Purchasing

Purchase Requisition (PR)

A Purchase Requisition is a document initiated by internal departments to request the purchase of goods or services. It outlines the specific items or services needed, quantities, and any other relevant details.

Key Components:

• Requester Information: Details of the individual or department making the request.
• Item Details: Description, quantity, and specifications of the items or services requested.
• Budget Information: The budget allocation or cost center associated with the request.
• Approval Workflow: Steps for obtaining necessary approvals before proceeding with the purchase.

Process:

• An internal department identifies the need for goods or services.
• A Purchase Requisition is created to formalize the request.
• The requisition undergoes an approval process, involving relevant stakeholders.
• Once approved, the Purchase Requisition serves as the basis for creating a Purchase Order.

Purchase Order (PO)

A Purchase Order is a formal document issued by the buyer to a supplier, indicating the details of the products or services to be purchased. It serves as a contractual agreement between the buyer and the supplier.

Key Components:

• Buyer and Supplier Information: Details of both the buyer (the organization) and the supplier.
• Item Details: Description, quantity, specifications, and prices of the products or services being purchased.
• Delivery Information: Shipping address, delivery date, and any specific delivery instructions.
• Terms and Conditions: Legal and contractual terms governing the purchase, including payment terms and warranties.

Process:

• A Purchase Order is generated based on an approved Purchase Requisition.
• The Purchase Order is sent to the supplier, indicating the intent to purchase.
• The supplier acknowledges and accepts the Purchase Order.
• The goods or services are delivered, and the buyer verifies the delivery against the Purchase Order.

Request for Quotation (RFQ):

A document sent to potential suppliers, requesting them to submit quotations for specific products or services. Initiates the procurement process, allowing the buyer to compare and evaluate offers from different suppliers.

Key Components:

• Buyer Information
• Item Descriptions
• Quantity
• Desired Delivery Date

Process:

• The buyer generates an RFQ, outlining the products or services needed.
• The RFQ is sent to potential suppliers.
• Suppliers submit quotations in response to the RFQ

Quotation Comparison Sheet:

A document that compares the quotations received from different suppliers, highlighting key factors such as price, delivery time, and terms. Assists in making informed decisions by evaluating and selecting the most favorable supplier.

Key Components:

• Supplier Information
• Quoted Prices
• Delivery Time
• Terms and Conditions

Process Steps:

• Quotations from different suppliers are gathered.
• A comparison sheet is created, analyzing and comparing key factors.
• A supplier is selected based on the analysis.

Supplier Agreement:

A formal agreement or contract between the buyer and the selected supplier, outlining terms, conditions, and expectations. Establishes a legally binding relationship, specifying the rights and obligations of both parties.

Key Components:

• Contract Duration
• Terms and Conditions
• Responsibilities of Both Parties
• Penalties and Liabilities

Process:

• A formal contract is drafted based on mutual agreement.
• Both parties review and sign the contract.
• The contract is stored for future reference.

Goods Receipt Note (GRN):

A document acknowledging the receipt of goods, typically generated by the receiving department. Confirms that the goods received match the details specified in the purchase order.

Key Components:

• Item Details
• Quantity Received
• Condition of Goods
• Date and Time of Receipt

Process:

• Upon receiving goods, the receiving department generates a GRN.
• The GRN is compared with the PO to ensure accuracy.
• The GRN is shared with the finance department for payment processing.

Purchase Return/Debit Note:

A document issued by the buyer to the supplier to request a return of goods or to address discrepancies in the delivered items. Formalizes the process of returning goods or resolving issues related to the delivered products.

Key Components:

• Reason for Return
• Item Details
• Quantity to be Returned
• Adjusted Amount

Process:

• The buyer identifies discrepancies or issues with delivered goods.
• A purchase return/debit note is generated.
• The supplier acknowledges the return, and adjustments are made to accounts.

Payment Approval:

Authorization documentation for processing payment to the supplier, often involving approvals from relevant departments. Ensures that payments are made in accordance with agreed-upon terms and conditions.

Key Components:

• Authorized Signatures
• Payment Amount
• Bank Details
• Invoice Reference

Process:

• The finance department verifies the invoice and supporting documents.
• Payment approval is sought from authorized personnel.
• Once approved, the payment is processed.

Purchase Order Change Request:

A formal request to modify details in a previously issued purchase order, such as quantity, delivery date, or specifications. Accommodates changes in requirements or circumstances that impact the original purchase order.

Key Components:

• Reason for Change
• Modified Details (Quantity, Delivery Date, etc.)
• Approval Signatures

Process:

• A request for change in the original purchase order is generated.
• The change is reviewed and approved by relevant personnel.
• The modified purchase order is issued to the supplier.

Purchase Invoice

The Purchase Invoice is a document sent by the supplier to the buyer, requesting payment for the delivered goods or services. It outlines the agreed-upon prices and any additional charges.

Key Components:

• Invoice Number: A unique identifier for the invoice.
• Itemized Charges: Detailed breakdown of costs, including unit prices, quantities, and total amounts.
• Payment Terms: Conditions specifying when and how payment should be made.
• Goods Receipt Confirmation: Reference to the Goods Receipt Note, confirming the receipt of goods.

Process:

• The supplier sends an invoice to the buyer upon delivering the goods or completing services.
• The buyer reviews the invoice against the Goods Receipt Note and the original Purchase Order.
• If everything is in order, the buyer processes the invoice for payment.

Purchase Payment Receipt

After a company receives goods or services from a supplier and is invoiced for the purchase, they make a payment to the supplier. In return, the buying company generates a document known as a "Supplier Payment Receipt" or "Purchase Payment Receipt" to acknowledge the payment. Confirms that the buying company has made the payment against the received Purchase Invoice. Similar to the sales receipt, the payment receipt for a purchase may include details such as the payment date, amount, payment method, and any remaining balance.

Key Components:

• Receipt Number: A unique identifier for the payment receipt.
• Payment Date: The date on which the payment was received.
• Payment Amount: The total amount received from the customer.
• Payment Method: The method used by the company to make the payment.

Process:

• The company makes a payment based on the issued invoice.
• The company generates a Payment Receipt to confirm the receipt of payment.
• The Payment Receipt may be provided to the supplier as proof of payment.

Supplier Performance Evaluation:

A document that assesses and evaluates the performance of suppliers based on predefined criteria. Provides feedback on supplier performance and helps in making informed decisions about continuing or terminating relationships.

Key Components:

• Criteria for Evaluation
• Ratings/Scoring
• Feedback and Comments
• Improvement Recommendations

Process:

• Periodic evaluations are conducted based on predefined criteria.
• Performance is scored, and feedback is documented.
• Improvement recommendations are communicated to the supplier.

These documents collectively facilitate a streamlined procurement process, from the initial identification of needs through to the payment for goods or services received. They help maintain transparency, accountability, and efficiency in the purchasing workflow.