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Wednesday, May 26, 2010

Steps involved in Purchasing Process

Steps of the Purchasing Process


1. Purchase Requisition: A form known as Purchase Requisition is commonly used as a formal request to the purchasing department to buy materials specified therein. The requisition is received from certain authorised persons. They are storekeeper, purchase planner, plant engineer, department heads.

A purchase requisition has the following purposes:

a. It sets the purchasing process in motion

b. It is a written record of details like quantities, any speciation etc.

c. It provides date for reference i.e., date when materials are required.

Dates are important in case responsibility for stoppage in production due to shortage of materials is to be determined.

2. Selecting the Supplier: When the purchase department receives a duly authorised purchase requisition, the department invites tenders for the supply of materials. A comparative statement known, as ‘schedule of quotation’ should be prepared so that supplier may be selected. The important rule here is to buy best quality materials at the lowest possible price after giving due consideration to delivery dates and other terms of purchase.

3. Purchase order: When the supplier is identified, the most common procedure is the preparation of a purchase order. The purchase order is the form used by the purchase department authorising the supplier to supply the specified materials at an agreed price and terms.

4. Receipt of Materials: Receiving Department receives all incoming materials. When the packages are received, the receiving official gets them and makes a detailed verification of the contents. The details of the materials received are entered in a Goods received note. Five copies of the note are prepared. Receiving department keeps one copy. The remaining copies are routed to the purchase department, the department originating the purchase requisition, the stores department and the accounting department.

5. Checking and Passing of Bills for Payment:
Invoice gives details of goods supplied and the amount to be paid. Account department receives the invoice from the purchase department. Then, account department checks the authenticity as well as the arithmetical accuracy. The quantity and the price mentioned in the invoice are checked with reference to goods received note and the purchase order respectively. The inspection report and goods returned note should be compared with the invoice. It is also necessary to check extensions and totals. After comparing these documents with the invoice, if it is found that the invoice is in order, the purchase manager will sign it and pass it to the accounts department for payment. 

Keywords: Steps in Purchasing Process, Purchasing Process, Process of Purchasing

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