: Invoice processing and payment

Finally, the supplier sends an invoice, which is matched against the PO, and delivery confirmation before payment is made.

Example: The finance team reviews the SaaS vendor’s invoice, ensures it matches the agreed terms, and processes payment on time.

Tip: Check, check, and check again. Match the invoice to the purchase order and receipt. It’s a quick but essential step to avoid errors or overpayments. 

Procurement vs purchasing: Key differences

Procurement and purchasing might sound like the same thing, but they’re not. 

Procurement is all about strategy, thinking long-term, building relationships, and aligning spending with your company’s goals. 

Purchasing, on the other hand, focuses on execution. It’s the tactical side of things, making sure the orders are placed, goods are delivered, and payments are made.

Understanding the key differences between purchasing and procurement can help your business optimize both processes.

Procurement vs purchasing comparison

Think of procurement and purchasing as parts of the same process. Together, they make up the procure-to-pay cycle, which ties strategy and execution into one seamless flow. Here’s how it works:

Procurement steps

• Identify needs: Start by figuring out exactly what your business requires.
• Source suppliers: Research and vet potential vendors. Make sure they meet your standards for quality and cost.
• Negotiate and finalize contracts: Lock in agreements that provide value and minimize risk.

Purchasing steps

• Raise purchase orders: This is where the action begins. Convert requests into official orders with all the details in place.
• Receive goods or services: Check everything as it arrives. Does it meet the agreed standards? If not, flag it immediately.
• Process invoices and payments: Match the invoice with the PO and delivery receipt, then clear the payment. No surprises, no delays.

The role of technology in procurement and purchasing

Technology is reshaping procurement and purchasing, helping you work faster, smarter, and more effectively.

Here’s how procurement software can transform your process:

• Automate the boring stuff. Requisition forms, approvals, and invoice matching are repetitive tasks that take forever if you do them manually. E-procurement platforms handle them all automatically, saving you time and reducing costly errors.

• Turn data into decisions. Modern procurement tools don’t just collect data—they give you real-time insights. Track spending, measure supplier performance, and spot opportunities to cut costs. You’ll make smarter decisions faster.

• Get everyone on the same page. Cloud-based systems make teamwork easy. With shared dashboards, procurement, finance, and operations teams can collaborate seamlessly, avoiding delays and confusion.

• Simplify SaaS chaos. Managing software licenses can be a nightmare. Specialized procurement tools for SMBs procurement track what you’re using, flag unused subscriptions, and stop you from overpaying. It’s a game-changer.

• Work smarter, not harder. Technology doesn’t just speed things up—it puts you in control. With streamlined workflows and better oversight, you’ll spend less time firefighting and more time focusing on what really matters.