Functions in Purchasing Process

Functions in the Purchasing Process

1. Requisition- the need for goods/ services is identified and a request to purchase is made by an authorized employee to the purchasing department

o Doc: Purchase Requisition- a written request for goods.

2. Purchasing- Purchases are coordinated through the purchasing department to ensure goods are acquired in the right quantities at the lowest possible prices.

• Each company should have a policy, which requires different levels of authorization for different dollar values of purchases (higher dollar purchases should require higher level of approval).

• Should limit access to changes to the Vendor access file (approved vendors)

o Doc: Purchase order- records the description, quantity, quality for the goods to be purchased. Usually used to indicate the purchase has been authorized. Should be assigned a sequential number.

1. Receiving- receipt of the goods/ services, involving counting and inspecting goods for accuracy and quality.

• This is the point when most companies recognize the liability (and update inventory).

• One copy sent to storeroom, one copy sent to AP

• Need to safeguard goods to prevent theft

o Doc: Receiving Report- written documentation of the number and date received (and other relevant data).

2. Invoice Processing- AP department receives the invoice and processes it for payment.

• KEY CONTROL: 3 WAY MATCH. At this stage the PO, Receiving report and invoice are matched and a comparison of the details are should be performed.

• The PO indicates approval of the purchase as well as the number ordered and agreed upon price. The receiving report indicates the number of good received. The invoice indicates the number of good invoiced and the price. Accounting agrees the total of all 3 before payment is processed.

• Any discrepancies are followed up before payment is...