In our day to day business, we one way or the other purchase raw materials, machines, gadgets even software to enhance the smooth flow of our production process and our business in general. Technically, this process is referred to as Procurement.
Procurement, as widely known, is the process of finding and agreeing to terms, and acquiring goods, services, or works from an external source, often via a tendering or competitive bidding process. The procurement process finds its way into almost all the businesses around the world. Its main aim is to ensure that the business gets the RIGHT solution to its needs. It ensures transparent bookkeeping and prevents fraud.
In this article, we are outlining for you, the various steps in the procurement process:
- Recognize your needs: The procurement process begins when you recognize a need for goods or services from an external source is established. Be it a brand-new order or a recurring purchase, needs are analyzed and the availability is checked thoroughly. Depending on the type of need, cross-departmental discussions may be needed after which the request is created.
- Be specific about your needs : It is very important for you to get the RIGHT product. Most businesses have set standards to help determine their specifications. You must be able to make your specifications as clear as possible to make sure that the right product is procured to ensure smooth operations. This step is therefore deemed very important to the process.
- Find the Right Source of Supply : At this point, you have to determine where to obtain the needed products or services. This also very important because you have to be sure you’re obtaining from the right source. You might have a list of approved vendors you can procure the product from or you can search for a supplier using purchase orders or through research of other sources like the internet. You can then qualify the potential suppliers with your set standards before arriving at your final decision
- Prepare and Deliver your Purchase Order: A purchase order is a commercial document and first official offer that you issue to the selected supplier indicating types, quantities, timelines and agreed prices for products or services. This is used to control the purchasing of products and services from external suppliers. You get to specify the delivery method of the Purchase Order at this point and then when the issuance is complete, the supplier then acknowledges receipt of the purchase order. Both of you keep a copy on file.
- Receive and Inspect Purchases : Once the supplier delivers the products, you have to make the decision to accept or reject it depending on whether the products meet your exact specifications. Acceptance of the products hereby gives you the obligation to pay the supplier.
- Review and Approve Invoice and make Payments : The procurement process helps you to prevent overlooking the vital steps that may come back to haunt you later. The invoice may arrive with the product or after the product has been delivered. Upon receipt, you need to review and compare it to the original purchase order and the receiving document to make sure that what you have been billed for is actually requested and received. After you approve it, the invoice moves to payables for payment processing.
Carefully going through this process will save you a lot of time, money and undue stress from acquiring quality stock and handling purchases for your business.