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Purchasing Process

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Jay Mark Ballester
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26 views

Purchasing Process

Uploaded by

Jay Mark Ballester
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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THE PURCHASING
PROCESS
GROUP 1
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PURCHASING PROCESS

The process involves identifying user requirements,


evaluating stakeholder needs, identifying suitable
suppliers, developing agreements, placing orders,
ensuring prompt payment, validating the fulfillment of
needs, and driving continuous improvement.

It is also often called the procure-to-pay


process or P2P.
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FUNCTIONS
The purchasing process is an interacting structure of
people, equipment, methods, and controls that is designed
to accomplish the following primary functions:

1. Handle the repetitive work routines of the purchasing


department and the receiving department

2. Support the decision needs of those who manage the


purchasing and receiving departments

3. Assist in the preparation of internal and external reports


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The Purchase-to-Pay Process


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The Purchase-to-Pay Process

STEP 1: NEEDS ANALYSIS

Before a purchase can happen, a business need


must be identified. The need should solve a specific
problem and be documented by either the purchase
requester or the procurement team. The procurement
team can work with other teams on how to best justify a
need and document it.
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The Purchase-to-Pay Process

STEP 2: PURCHASE REQUISITION CREATED

Once a need has been


identified, a The purchase requisition
purchase requisition is form contains full details
submitted to either the on the items or services to
procurement department be obtained, including the
or purchasing manager of justification for why they
the department making need to be purchased from
the request. the needs analysis.
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The Purchase-to-Pay Process

STEP 3: PURCHASE REQUISITION (PO) REVIEW AND


APPROVAL
Once the requisition is approved, it gets turned into a purchase
order (PO). This can also be automated with e-procurement software, or
done manually with Excel, Word, or a paper form.
Rejected purchase requisitions are returned to the requester to
ask for a correction or clarification on why the purchase can’t be made.
The purchase order contains everything a vendor needs to fulfill
the order, including quantity, price, item number, payment information,
and payment terms.
The procurement team should review purchase orders to ensure
that they include accurate pricing and match the purchase requisition.
They also need to verify the funds exist in the appropriate budget
to cover the purchase.
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The Purchase-to-Pay Process

STEP 4: REQUEST FOR PROPOSAL

In some cases, approved POs are sent to the procurement


department and used to create either an RFP (request for
proposal) or RFQ (request for quotation). These, or some
other sourcing documents, can be used in a sourcing event.

These requests are dispatched to potential vendors to solicit


bids. Vendors are carefully reviewed based on important
characteristics such as performance history, compliance
records, average lead times, reputation, and price.
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The Purchase-to-Pay Process

STEP 5: CONTRACT NEGOTIATION AND APPROVAL

If the RFP or RFQ process is used, the vendor with


the winning bid is awarded a contract. The contract is
further refined to ensure optimal terms and conditions and
a mutually satisfactory arrangement for both parties.
Once the contract is signed, the
purchase order becomes a legally binding agreement betwe
en the buyer and seller
when the supplier accepts it.
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The Purchase-to-Pay Process

STEP 6: SHIPPING AND RECEIVING

The supplier delivers the goods or services


within the agreed-upon timeframe. Relevant
documentation, like goods received notes for goods
or timesheets for services, can be tracked and
recorded as evidence for future audits.
Once they’ve been received (in the case of
goods) or performed (in the case of services), the
purchaser reviews if what they’ve received is what
was ordered and notifies the vendor of any issues.
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The Purchase-to-Pay Process


STEP 7: THREE-WAY MATCHING

Three-way matching is a verification process that


accounts payable teams use to ensure that they are paying
the correct amount and for the correct items. The process
compares receipts/packing slips against the purchase order
and invoice.
If all the information matches, then the invoice can be
paid. If there is a discrepancy on the invoice or receipt, the
vendor is asked for clarification or a correction to the invoice.
This will follow an invoice dispute management process.
Discrepancies should be rectified as soon as possible to
avoid late payment charges, production delays, or damage to
supplier relationships.
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The Purchase-to-Pay Process


STEP 8: INVOICE APPROVAL AND PAYMENT

Invoices that pass three-way matching are approved


for payment. Payment is issued to the vendor via the
payment information provided on the invoice.

Ideally, such payments are made to capture early


payment discounts and other incentives while
avoiding late payment fees.
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The Purchase-to-Pay Process

STEP 9: ACCOUNTING RECORDS UPDATE

Completed orders are recorded in the company’s


books, and all documents related to the transaction are
securely stored in a centralized location.
When using procurement software that integrates
with your accounting software or ERP, this happens
automatically and shouldn’t require any extra work from
either accounting or procurement.
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THANK YOU!
GROUP 1

Zarah Andrea A. Noynay Angela Y. Galvez


Ecyra M. Navarette Kreziel H. Barroga
Julito R. Dejito Jr. Rogelyn L. Favillar
Jean Desuyo Rosary Jim F. Valdez
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Internal Process
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