Pros and Cons of Having a Purchasing Agent

A purchasing agent is your company's representative in all transactions with the vendors and suppliers who provide necessary business-related goods and services. Most small businesses, however, do not have the budget to keep a purchasing agent employed on staff. In such cases, an independent purchasing agent can often be the best option.

Role of a purchasing agent

Before you can decide whether retaining the services of an independent purchasing agent is the optimal move for your business, it's important to know what the duties and responsibilities of a purchasing agent are. These generally include:

• Evaluating vendors and suppliers, both potential and current
• Establishing solid relationships with your business's chosen vendors
• Analyzing pricing and other data to ensure vendors' prices are reasonable
• Negotiating agreements with vendors and monitoring ongoing contracts
• Dealing directly with vendors when issues such as defective goods or delayed delivery arise

A professional purchasing agent also keeps an eye on trends in your industry in order to keep their purchasing knowledge up-to-date.

Pros of having a purchasing agent

The decision to hire or contract with a purchasing agent is often a big step for a small business. So before deciding, it's important to consider both the advantages and the disadvantages. The following are some of the pros:

• Management of vendor relationships. Because a purchasing agent manages the relationship between your company and its vendors, they act as your representative in any related transactions and ensure that your business continues to consistently and reliably receive the goods and services necessary to meet your profit goals.
• Negotiation of deals. The deals your purchasing agent makes with vendors have a direct impact on your bottom line. Obtaining a reasonable price point is important for a small business, as goods that cost too much will affect the profit you make from your own sales.
• Management of inventory crises. A good purchasing agent nurtures the relationships your company forms with its vendors. When unexpected events occur, your agent may be able to leverage this relationship to generate the required outcome. For example, if your company finds itself in urgent need of goods necessary to fulfill an unexpected but valuable contract, a well-connected purchasing agent may be able to obtain expedited delivery from an established vendor, without incurring an unreasonable hike in price.
• Purchasing knowledge. A good purchasing agent has their finger on the pulse of your industry when it comes to required supplies and inventory. With so many other important tasks facing them, most small business owners simply do not have the time to stay on top of issues such as price and reliability when it comes to buying from vendors.

Cons of having a purchasing agent

There are many pros of using a purchasing agent, but there's also a flip side. The following are some of the potential drawbacks:

• Costs. There's no way around this one. Whether you hire a purchasing agent or contract with an independent contractor, you have to pay for their services. Small businesses with inconsistent cash flow may find the cost alone sufficient to deter them from working with a purchasing agent, until the business grows to the stage where cash flow is more regular.
• Finding the right purchasing agent. The search for someone who's the right fit for your business can be time-consuming. You want someone who will work on your behalf both competently and efficiently but at the same time without costing too much. Making a hasty decision in choosing a purchasing agent can cause multiple headaches later on.
• Protecting your trade secrets. Your purchasing agent will have access to certain information that you need to keep confidential, so they need to be someone you can trust. To help protect your trade secrets, choose a trustworthy agent and make sure to have a properly drafted agreement in place.

If you do decide that using a purchasing agent makes sense for your business, make sure to have the proper contract in place to protect the interests of both parties. A properly drafted purchasing agent agreement can go a long way to maintaining your relationship and preventing trouble down the road.