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Tuesday, September 27 1:00 PM

09/27/2022
PURCHASE CYCLE
SIGN IN
 AGENDA

Introduction
Document Used

Steps

Internal Controls

Flowchart

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Purchase Cycle 9/27/2022
 Purchase System
Introduction - The purchasing process is the steps a business goes
through to complete a transaction. Businesses typically
go through a formal process when purchasing
Steps something, unlike consumers.

- It gives businesses a structured way to address their

Flowchart needs. It also allows for more informed financial
planning. An effective purchasing process can help
prevent theft, fraud, or irregular spending since it
Document Used requires documenting all business transactions.

Internal Controls

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Introduction 9/27/2022
 - the purchasing cycle is at the core of procurement and
Introduction
can have a major impact on your productivity,
competitiveness, and profitability.
Steps
- Understanding your company’s purchasing cycle is the
first step toward optimizing it.

Flowchart - Understanding your customers' position in the buying

cycle and purchase lifecycle, allows you to make more
intelligent and therefore more powerful marketing
Document Used decisions.

Internal Controls

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Introduction 9/27/2022
 PO MATCHING PURCHASE ORDER
AND CLOSURE CREATION
Introduction

Steps DELIVERY AND

BUDGET CHECK
QUALITY CHECK
AND RFP
Flowchart

Document Used
NEGOTIATION VENDOR
AND PO SHORTLIST AND
DISPATCH SELECTION
Internal Controls

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Steps 9/27/2022
Introduction
1. Purchase order creation
The first step of the purchase order life cycle is creating a purchase order.
Steps
Once a purchase request is approved and authorized, it is converted to a
purchase order. In the case of multiple line items, each item will be
transferred to a new purchase order.

Flowchart While purchase requests can be raised by employees, purchase orders

can only be created by the procurement team in an organization. In the
case of small businesses, this authority may reside with the finance head or
the business owner/CEO.
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Internal Controls

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Steps 9/27/2022
Introduction
2. Budget check and requests for proposal (RFP)
Once the procurement team creates the purchase request, the finance
team carries out a budget check. After this, there is a standard search for
Steps existing purchase contracts. If such a contract exists, the purchase order
will be sent to the respective vendor.

If not, then the procurement team will have to send requests for proposals
Flowchart
(RFP) to a list of prospective vendors with the intention to elicit quotations
for a product or service.

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Internal Controls

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Steps 9/27/2022
Introduction
3. Vendor qualification and selection
After receiving commercial quotes from suppliers, the purchasing team will
compare their business requirements with the vendor proposal. To arrive at
Steps a unified vendor selection decision that is in the best interest of the
organization, the procurement team will conduct a thorough investigation
and also seek input from all stakeholders.
Flowchart

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Internal Controls

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Steps 9/27/2022
 4. Negotiation and PO dispatch
Introduction Once a vendor is selected, it is time for contract negotiation. This is the
time when suppliers and buyers discuss and address issues that will forge a
better business relationship. Typically, purchasing negotiations will cover
Steps the following items: Time constraints, Delivery expectations, Quality
benchmark, Payment terms, Potential liabilities and risks, Confidentiality of
purchase, Dispute resolutions, Change in requirements (if any).

Flowchart Once the negotiation is complete, the purchase order is forwarded to the
vendor for approval. The vendor’s approval and acknowledgment will
activate a legally binding contract between the vendor and the buyer.
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Internal Controls

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Steps 9/27/2022
 5. Delivery and quality check
Introduction Vendors usually send an advance shipment notice to the purchaser once
the order is shipped. This notice includes shipping date, shipping agency
details, tracking number, a copy of PO and invoice, etc.

Steps After receiving the product/service, the buyer checks the packaging slip
and PO information and acknowledges the receipt. Then, the purchaser
performs a standard quality check and notifies the vendor or rejects
products in case of damage or defect in the delivered item.
Flowchart

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Internal Controls

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Steps 9/27/2022
Introduction 6. PO Matching and Closure
In this step, three important purchasing documents—the purchase
requisition, purchase order, and vendor invoice—are lined up and
evaluated to make sure there are no discrepancies, and to verify the
Steps accuracy of information. Discrepancies need to be addressed according
to the dispute resolutions mentioned in the purchasing contract.

Once this three-way document match is complete, the invoice is approved and
Flowchart forwarded to payment processing depending on organizational norms. Next, the
purchase order is formally declared as closed and stored for the purpose of
bookkeeping or audits.
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Internal Controls

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Steps 9/27/2022
Introduction

Receiving vendor or Preparation of Voucher Approval of Cash

third-party invoices (Cash Disbursement Request) Disbursement Request
Steps

Flowchart

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Issuance of Cash Stamping of vendor or Recording of
Disbursement Check third-party invoices as paid Cash Voucher

Internal Controls

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Steps 9/27/2022
 The Purchase Flow Chart and it's process helps the employees
understand the flow of the company's transaction.
Introduction

Steps

Flowchart

Document Used

Internal Controls

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Flowchart 9/27/2022
 Purchase
Process

Complete Purchase
Requisition Form

Approved No Purchase
Requisition

Yes

Cash Credit Card Credit Card

Or Cash?
Is it an
Independent No
Fill out CCPR
Contractor?
Yes
IC’s Agreement filled Obtain P.O. from Invoice CCPR
out or on File Controller

Invoice
P.O. Documents to Controller
For Approval
Introduction Three Key Purchasing Documents:

Steps Purchase Requisition

Flowchart
Purchase Order

Document Used

Vendor Invoice
Internal Controls

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Document Used 9/27/2022
 PR = The purchase requisition process begins with a purchase
Introduction requisition form/ purchase request form, a document created
by the purchaser and submitted to the department that controls
finances. Each purchase requisition will be assigned a unique
Steps requisition number so it can be tracked through the entire
process with a full audit trail (or p

Flowchart
PO = The purchase order (PO) is where “buying” happens. Once
the purchasing or procurement department has approved the
Document Used purchase requisition and did approve to purchase of the
desired goods and services, it issues a purchase order number
and the purchase order can be sent to the vendor.
Internal Controls

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Document Used 9/27/2022
 Invoice = An invoice is an official payment request sent by the
Introduction vendor to their buyers once the order is fulfilled. It lists down the
goods or services that have been delivered and specifies the
amount of money that is owed.
Steps
Generally, an invoice is comprised of: the invoice number,
vendor information, credits/discounts availed, payment
schedule/date, and total amount due
Flowchart

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Internal Controls

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Document Used 9/27/2022
Introduction - Transaction Authorization

- Segregation of Duties
Steps

- Supervision
Flowchart

- Accounting Records
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Internal Controls

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Internal Controls 9/27/2022
Introduction - Access

- Independent Verification
Steps

Flowchart

Document Used

Internal Controls

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Internal Controls 9/27/2022
 MEMBERS

Bacolod, Uriel AC
Cuevas, Barwisa
Sultan, Fatima Nashrene
Tingcang, Marc John
Villacorte, Xeen
THANK YOU FOR LISTENING!

Shutting down….