While the process of procurement might be ostensibly simple, it’s paved with stages and levels that require dextrous navigation, constant analysis and frequent monitoring throughout. Rather than simply locating the necessary goods, paying for them, receiving said goods and documenting the transaction, the process is a constantly evolving one.
As such, there is no one-size-fits approach to the procurement process; it can be entirely dependent on the organisation. Those on the more formal side will opt for a process in line with their values and one which complies with strict guidelines, while other organisations may differ.
Here, we offer guidance on how to approach the procurement process, as well as tips and advice on how to effectively navigate the acquisition of products in an effective manner.
How to Approach the Procurement Process
Procurement is set in motion when a business requires goods or services to achieve its needs. Whether it’s external, internal, a new item or something being re-ordered, it will likely be a necessary component required to run the business. At this stage, you’ll identify what the item is, the amount you’ll need, when you’ll need it delivered and the approximate cost of all the items
You’ll begin to source potential vendors that can provide you with the necessary goods at the best price and quality. Unless you already have a list of trustworthy, dedicated vendors, finding vendors who can offer you a high level of quality for a good price, that’s reputable to boot, is undoubtedly important. It’s possible you’ll be building a long-term relationship that’s mutually beneficial, so finding a vendor you’re comfortable working with is crucial.
Once you’ve decided what items you require and which vendor you’ll be buying them from, you’ll need to get the go-ahead from the department with the funds needed to make the purchase. For this, you’ll need to create and submit a purchase requisition before you can actually go ahead with the order itself.
When the purchase requisition has been approved, the appropriate department then sends a purchase order to the vendor you’ve chosen to work with. If you haven’t signed a contract with the vendor, then the purchase order will be legally binding in the contract’s absence. The purchase order details the price, specifications, terms and conditions of the product or service, as well as any other additional obligations. It will differ from vendor to vendor, but the purchase order tends to include the name of your company, the description and quantity of the goods or services, price, a mailing address, payment information and terms, invoice address and a purchase order number.
If the order is as described and agreed upon, payment is to be sent to the vendor within the specified timeframe, usually in the form of cash, cheque, bank transfers, credit letters or other types of electronic transfers.
At the end of the process, the company must maintain a record of the transaction, which includes thorough documentation of all purchases, from the start of the process through to the invoice.
Depending on your vendor, you may or may not receive these at the same time. Either way, the vendor will send over an invoice to the purchaser which describes exactly what the order includes. It will confirm the sale and re-affirm when your payment is due.
Upon receiving the order, you’ll usually have a small window of time to let the vendor know of any issues with the product or service. If you’ve found any discrepancies, then you’ll have to reconcile your purchase order, order receipt and vendor invoice to double check that what you are being charged matches what you have received.