Negotiation Tactics

Hardball Negotiation Tactics- Win/Lose

Going into the negotiation by being extremely demanding and offering concessions very slowly to wear down the other party and making minor concessions after lengthy negotiations. The negotiating party is using an aggressive style of negotiation which may not be suitable for the type of outcomes required. This type of opening offer should only be used if a relationship is not important to both parties. It is more appropriate to have a walk away position in mind and go in with a more realistic opening offer.

Power to Negotiate. Your opponent may say that they need to refer the final decision up the chain, this could be a stalling technique, for them to come back to put pressure to say a decision will not be signed off by the person with authority to sign off a negotiation. If this happens request to negotiate with the more senior party who can make the final decision.

Take-it-or-leave-it negotiation strategy. This should be a very last resort because if it’s used early on, then there is no room for manoeuvre. Committing to this type of negotiation means you are putting yourself in a position where things become non-negotiable and no contract should be non-negotiable unless there is no value to signing the contract. If an offer is made and this is not acceptable, make a counteroffer until you can nail down to your best alternative and final offer.

Making concessions too early. You have made an offer and your counterpart wants a concession on the offer you made. Don’t lower your offer before they come back with a counteroffer, otherwise, you will be losing your bargaining chips and making it easier for the other party to make a lower counter offer with minimum effort.

 Demanding more and more.  Some opponents will use an aggressive tactic where they make difficult and demanding requirements that get longer and longer. They want to make it appear impossible to get agreement and want you to fold by conceding to most of their requirements. Counteract this by stating that you will only negotiate on reciprocal exchanges.

Making it personal. Hopefully negotiations never get personal. If you feel uncomfortable let the other party know why you feel their behaviour has crossed the line and explain that they need to keep a professional negotiating position.

 Massaging the truth.  How do you know if things are exaggerated or if the other party is being light on the truth? You can’t but go with your gut instinct, probe, question and test.

Making threats.  Making threats should be done with caution. Can the other party carry out their threats? Ignore it and see what happens, they could just be bluffing and if there is a corresponding fall out then you can offer concessions to get the talks back on track.

Ignoring your counteroffer. The other party might try to ignore your counter offer but be persistent.

Good cop, bad cop.Most negotiating teams will do a good cop bad cop routine. Read between the lines to decide whether if the final offer is the best one you can get.

 

Negotiation Tactics for playing nice.

Partnership Negotiation Win/ Win

In this type of negotiation work with the other party to develop expectations about the type of deal, we expect to receive. In your mind have an ideal outcome.

Use emotions to set the scene. They will be looking at your response to their opening offer and subconsciously will lower their expectations if they don’t believe it’s achievable. In the spirit of a partnership be warm and welcome but don’t act to agreeable as this might set the expectation that they can ask for more concessions.

When making a big concession, know what you want in return. Have an idea which ones you are willing to trade and whether if this trade is perceived as a big win by the other party.

One common negotiation mistake that sabotages a win-win situation is to escalate expectations by making a steep concession that could lead the other side to expect another.

Delay making an agreement. If the other party thinks it was too easy to get the agreement they will start to think they got a bad deal that they should have asked for more.

Perceptions of Your Outcome

What is a good outcome for the other party?

Both sides will form a perception. A party might sound like they have onerous requirements that initially you might disagree with, however, when you drill down to why the other party wants something, it might make sense, drill down to the “why” to find options for compromise.

Negotiation Experience

Negotiate in good faith. Research has shown that people prefer to conduct a negotiation that is fair even if it’s unfavourable for them. Even if you are in a position of power, both parties need to be happy to get the right results.

Match negotiators using the right level of seniority and experience of conducting negotiations.

I hope the negotiation tactics have been useful if you want to work with me, I provider retainer and consultancy services

 

Procurement Dictionary

Confused about procurement terminology! Here is a procurement dictionary or glossary of the main key words you need to be aware of and its meaning. The procurement dictionary focuses on the key terms that are used regularly in the industry!

Account Manager

In the hierarchy of sales positions, an account manager is responsible for managing the relationship with a series of accounts.  Typical responsibilities include diagnosing business opportunities, planning communications, managing relationships, negotiating agreements, reporting and troubleshooting problems.

Acceptance

Unconditional agreement to an offer made by another party, which may lead to a legally enforceable agreement, provided other prerequisites for contract formation are met.  Also, the acceptance of completion or performance of work, or delivery of a good

Acceptance Testing

Buyer specified quality control tests performed to demonstrate that the goods supplied have been manufactured to specification.  Tests are usually performed on a sample and, testing may form the basis for issuing a Certificate of Compliance if the lot falls within acceptable quality levels.

Accounts Payable

Accounts Payable function is the department responsible for ensuring that an organisation pays its invoices appropriately.

Accounts Receivable

Accounts Receivable is the department responsible for ensuring that sums owed by external organisations as a result of the sale of goods or services are paid according to the agreed terms.  Credit controllers may ensure that customer payments occur within the agreed time frame following the issue of an invoice by the seller to the purchaser.

Accrual 

Under accrual accounting, provision is made against budgets at a time when goods or services are received, rather than when the invoice for those goods and services is paid or received.

Added Value

A phrase often used to classify non-cash releasing benefits realised through the procurement process.  The “added value” from the procurement process may include risk reduction, stakeholder training, exclusivity, preferential access to resources etc., all of which would be classified as ‘added value’ benefits.  See also Benefits Realisation Plan, Cost Avoidance and Savings.

Aggregation

A generic term applied to the practice of volume consolidation or leverage. Demand for identical or similar categories is grouped together in order to offer the buyer greater economies of scale when negotiating with potential suppliers

Alternative Dispute Resolution

Alternative dispute resolution [ADR] includes a range of alternatives to litigation for resolving disputes between commercial entities.  The popularity of the practice has grown as the time and cost required to bring cases to court has increased and the probability of a satisfactory outcome has become less predictable

Approved List

A phrase used particularly in public sector organisations to describe a standing list of pre-qualified bidders for a particular scope of work. Instead of issuing public advertisements each time a scope of work is to be tendered, bidders may be selected from within an approved list for that category.

Balanced Scorecard

The concept of the balanced scorecard emerged in the early 1990s and advanced the view that simple financial or economic measures of organisational performance were inadequate to measure an organisation’s success.  Four perspectives were originally proposed, each of which being a separate dimension against which an organisation might measure its ‘performance’.  The perspectives were financial, customer, internal business processes and learning and growth.  The diversity of perspectives reflects the fact that an organisation’s success in realising its strategy cannot be measured solely in terms of shareholders or financial measures of performance.  The ‘balance’ refers to the measurement of an organisation’s success from a number of other perspectives, including staff and customers

Battle of the Forms

The battle of the forms describes the situation that results when parties involved in a commercial transaction exchange documentation with differing terms and conditions.  In the event of a dispute between the parties, the courts have to decide what was agreed between the parties and, in the absence of a contract, the courts in some jurisdictions will seek the last unchallenged counter offer.  In practice this often favours the supplier, as the quotation, order acknowledgement, proof of delivery and invoice all succeed buyer communications

Benchmarking

Benchmarking in procurement terms can have two specific applications.  The first type, price benchmarking involves the determination of whether commercial terms currently offered or enjoyed represent value when compared with terms enjoyed by other customers for a similar category. Price benchmarking is most easily undertaken for homogenous and simple goods, but even so needs to consider other terms of the arrangement such as quantities ordered, frequency of orders, payment terms etc.  The second type of benchmarking, performance benchmarking, also involves comparisons of key metrics against other entities, but typically addresses dimensions of organisational performance rather than price paid.  Examples might include the cost of the procurement function as a percentage of the total spend, the cost of raising and paying a purchase order, the quality of the strategic sourcing process, the quality of staff development processes etc.

Blanket Order

A blanket order is an order raised with a supplier for a specific range or category against which individual requirements will be drawn down over a period.  Typically, the overall quantities are not known precisely at the start of the arrangement, so a commitment is given to fix the terms of the agreement for a specified period, for example, six months or 12 months.

Bond

A bond is a written agreement set up by participants in a relationship in order to guarantee performance, or to provide security against default or non-performance.  Examples include bid bonds, performance bonds and completion bonds.  In each case, a sum of money is deposited as surety that each party will fulfil their obligations, as the bond may be forfeited in defined circumstances.

Business Case

A business case is a structured evaluation of a proposed decision, providing a transparent decision-making trail and evaluating the merits of the choices considered.  Typically business cases are submitted for review to senior managers and seek to distil complex issues and to provide rational choices between competing alternatives.  As an example, business cases are often prepared to consider the investment of money in equipment or new projects and would include a statement of the proposed goals, exploration of alternative options, some form of cost benefit analysis, a risk analysis, recommendations for the preferred options and, an implementation plan.  The procurement contribution to business cases may include validating the ‘do or contract’ decision, ensuring that the proposed benefits are realistic, aligning any contractual arrangements so that risk is shared with the contractors, assessing the commercial risks, ensuring that the total cost of the project is costed, not just the initial purchase price, and of course negotiating terms with any contractor in order to try to maximise the return on investment.

Business Process Outsourcing

Business process outsourcing [BPO] is a phrase used to describe the outsourcing of a specific function or range of services.  Examples might include customer contact centres, information technology support services and procurement services.  The strategic logic is that organisations have some core capabilities by which they enjoy competitive advantage over their competitors, but may undertake some other activities at which they are relatively inefficient.  Where third parties can provide these functions to the same or a higher standard at a lower cost, it can make strategic sense to outsource the provision of these services to specialists.

Category Analysis

A prerequisite to category management is a full understanding of the category in terms of the attributes of demand for the category and the supply market for the category.  Category analysis is broader than spend analysis, as the scope is both external and internal.  It seeks to develop a comprehensive understanding of the stakeholders, demand profile, supply chain, suppliers and supply market characteristics.

Category Management

In the procurement area, the term can be used in two ways: as a description of the procurement process, or as a basis for organising the procurement team.  As a description of the procurement process, category management involves applying the end-to-end procurement process to a specific range of goods or services.  This involves all the pre-award processes such as category analysis and demand management, sourcing and contract negotiation, as well as the post-award processes such as performance management.  As a basis for structuring procurement resources category management usually involves defining the need, sourcing the market, negotiating the contract and managing the providers after the award.  In order to ‘scale the role’ so that different categories represent approximately equal challenge, three key factors are considered: the value of spend in each sub-category, the diversity of the sub-categories and the challenge in the supply markets.

Change Order

A change order is the formal document through which a change is made to a construction contract, for example the scope of work or the completion date or the price of the work.  Both parties agree to the change and the implications in terms of mutual rights and obligations.

Damages

Damages are a form of compensation paid to a claimant for suffering loss, injury or harm as a result of another’s breach of an agreement.  There are several types of damages that may be claimed in the event of a breach of an agreement: damages for economic loss, reliance damages and expectation damages are three examples.  All damages represent an attempt to restore the parties to where they would have been had the breach not occurred.  Damages cannot be punitive.

Damages for economic loss may be liquidated or unliquidated.  Liquidated damages are ‘a genuine pre-estimate of the likely loss’ and represent an attempt by buyers to calculate the economic loss caused by a breach of a contract by a supplier.  Many suppliers seek to cap the scale of damages to limit their liability.  Unliquidated damages are damages assessed by the courts.  Reliance measures seek to compensate the claimant for ‘out of pocket’ expenses incurred due to the other party’s breach.  Expectation damages refer to sums that should have been earned in the future had the breach not occurred, for example lost profit.

Damages, Liquidated

A genuine pre-estimate of likely loss, liquidated damages are a pre-agreed sum of money that the buyer estimates will be lost in the event of a breach of their contractual obligations by the supplier.  The purpose of damages is to restore the parties to where they would have been if the breach had not occurred, so damages may not be punitive, but should relate directly to the buyer’s expected loss.  The implication of liquidated damages is that the buyer needs to communicate to the supplier all the likely consequences of a potential breach, so that the supplier understands the implications of a breach of the contract.  While some suppliers will seek to cap their liability, the buyer may need to make a commercial judgement about the appropriateness of transferring all of the risk to a supplier.

Demand Management

Demand management refers to the analysis and influence of levels of consumption.  It involves understanding what is bought, by whom, when, how and why, and then seeking to change patterns of consumption so that total cost is minimised.  For example, procurement processes may negotiate the rate for electricity so that it is purchased at the best possible tariff, but if usage is cut this will result in the largest saving of all.

e-Procurement

e-Procurement involves the online conduct of business-to-business procurement processes using web-based applications. The significance of e-Procurement is that it enables buyers to locate potential suppliers, review product choices, select products and make purchasing transactions directly over the Internet.  Typical e-Procurement applications include web-based ERP solutions that automate transactional procurement processes.   e-Sourcing can facilitate the location of potential supply sources, e-Tendering can facilitate simplified quotation and tendering processes, e-Auctions may allow reverse auctions and e-Marketplaces bring together multiple sellers in a single environment.

The significance of e-Procurement is not simply the automation of workflows such as requisitioning, creating purchase orders, and receiving and paying for goods.  e-Procurement solutions change the sourcing process by facilitating the value propositions of multiple suppliers to be accessed in one place and at one time to create a ‘one-stop shop’ for all categories, and reduce the friction involved in traditional commerce

Five Forces Analysis

Five forces analysis is an approach to understanding market dynamics using the interaction of five key market forces.  The market forces are the bargaining power of buyers, the bargaining power of suppliers, the threat of new entrants, the threat of substitutes, and the degree of competitive rivalry.  The aim is to understand the profitability of the industry.  The significance for buyers is that, by understanding the trends impacting on the market, the buyer can model what is likely to happen in the market.  Buyers can also exert influence on a number of the forces, most obviously the bargaining power of buyers, but also the threat of new entrants and the threat of substitutes.

Governance

Governance in procurement refers to the overall systems and procedural arrangements to ensure that the procurement process displays appropriate levels of control and probity. The key components of a governance regime are an appropriate procurement policy, procedures defining how the process should be managed, allocation of roles and responsibilities so that roles are separated and appropriately capable staff manage the key processes, and controls and review processes to monitor the conduct of the procurement process.

 

For example, a procurement policy may define when competitive offers should be obtained, and how higher value acquisitions should be managed. Selected officers may control approvals to award certain categories of spend, so that there are no ‘closed loops’.  Lower value acquisitions may be managed through simplified processes, but otherwise the governance regime may define the role and contribution of procurement staff in managing the organisation’s spend portfolio.

Hire Purchase

A hire purchase contract is an agreement to allow the use of an asset while instalment payments are made, prior to a final payment which allows title in the goods to pass to the buyer.  Hire purchase may be used instead of outright purchase where the buyer wants the benefits of usage but does not want to make the initial outlay for outright acquisition.  Instead, the buyer pays regular payments which act as rental payments, covering the cost of the asset, the interest accrued and the supplier’s profit.  When the total sum has been paid, the buyer may then buy the asset at a nominal sum or return the asset to the supplier.

Indemnity

An indemnity is a promise to compensate another party in the light of certain events occurring which cause that party to incur a loss.  As an example, indemnity provisions may help a buyer cover any costs that they incur as a consequence of their supplier performing poorly.  Indemnities are typically sought against suppliers making mistakes in advice or guidance, negligence, breach of confidentiality or another’s intellectual property rights, or breach of contract.  Conversely, buyers often include a ‘hold harmless’ indemnity clause to prevent the supplier from claiming damages from the buyer for losses incurred by the supplier.  If the clause is drafted using the terms ‘indemnify’ or ‘hold harmless’, then the Courts may interpret the clause as an obligation on the other party to prevent loss.  The use of terms such as ‘make good’ or ‘compensate’ are more likely to be interpreted as obligations to compensate the buyer for actual loss.

Intellectual Property

Intellectual property [IP] refers to ‘creations of the mind’.  There are two broad classes of intellectual property: artistic creations covered by copyright, and industrial property.  Industrial property includes patents to protect inventions, industrial designs, trademarks, service marks, commercial names and trade secrets.  Most sets of terms and conditions have clauses addressing ownership of intellectual property, as many procurement contracts seek to acquire intellectual property as deliverables of the agreement.  For example, terms may seek to clarify that pre-existing IP belongs to the respective owners, but new IP that the parties plan to create as part of a new contract, belongs to the buyer.

Joint Venture

Joint ventures are business agreements where the parties involved agree to develop a new entity with new assets and often, but not necessarily, contribute equity to it.  The parties involved maintain joint control over the new enterprise and subsequently share in any profits, as well as supporting the business initially by paying expenses and funding assets.  The purpose behind a joint venture is to bring together complementary capabilities, to share risk between contracting parties, or to ensure a degree of local ownership.  Joint ventures are part of a continuum of potential relationships between organisations and, while they are one form of strategic alliance, they are unique in the sense that a third legal entity is created.  It is a more formal arrangement than a partnership or an alliance where two or more parties agree to cooperate, generally, but not necessarily, without creating a new legal entity.  See also Partnership and Strategic Alliance.

Key Performance Indicator

A key performance indicator [KPI] is a term for a performance measure that is important to the organisation, business unit or individual who is being measured.  In procurement, KPIs are typically used as measures of supplier performance and may be part of a contract or service level agreement.  For example, in a contract for responsive repairs, the time taken to perform is important, so the time taken to respond to a call-out might be one possible performance indicator.  Choosing the right KPIs requires a good understanding of what is important to the organisation, which in this case is the time taken to make the repair, not just how quickly the engineer took to arrive on site.  Provided there are metrics for each KPI, reviewing performance can give each party an understanding of the level of service being provided.  See also Performance Review and Service Level Agreement.

Letter of Intent

A Letter of Intent [LOI] is a document outlining the status of agreement between two or more parties before a contract has been finalised and which aims to give some comfort to one or both parties that they can anticipate a contractual agreement will be forthcoming.  Whether called a letter of intent, heads of agreement or memorandum of understanding, the parties want to signal that negotiations are proceeding and they need to record the status of their negotiations such as what has been agreed, perhaps to allow one party to commence work before the final contract is agreed.

 

This can present a number of problems.  First, if the terms are poorly worded, it may be unclear as to whether the parties intend to be bound by the Letter of Intent.  Second, the Letter of Intent may actually become a contract and commit the buyer to something that they did not intend to be legally binding.  Third, contracts can take an inordinate amount of time to emerge from the governance process, and what was implied by the Letter of Intent, i.e. ‘please start work as we will probably enter into a contract with you, but we want you to commence work without a formal legal commitment’ may have to be unwound if the contract is not approved in governance, or the buyer changes plan before the contract emerges from their own governance processes.  See also Representations, Pre-contractual.

Maintenance, Routine, Operating Categories

Maintenance, routine and operating [MRO] categories are low value categories which are not an input to the production process, but which are used in support of operations.  The term is a subset of indirect materials and represents a level of classification of categories.  Examples of MRO categories would be cleaning materials, lubricants, laboratory supplies, spare parts, gaskets and industrial consumables, and in some procurement organisations these categories would not be aggregated as MRO, but managed individually.  The reason that they are grouped together is that they have some common characteristics, such as being relatively low value, and maintaining continuity of availability is a key procurement objective.

Sometimes the acronym is used to imply maintenance, repair and overhaul, which describes categories which are used to support plant, equipment and machinery.  Scheduled overhauls and maintenance campaigns require provisioning of parts and, in most situations, the cost of downtime is greater than the cost of holding inventory, so MRO often implies matching supply and demand at lowest overall total cost.

Negotiation

Negotiation is a process through which each party tries to achieve their goals in the context of the relationship with the other party.  In procurement, the other party may be a long-term supplier or a one-time supplier, and our approach may be different in each case.  However, in every negotiation we need to be clear about our objectives, and decide how we plan to achieve our goals.  For example, ‘win:win’ negotiations may be appropriate in some circumstances, and we may plan to share value with the other party, perhaps through the exchange of concessions or trading negotiable variables.  In other situations we may have no remit for the relationship with the other party and plan to claim value for us, by using facts and reason, without helping the other party ‘win’.  The common elements are clear objectives – the ‘what’ and the ‘how’ – how we plan to persuade the other party, which needs to be consistent with the relationship that we want to create.

Offer

In a legal context an offer is ‘an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed’.  Typically suppliers make offers in the form of bids, quotations or tenders, which may then be accepted by the buyer.  The offer defines the terms upon which the supplier is willing to be bound, which normally include price, date of delivery, payment terms and a description of the category.  One of the essential prerequisites for the formation of a contract is the existence of an offer.

Pareto Principle

The Pareto Principle has expression in many fields of procurement.  One is that a small number of categories represent the majority of the total spend and a small number of suppliers cause a disproportionate number of the problems.  The principle has also evolved into the ’80:20 rule’, which underpins many situations in economics and management where scarce effort needs to be focused to best effect.  For example, if 20% of all purchase transactions account for 80% or more of the total spend, focusing on these acquisitions, so that managerial effort is used to best effect can optimise the return on procurement effort.  Pareto analysis is usually seen as one dimensional, as it does not consider the business impact of the categories, or the market complexity. 

Packaging Covenant

The Australian Packaging Covenant is an agreement between companies in the packaging supply chain and government to reduce the environmental impact of consumer packaging.  The goals will be achieved by designing packaging that is more resource efficient and more recyclable, thus increasing the recycling of used packaging, and reducing litter.  The Covenant is based on the premise that industry self-regulation is preferable to government imposing its own regulations on the industry, which may be much harsher.  See also Corporate Social Responsibility.


Panel Arrangement

Panel arrangements are sourcing arrangements with multiple suppliers for the same category.  They are used in situations where there are irreconcilable user preferences or when it is not possible or desirable to single source, or when the buyer wants to promote and stimulate competition.  For example, the consultancy category is one in which there is a wide variety of user requirements, and it is not realistic to rationalise variety into ‘standard’ work scopes.  The procurement strategy may be to reduce the number of providers, and place the selected providers on a panel arrangement, so that the category spend can be consolidated with a reduced number of providers, each of whom agrees to the organisation’s terms and conditions.  A rate card may be negotiated for ad-hoc work.  See also Sourcing Strategy.


Pareto Principle

The Pareto Principle has expression in many fields of procurement.  One is that a small number of categories represent the majority of the total spend and a small number of suppliers cause a disproportionate number of the problems.  The principle has also evolved into the ’80:20 rule’, which underpins many situations in economics and management where scarce effort needs to be focused to best effect.  For example, if 20% of all purchase transactions account for 80% or more of the total spend, focusing on these acquisitions, so that managerial effort is used to best effect can optimise the return on procurement effort.  Pareto analysis is usually seen as one dimensional, as it does not consider the business impact of the categories, or the market complexity.  See also Portfolio Analysis.


Partner

Partner is a label applied to suppliers with whom the buying organisation enjoys a longer term and cooperative relationship.  It is part of a classification of potential buyer-supplier relationships, and represents a type of relationship in which both parties work to reduce waste, reduce cycle time, and create joint profit and other forms of value.  The creation of joint working teams and the adoption of common work practices are linked to longer term relationships, in which both parties forego opportunism, and work towards longer-term goals.  Such relationships are; however, time consuming to create and resource hungry.  See also Cooperation, Lean Supply, and Win:Win.


Partnering

Partnering refers to the process of developing a relationship to one in which both parties are prepared to work cooperatively.  It requires selecting the potential partner and facilitating changes in behaviour, such as the replacement of competition with cooperation and the development of trust.  If the parties have been used to claiming value from each other in win:lose negotiations, partnering implies creating and sharing that value.  For example, the parties may align the buyer’s ordering and the supplier’s fulfilment processes in a way that allows the supplier to reduce inventory levels by $100,000.  In a win:loserelationship, the party with the most power would claim that benefit.  In a partnership, the parties would expect to share that benefit in a more equitable way.  Partnering also describes the creation of a culture where the seller is open about their costs, and the buyer declines to behave opportunistically.  See also Partner and Win:Win.


Partnership

Partnership is a label given to a relationship in which the parties forego short-term opportunism and demonstrate a longer-term commitment to jointly strive for lower costs and the creation of new ways of working together to improve joint competitiveness.  In a partnership, senior managers from both organisations will meet to align longer term planning and goals, and commission joint teams to work across organisational boundaries to align systems, processes and behaviours.

 

In practice the label is sometimes used in situations that do not qualify as a partnership.  It is not possible, for example, to have partnerships with every supplier in the supply base, and ‘preferred suppliers’ do not meet the criteria for a partnership.  See also Partner and Win:Win.


Patent

A patent is a temporary monopoly that is granted for any device, substance, method or process that is new, inventive, and useful.  In return for the right to exploit the monopoly commercially, usually for 20 years, the applicant agrees to publish the details of their idea and to allow the use of the invention by others after the expiry of the patent.  Patents may be granted for a range of inventions, such as mechanical devices, computer software and some business methods.  You cannot patent an idea, only the expression of an idea.  See also Intellectual Property.


Payment Profile

The term ‘payment profile’ describes the timing and scaling of a contractor’s remuneration.  For example, some contracts include a retention clause, under which the client retains a sum of money until a defined period has elapsed.  In other contracts, the client may make interim payments to the contractor to cover out-of-pocket expenses such as the purchase of materials, based on a claim by the contractor for the value of those expenses.  Alternatively, the client may define key milestones that trigger the release of a payment on completion by the contractor.  Such stage or milestone payments represent a payment profile, and this profile is used where it is not possible or appropriate to create a simple lump sum payment upon completion of the work.  See also Incentive.

 


Penalty Clause

A clause in a contract that seeks to punish one party for breaching the agreement.  Remedies for breach of contract seek to restore parties to where they would have been had the breach not taken place.  It is not possible for the injured party to benefit beyond that from the other party’s breach, so damages which have a punitive effect on the party who breaches the agreement by enriching the injured party are not enforceable in law.  See also Damages, Liquidated.

Performance Bond

A performance bond is a sum of money lodged by a contractor with a third party, typically a bank, which is forfeited in defined circumstances.  The purpose is to compensate the client for lack of contract performance.  For example, where a catering contractor is engaged to run a catering operation, the client may seek a performance bond to be lodged with a bank, which would be triggered upon the insolvency of the caterer, or the termination of the contract for poor performance.  The scale of the bond would be calculated to equate to the switching costs of demobilising the incumbent and mobilising a new contractor.

Quality

Quality is defined within the relevant standard ISO 9000 as ‘the degree to which a set of inherent characteristics fulfils requirements’.  Requirements in this case are needs or expectations, and refer to the ability of a product or service to satisfy the customer’s needs.  Quality is rarely an absolute standard and can only be measured against a customer’s needs or reasonable expectations.  In procurement, quality is always a key factor in decision-making and is often the single most important factor; if the solution chosen is not fit for the intended purpose, why would you select it?  There are also legal obligations on suppliers to supply goods of acceptable quality.  This implies that goods need to reach a basic level of quality given the price of the goods and any description that is provided with the goods.  The goods need to be fit for all the purposes for which the goods are commonly supplied, acceptable in appearance and finish, safe, durable and free from defects and faults.

Services must be carried out with due skill and care and any materials provided as part of the service must also be fit for the purpose.

 

While the legislation is targeted at consumer transactions, it is important in business-to-business procurement that buyers make sure potential suppliers are aware of the purposes for which the purchase is required.  This is why output specifications such as performance or functional specifications, are often preferred to input specifications, as output specifications define what the solution should be able to do.

Rationalisation

Rationalisation is a strategy to achieve increased leverage through the reduction in the number of alternative solutions purchased to meet the same need, known as variety reduction, or the number of suppliers used to fulfil those needs, known as supply base reduction.  In each case, the strategy needs to consider carefully the impact of the change on the risk profile of the category, as reducing the number of alternatives may increase the likelihood of an interruption to performance.

Scope of Work

The range of activities to be undertaken as part of a contract for services.  The scope of work may specify what has to be done and by when.

Team Charter

When assembling a cross-functional or other type of team, the team formation process can be helped by the collective development of a team charter.  The team charter may define the team’s mission, objectives, processes, roles, responsibilities and values.  Teams are believed to evolve through defined phases, and developing and agreeing a charter can help the team form and establish some operating norms

UNSPSC

The United Nations Standard Products and Services Code [UNSPSC] is a widely used coding system for goods and services.  The use of a common coding system enables buyers and sellers to describe goods and services in a common way without recourse to suppliers’ own catalogue codes and descriptions.  The UNSPSC framework adopts a four or five level hierarchy, using the labels Segment, Family, Class, Commodity and Business Function (optional).  The UNSPSC is increasingly used to classify categories to allow spend analysis and to facilitate e-Commerce.

Value Chain

A value chain can be conceived at two levels: first, at the level of the firm, the value chain is a series of primary and support activities that acquire and process inputs I order to create value.  Second, at an industry level, the value chain describes the linkages between the different firms operating in the same supply chain.  Its significance for procurement and supply chain management is not limited to the fact that it proposes that participants in the same supply chain are united in a common value stream.  The value chain also identifies inbound and outbound logistics as primary activities in creating value for the enterprise.  Value chain analysis implies a review of the organisation’s key activities to identify opportunities to increase margins through a focus on a range of cost drivers.

Waiver

The voluntary relinquishment of a right or privilege.  A party to an agreement may decide to waive their rights in defined circumstances.  For example, the buyer and supplier may have originally agreed that delivery should occur on 1 April, but the buyer may, at the seller’s request, agree to accept delivery on 14 April even though it will occur two weeks after the agreed date.  Here, the buyer has waived their right to claim damages for late delivery.

Yield

In manufacturing, yield describes the ratio of usable outputs as a percentage of total output.  The term is also used in some industries as a synonym for return or profit

Zero Defects

The goal of some quality systems is the generation of no substandard outputs.  In practice, this equates to zero defects and, by way of comparison, Six Sigma quality systems aim to produce no more than 3.4 defects per million cycles.  This illustrates that zero defects is a very challenging goal

Hopefully the procurement dictionary has been useful, if not you can find the full range of availale at CIPS   The information on this page is from the information in the CIPS glossary.

Top 3 Ted Talks Video Inspiring Leaders in Business

Below you can watch the top 3 Ted Talks videos, correct in September 2017.

Below is my favorite leadership article, copied from HBR

I like this article alot, it rings true  all great leaders should make their team feel safe, distrust feeds the self-fulfilling prophecy, if things are not going well all parties need to engage but if the pattern is difficult to break, a good leader will take responsibility to break negative thought processes.

High-Performing Teams Need Psychological Safety. Here’s How to Create It

AUGUST 24, 2017

“There’s no team without trust,” says Paul Santagata, Head of Industry at Google. He knows the results of the tech giant’s massive two-year study on team performance, which revealed that the highest-performing teams have one thing in common: psychological safety, the belief that you won’t be punished when you make a mistake. Studies show that psychological safety allows for moderate risk-taking, speaking your mind, creativity, and sticking your neck out without fear of having it cut off — just the types of behavior that lead to market breakthroughs.

Ancient evolutionary adaptations explain why psychological safety is both fragile and vital to success in uncertain, interdependent environments. The brain processes a provocation by a boss, competitive coworker, or dismissive subordinate as a life-or-death threat. The amygdala, the alarm bell in the brain, ignites the fight-or-flight response, hijacking higher brain centers. This “act first, think later” brain structure shuts down perspective and analytical reasoning. Quite literally, just when we need it most, we lose our minds. While that fight-or-flight reaction may save us in life-or-death situations, it handicaps the strategic thinking needed in today’s workplace.

Twenty-first-century success depends on another system — the broaden-and-build mode of positive emotion, which allows us to solve complex problems and foster cooperative relationships. Barbara Fredrickson at the University of North Carolina has found that positive emotions like trust, curiosity, confidence, and inspiration broaden the mind and help us build psychological, social, and physical resources. We become more open-minded, resilient, motivated, and persistent when we feel safe. Humor increases, as does solution-finding and divergent thinking — the cognitive process underlying creativity.When the workplace feels challenging but not threatening, teams can sustain the broaden-and-build mode. Oxytocin levels in our brains rise, eliciting trust and trust-making behavior. This is a huge factor in team success, as Santagata attests: “In Google’s fast-paced, highly demanding environment, our success hinges on the ability to take risks and be vulnerable in front of peers.”

When the workplace feels challenging but not threatening, teams can sustain the broaden-and-build mode. Oxytocin levels in our brains rise, eliciting trust and trust-making behavior. This is a huge factor in team success, as Santagata attests: “In Google’s fast-paced, highly demanding environment, our success hinges on the ability to take risks and be vulnerable in front of peers.”So how can you increase psychological safety on your own team? Try replicating the steps that Santagata took with his:

So how can you increase psychological safety on your own team? Try replicating the steps that Santagata took with his:

1. Approach conflict as a collaborator, not an adversary. We humans hate losing even more than we love winning. A perceived loss triggers attempts to reestablish fairness through competition, criticism, or disengagement, which is a form of workplace-learned helplessness. Santagata knows that true success is a win-win outcome, so when conflicts come up, he avoids triggering a fight-or-flight reaction by asking, “How could we achieve a mutually desirable outcome?”

2. Speak human to human. Underlying every team’s who-did-what confrontation are universal needs such as respect, competence, social status, and autonomy. Recognizing these deeper needs naturally elicits trust and promotes positive language and behaviors. Santagata reminded his team that even in the most contentious negotiations, the other party is just like them and aims to walk away happy. He led them through a reflection called “Just Like Me,” which asks you to consider:

  • This person has beliefs, perspectives, and opinions, just like me.
  • This person has hopes, anxieties, and vulnerabilities, just like me.
  • This person has friends, family, and perhaps children who love them, just like me.
  • This person wants to feel respected, appreciated, and competent, just like me.
  • This person wishes for peace, joy, and happiness, just like me.

3. Anticipate reactions and plan countermoves. “Thinking through in advance how your audience will react to your messaging helps ensure your content will be heard, versus your audience hearing an attack on their identity or ego,” explains Santagata.

Skillfully confront difficult conversations head-on by preparing for likely reactions. For example, you may need to gather concrete evidence to counter defensiveness when discussing hot-button issues. Santagata asks himself, “If I position my point in this manner, what are the possible objections, and how would I respond to those counterarguments?” He says, “Looking at the discussion from this third-party perspective exposes weaknesses in my positions and encourages me to rethink my argument.”

Specifically, he asks:

  • What are my main points?
  • What are three ways my listeners are likely to respond?
  • How will I respond to each of those scenarios?

4. Replace blame with curiosity. If team members sense that you’re trying to blame them for something, you become their saber-toothed tiger. John Gottman’s research at the University of Washington shows that blame and criticism reliably escalate conflict, leading to defensiveness and — eventually — to disengagement. The alternative to blame is curiosity. If you believe you already know what the other person is thinking, then you’re not ready to have a conversation. Instead, adopt a learning mindset, knowing you don’t have all the facts. Here’s how:

  • State the problematic behavior or outcome as an observation, and use factual, neutral language. For example, “In the past two months there’s been a noticeable drop in your participation during meetings and progress appears to be slowing on your project.”
  • Engage them in an exploration. For example, “I imagine there are multiple factors at play. Perhaps we could uncover what they are together?”
  • Ask for solutions. The people who are responsible for creating a problem often hold the keys to solving it. That’s why a positive outcome typically depends on their input and buy-in. Ask directly, “What do you think needs to happen here?” Or, “What would be your ideal scenario?” Another question leading to solutions is: “How could I support you?”

5. Ask for feedback on delivery. Asking for feedback on how you delivered your message disarms your opponent, illuminates blind spots in communication skills, and models fallibility, which increases trust in leaders. Santagata closes difficult conversations with these questions:

  • What worked and what didn’t work in my delivery?
  • How did it feel to hear this message?
  • How could I have presented it more effectively?

For example, Santagata asked about his delivery after giving his senior manager tough feedback. His manager replied, “This could have felt like a punch in the stomach, but you presented reasonable evidence and that made me want to hear more. You were also eager to discuss the challenges I had, which led to solutions.”

6. Measure psychological safety. Santagata periodically asks his team how safe they feel and what could enhance their feeling of safety. In addition, his team routinely takes surveys on psychological safety and other team dynamics. Some teams at Google include questions such as, “How confident are you that you won’t receive retaliation or criticism if you admit an error or make a mistake?”

If you create this sense of psychological safety on your own team starting now, you can expect to see higher levels of engagement, increased motivation to tackle difficult problems, more learning and development opportunities, and better performance.

If Laura does a Ted Talks video, I would definitely be interested in watching it but since there is no Ted Talks you can read more Harvard Business Review Articles

How To Describe Reprocurement Definition

Is Reprocurement a word in the dictionary? Probably not, the colloquial expression is used to describe recurring purchases. Therefore the best way to describe re procurement as a definition is the “procurement of goods of services that are a recurring requirement”

Why do organisations have a requirement for reprocurment? There are certain goods and services that are required as evergreen contracts, basic examples that everyone can identify with i.e. contract such as stationery items unless your hi-tech organisation doesn’t use pens and papers if that’s the case perhaps you might have a recurring requirement for laptops and notebooks.

Depending on the value of the contract suppliers typically have to bid to win the right to supply goods or services. Sometimes there is a danger that clients prefer to re-procure with the same supplier because they know and trust suppliers that they have worked with in the past. New suppliers should not be discouraged from participating in a bid, though existing suppliers may have an advantage in knowing the customer’s preferences, this isn’t an automatic done deal, in fact, it’s far from it.  If the contract is of a certain value, its likely that it needs to be competitively tendered. Public sector organisations are subject to EU regs, even after Brexit, the 2015 Public Regulations will still exist as part of UK law. Private sector companies are obliged to tender contracts transparently and genuinely in line with the law to avoid fraud or misrepresentation cases. In addition to the law being on allowing for a level playing field, some existing suppliers get complacent and without good contract management contracts go wrong, and there may be a desire to switch suppliers and initiate a reprocurement exercise.

Most procurement departments will have a contracts register, either a cloud based contact management system or a simple excel sheet with dates of existing contract expiry. Every couple of years there will be a new need to carry out a reprocurment exercise.

Sign up to some contract finder opportunities

 

How To Use Psychology of Colour in Business

procurement templates colour

Use psychology & colour in business to make a difference. Most people are visual and subconsciously react to colours. You might notice that most men like to wear blue because it creates the sensation of trust and security i.e. police officers, or a businessman.

Wearing head to toe in one colour for business meetings can be a bit overpowering, and change up your outfit by wearing accent colours such as a tie. Females have a wider choice on how they want to wear colour.

Different color evokes similar emotional responses in most people. however there may be cultural difference people of different cultures may have different thoughts and emotions about certain colours, for example, red is normally seen as confident and fiery but in Chinese culture, it is also a sign of good luck.

When humans see the color red, their reactions become faster and more forceful. However, that boost of energy is likely to be short-lived and ultimately, red reduces analytical thinking.

Research has linked green with broader thinking and more creative thought. People generally like green. “There seems to be a positive association between nature and regrowth,”

 

When asked what their favourite colour is, the most common answer around the world is blue. This may be because when our ancestors used to see blue – like a clear blue sky or a watering hole. It’s linked to our survival instincts.

Overall, yellow remains the least likely favourite colour for most people, so pick a different colour if you want to appeal to the masses. Don’t write it off altogether, just use smaller splashes of colour and different hues.

People associate the colour orange with a good value. Sometimes I also associate it with technology.

Pink is serene, romantic and a calming colour.

Black and white are classic colours where you can’t go wrong but I wouldn’t recommend wearing just black every day as you might be perceived as boring with no flair.

Doing business is about using all the senses and an array of toolkits at your disposal to make you stand out from the crowd.

 

 

Approved Supplier List for New Supplier

What is an Approved Supplier List (ASL) and how do new suppliers get onto this list. In my experience client groups sometimes gets confused. I’m going to bust some common myths.

  1. I want to use a supplier I have used before therefore they are on an Approved Supplier list- that’s inaccurate, just because you filled in new supplier form and the supplier is in the finance system this doesn’t mean that they are on the ASL.  It just means at one point someone in the company bought goods or used their services.
  2. I want to nominate a company to become an Approved Supplier and my Procurement Department is making it difficult. You cannot just nominate a company, they need to go through a competitive tendering process in line with the organisation’s procurement policy
  3. I have tendered the supplier- therefore they are on the Approved Supplier List, this is not necessarily true, you may have tendered the requirement but it depends on what the contract allows.. If the tender was for a specific project then yes you have a contract but this does not mean it becomes an Approved Supplier where you can keep putting work through the same supplier without further competition.

 

This is a bit of a minefield but largely the problems crop up when people think there is such thing as an Approved Supplier List but the procurement department hasn’t set one up.

Approved Supplier list are useful to have but require a bit of work upfront. Firstly the contract needs to be set up to allow for multiple call offs, the best option is to advertise for a framework contract. The contract is sufficiently large should be controlled centrally with local procurement either via a direct call off or further mini competition, for example, a stationary contract is not required to be competed each time but a consultancy contract might have the different scope of works for different clients within the same organisation.

The list needs to be accessible if you are a procurement department ideally this should be published on your intranet page and updated regularly.

Approved supplier list are not evergreen, contracts should have a definitive end date and re-tendered if the requirement is ongoing.

You might want to read more about framework agreements 

 

 

First Impressions Count

First impressions count, but how do you back up the first impressions by making sure that you stand out from your competitors? You need certain skills!

Data analysis and research

The ability to identify sources of credible data, develop a fact base and format it for presentations and reports is crucial. Knowing how to collect, cleanse and collate information is, however, just the start. Expertise in analysing and interpreting it is just as important. You need to be able to identify key issues and apply analytical frameworks to identify potential for improvement. Your analyses and insights will be enhanced if you can find relevant information and market intelligence in professional magazines, on the internet or by tapping the existing knowledge within your procurement department.


Communication – verbal and written

Knowledge and insights are of little use in procurement, a very people-based profession, if you don’t know how to communicate them to others. The rising procurement professional must be able to communicate effectively both verbally and in writing. The ability to speak and write in a clear, concise and user-friendly fashion – in every format from emails through meeting notes to detailed reports and presentations – is essential.


Stakeholder management

Procurement people can often find themselves in a “piggy in the middle” situation at work, as they are mediators between different sets of stakeholders, with seemingly very different demands. Being able to identify stakeholder groups, analyse their needs and then formulate strategies to manage them in a way that works for all concerned is a crucial skill.

Strategy-setting

Attention to detail is taken as read in a competent procurement professional. In addition, you should be able to see the big picture and work out the best way forward. The ability to set a credible, workable strategy is essential for the aspiring high-flyer. Further, you must be able to implement a defined strategy efficiently with teams and revise it as necessary to produce the best results.


Project management

A successful manager is able to deliver effective projects with clearly defined objectives, methodology and outcomes. This includes identifying key milestones, dealing with risks and escalating any potential delays to relevant stakeholders as appropriate. Modern management often involves advanced structured approaches and using software project management tools. If you’re familiar with or qualified to use these, then so much the better.

Mentoring and coaching people

The best managers are not only good at what they do but are also skilled in passing on their knowledge. This is often best done informally or on the job, through mentoring and coaching. It will not only benefit those who receive your help but also make them feel valued and contribute to achieving better results for the group, and the organisation as a whole. Being recognised as a good teacher or coach is a valuable asset.

Teamwork

As many an Oscar winner has observed, the support of a team is crucial to the star’s success. Working effectively in a team allows you to deliver more than you would be able to do on your own, and will bring untold achievements. Going it alone is okay for heroes, but in the world of modern business, the group effort is what makes a real difference. As a good team worker, you need to recognise your colleagues’ different abilities and inclinations and work with them to leverage everyone’s skills and achieve the best results.


Leadership

The nature of authority has changed dramatically since the time when the boss told workers what to do and they obeyed. Now it’s all about motivating and inspiring your team to do their very best. And remember, you don’t actually have to be in the leader’s position to show leadership. Focus on nurturing and encouraging others, whoever they may be. To do this well, you need to understand other people, gain their confidence and promote objectives that they will sign up to.


Negotiation

The skill of negotiating effectively and winning agreement on a deal that is acceptable for all parties requires strong communication skills, empathy and creativity. It also needs to be supported by an ability to evaluate various options quickly. In practice, this is likely to call for comprehensive modelling and analysis of various options, and packaging these into formal meeting documents outlining negotiating strategies.

Professional image

Looking the part is essential. Like it or not, people judge others on their appearance and, if you present yourself as smart and businesslike, you are more liable to be treated as such. You should aspire to demonstrate honesty in all your dealings, a professional approach and respect for your colleagues and business partners.

Framework Award Letter

Copy and paste the framework award letter into MS word and PDF before sending to the supplier

[insert supplier name and address]  [insert date]

Dear [insert name or Sir/Madam]

Invitation To Tender for [insert product/service]

Tender OJEU Contract Notice Reference Number [insert reference number eg eg 2008/s – xx/xxxxx]

Framework Agreement Reference [insert framework agreement reference number]

I am pleased to inform you that the [insert name of the authority awarding the contract ie xyz (the “Authority”) has made the provisional decision to select your company to be a party to the framework agreement for [insert product/service].

Your company was successful in the following Lots(s): [insert Lot number(s) and description].

With this letter, I am enclosing two copies of the framework agreement for this tender. I should be grateful if you would arrange for them to be signed where indicated (but not dated) and returned to me as soon as possible.

Under Regulation 32 of the Public Contracts Regulations 2006 (as amended), public contracting authorities are obliged to introduce a “standstill” period between announcing a provisional decision in relation to the award of certain government tenders and entering into any form of binding commitment. We have therefore written to the other bidders explaining our decision.  Assuming the provisional decision remains unaltered as a result of any representations made during the standstill period, I will then arrange for the framework agreement to be executed on behalf of the Authority and completed once the standstill period expires and will send you one copy for your records.

You are strongly advised not to incur any expense or enter into any binding arrangements until such time as you receive the signed and dated framework agreement back from the Authority.

I hope that it will not cause you any inconvenience to bear with us for this short period that is necessary to allow us to meet our obligations under European law.

 

I look forward to working with you in the future.

 

Yours faithfully

[insert name and title]

Team Meeting Agenda

Capture information on Team Meetings so you don’t waste time by talking but not capturing actions. This Team Meeting Agenda should do the trick.

The purpose of a team meeting is to catch up on a regular basis to discuss a status update. Team members should all be aware of what workload their colleagues have on at any moment so they can provide a consistent service level to internal and external stakeholders at any given time.

Perhaps take it in turns to chair the meeting, giving everyone a chance to lead, some members of the team are naturally quieter than others so this gives everyone an opportunity to practice chairing meetings.

The optimal frequency is once a week but if you have fast moving projects you might want to have a quick 15-30 minute briefing session on a daily basis.

If you are attending a more formal meeting check whether if your company has official templates to be used or check brand guidelines if the Agenda is to be issued to a wider audience outside of the company.  Normally attendees are listed in order of seniority and its optional but you can list in alphabetical order and don’t forget to include job titles.

 

                                                                                                                                                                              

Location:                                                                                             Time:                   

Attendees:                                                                                                                                                                    

Purpose: Review performance & plans daily    

Project Attendees:

Agenda                                                                                Project lead

Project team

  1. Resources (planned v actual)
  2. Stakeholder visits to the hub/Meetings

Daily tasks

– Review previous day

– Plan for current day                                                                                    Input from:                                                                                                                                                                                                                          

Meeting Rules:                                                                

Adhere to the rhythm and make sure this is priority

Everybody to have an input

No interruption of others

Respect others opinions

Ask anything

Safe environment to discuss issues

What is discussed in the room stays in the room

Everybody to note their action coming out of the meeting

Be respectful

Be open, honest and supportive

Be professional and corporate

Challenge in a positive and constructive way

Be positive and upbeat – ‘can do attitude’

What Expenses Can A Contractor Claim?

As a contractor, it can be a minefield trying to figure out what you can and can’t legitimately claim as expenses. For instance, if you’re buying a new laptop, is it pushing the mark to claim for that?

Business mileage
(use of your personal car)
You can currently claim 45p per mile for the first 10,000 business miles you do in your car each year and then 25p per mile after that. This mileage includes travelling to and from temporary locations and between different sites. Of course, you need to get valid VAT receipts for fuel and these must be kept to support your claim.

Subsistence
You’ve got to eat! So, while working at a temporary location, you can claim reasonable meal and drink costs supported by valid receipts. So if you buy a sandwich and coffee for lunch, keep the receipts!

Accommodation
There are several categories for submitting accommodation costs and here’s how they all stack up:

All accommodation (hotels and B&B’s) must be accompanied by an original receipt

If you’re claiming accommodation rental costs, your rental agreement must be made under the name of your business and must be the original signed copy. It must also meet HMRC Dual Purpose rules, which means you’re already maintaining a property and are renting a second property for the purpose of your contract

You may be able to make a claim for staying with friends or family while at a temporary work place.

Travel
You can claim rail, bus, taxi and air travel as well as other travel-related costs such as tolls, tunnel fees and congestion charges, subject to the general travel rules explained at the bottom of this document.

Parking charges
Parking can be claimed as long as an original receipt detailing the date and cost is available for each amount.

Training and tuition
Any training or tuition to do with your current trade can
be
claimed. Training is treated like any other deductible
business expense; it must be ‘wholly, exclusively and
necessarily’ in the performance of duties. It must also be
directly linked to existing income, if not then it cannot be
treated as a deductible expense through your
limited company.
Manuals and text books
A reasonable amount may be claimed for the cost of
manuals and text books required for business purposes
where receipts are provided.
Eye sight tests
An eye test may be claimed for as long as a receipt is
provided. The cost of spectacles may be claimed if they are
prescribed for VDU use only. This will need to be confirmed
on the receipt from the optician.
Computers and other
office equipment
The cost of hardware, software and other office equipment
essential to your business can be claimed. There’s no limit to
the amount that can be claimed.
Postage
Office consumables
Any office consumables (printer ink, pens, etc) and stationery
you use for business may be claimed. This total cost must be
for a reasonable amount and you’ll need original receipts to
validate your claim.

Telephone
Itemised business calls from home or a personal mobile
phone are fully claimable, while unfortunately private calls
or line rental costs are not. To claim business calls a copy
of your itemised telephone bill must be kept. Internet
subscriptions cannot be claimed.
If the telephone/internet contract is taken in the company
name the full cost of the line rental/call charges can
be claimed.

Advertising/marketing
Costs of advertising your business is an allowable expense,
so for example online search engine listings, telephone
directories or even sponsorship of a local team.

Childcare
Up to £55 per week, per employee, paid to a registered
childcare provider can be claimed through your company.

Bicycle
You could claim for the cost of a bicycle through the Cycle to
Work scheme.
Charitable donations
Donations to a UK registered, HMRC approved, charity
are allowable.

Use of home as office
In 2012 a fixed rate of £4 a week was announced as an
acceptable flat rate claim for general costs associated with
the use of home as office, and it was confirmed that no
detailed expense claim needs to be prepared to justify such
an amount.

Staff entertaining

The cost of an annual staff function can be claimed through
your company. This should be supported by receipts and it’s
important that the receipts for this expense do not exceed
£150 per employee.

Pension contributions

Pension contributions made by an employer on behalf of its
employees are an allowable expense. I

Life insurance
You can save tax by paying for some life insurance policies
through your limited company.

NOTE INFORMATION HERE IS SUBJECT TO CHANGE DEPENDING ON ALLOWABLE EXPENSES, ALSO ADVICE SHOULD BE TAKEN FROM A PROFESSIONAL ACCOUNTANT- IF YOU NEED A REFEERAL TWEET ME @procuretweets and send me a direct message with your name and I will send you details of the company I use.