Procurement process Flashcards
The procurement process describes the
steps and rules that need to be followed to order, receive, and pay for goods and services. The process itself will vary from organization to organization, and for different types of purchases. The higher the value, the more steps we need to follow.
The procurement process is built on the principle of separation (or segregation) of duties. Sharing out responsibility between different people, and incorporating a range of checks, protects those
involved and minimizes the opportunity for fraud or influence from suppliers.
Each stage of the procurement process generates paperwork and supporting documentation, such as purchase requisitions, quotations, purchase orders, goods received notes, invoices, and payment vouchers.
All such documentation should be filed together for each transaction and for reference and audit purposes.
The procurement process
- Prepare specification, check budget
- Prepare purchase requisition
- Check and authorize requisition
- Obtain quotations
- Select supplier (purchasing panel)
- Issue purchase order
- Receive goods
- Receive & check invoice
- Prepare and authorize payment authority
- Pay supplier invoice
- Enter payment into cashbook
The procurement process
- Prepare specification, check budget
Specify the standard, quantity and estimated price of goods or services required, as described in activity plans. Check the budget in case price has changed since it was prepared
The procurement process
- Prepare purchase requisition
An internal request is prepared, usually on a standard form for that purpose. This formally requests the purchase of the goods or services specified. The request will include a description of the purchase and state why it is required.
The procurement process
- Check and authorize requisition
The purchase requisition will be checked and authorized by the budget holder or other authorized person, separate from the requestor. This is to verify that there is a genuine reason for the purchase and that budget is available.
The procurement process
- Obtain quotations
Quotations from reputable independent suppliers are requested (in accordance with internal procedures and funder rules). This makes sure an organization gets best value for money and minimizes the risk of collusion.
The procurement process
- Select supplier (purchasing panel)
Quotations are reviewed and a supplier is selected based on price, quality, delivery times, and after-sales terms to ensure value for money. For larger purchases, it is usual for a purchasing panel to select the supplier by evaluating or comparing the quotations or bids. This panel is sometimes called a purchase committee and is made up of a small group of authorized staff.
The procurement process
- Issue purchase order
An authorized purchase order (PO) is sent to the selected supplier with a copy kept on file with the supplier’s quotation. This is a legally binding contract.
The procurement process
- Receive goods
When supplies are delivered and checked, a goods received note (GRN) is usually signed to confirm receipt. A copy is filed with the purchase order for later reference.
The procurement process
- Receive & check invoice
The invoice and payment terms are checked. The invoice is then matched up with the GRN, PO, and quotation, often by the finance team.
The procurement process
- Prepare and authorize payment authority
A payment voucher is prepared and attached to the invoice and all the supporting documents. It includes budget and accounting codes and must be checked and authorized by the budget holder or other nominated person.
The procurement process
- Pay supplier invoice
Payment should be made to the supplier within the specified payment terms, usually 30 days. The invoice is stamped “paid” and payment date and details noted on payment voucher.
The procurement process
- Enter payment into cashbook
The final stage is to record the payment in the organization’s books of account.
