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1. Purchase Procedure

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10 views3 pages

1. Purchase Procedure

Uploaded by

abinayanandhakumar26
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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PURCHASE PROCEDURE

Introduction:

● The action of buying something is called a purchase.


● The purchase department plays a very important role in an organization because
purchasing has important role in manufacturing like checking quality, cost, efficiency of
materials.

General Purchase Procedure in a Company:

1. Purchase Requisition

2. Identify Sources of Supply

3. Call for Tenders or Quotations

4. Analysis of Tenders

5. Selection of Supplier

6. Placing the Purchase Order

7. Follow-up of Purchase Order

8. Receiving of Materials

9. Inspection of Materials

10. Checking of Invoices

11. Passing the Invoice for Payment

1. Purchase Requisition:

● A written request for materials is prepared by an authorized officer of the user


department.
● It includes details like material type, code, quality, and quantity.
● Three copies are prepared.
● First copy sent (purchase department)
● Second copy (production department)
● Third copy(user department for future reference)

2. Identify Sources of Supply:

● The purchase department should know the sources for various raw materials.
● Choosing the right suppliers benefits the organization.
● Key sources of supply include:

1. Past purchase experiences


2. Salesmen interviews with new suppliers
3. Catalogs
4. Trade directories (like Yellow Pages)
5. Trade journals
6. Consultations with business associates
7. Trade shows and conventions
8. Requests for quotations

3. Call for Tenders or Quotations:

● If the purchase department or purchase officer decides to invite tenders, he/she can
invite any of the following types of tenders…

Single Tender: Only one supplier is invited.


Restricted Tender: only selected supplies with past experience and goodwill are invited.
Open Tender: All suppliers are invited through advertisements in newspapers.

4. Analysis of Tenders:

● All the received tenders are opened on a specified date and time.
● The particulars of received tenders are summarized and tabulated, which helps the
purchase department to select the suppliers with the most favorable terms and
conditions.

5. Selection of the Right Supplier:

● The supplier is chosen based on factors like price quoted by supplier, cash discounts,
quantity discount, past performance, goodwill, terms of payment, mode of delivery and
time of delivery.

6. Placing the Purchase Order:


● After selecting the right supplier, A purchase order is prepared and sent to the selected
supplier.
● A purchase order is the commitment by a buyer to the seller's authority to charge the
buyer for supplies made. It becomes a legal contract.

7. Follow-up of the Purchase Order:

● The purchase order specifies the delivery time, date, and method.
● If the order isn’t fulfilled as specified, the purchase department should follow up with
reminders or oral communication to the supplier.

8. Receiving the Materials:

The purchase department, while receiving the materials should,:


● Prepare a statement of goods received.
● Indicate the identification mark for each type of material.
● Check the quantity and quality of materials.

9. Inspection of Materials:

● The materials are compared with the purchase order and delivery note.
● If they don’t match, they may be rejected, and a rejection report is prepared.

10. Checking the Invoices:

● The purchase manager checks invoices for accuracy.


● If the materials meet the purchase order's specifications, a note is issued, and terms and
prices are verified.

11. Passing the Invoice for Payment:

● If the invoice is correct, it is stamped "passed for payment" and sent to the accounts and
finance department for payment.

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