How to Setup a Purchasing Process

Company Letterhead

{{company_name}}

{{company_address}}

Phone: {{phone}}

Email: {{email}}

Website: {{website}}

1. Purpose

The purpose of this document is to establish a clear and consistent process for the procurement of all goods and services required by {{company_name}}. Adherence to this process ensures optimal value for money, compliance with internal policies, and effective management of supplier relationships.

2. Scope

This policy applies to all employees, departments, and purchasing activities within {{company_name}}, regardless of the value or nature of the goods or services being procured. This includes, but is not limited to, office supplies, equipment, professional services, and raw materials.

3. Definitions

• **Purchase Requisition (PR):** An internal document used by an employee to request the purchase of goods or services.

• **Purchase Order (PO):** A commercial document issued by {{company_name}} to a vendor, indicating types, quantities, and agreed prices for products or services.

• **Supplier/Vendor:** A business or individual that provides goods or services.

• **Procurement Manager/Department:** The designated individual or team responsible for overseeing purchasing activities.

4. Purchasing Process Steps

The purchasing process follows these sequential steps:

**4.1. Need Identification:** An employee identifies a need for goods or services and completes a Purchase Requisition form ({{PR_form_reference}}). The PR must include a clear description of the item/service, quantity, estimated cost, justification for purchase, and required delivery date.

**4.2. PR Approval:** The Purchase Requisition is submitted to the relevant Department Head/Manager for approval. Approval signifies endorsement of the need and budget availability. For purchases exceeding {{approval_threshold_1}}, additional approval from {{higher_authority_1}} is required. For purchases exceeding {{approval_threshold_2}}, approval from {{higher_authority_2}} is mandatory.

**4.3. Supplier Sourcing and Quotations:** Upon approval of the PR, the Procurement Manager or designated purchasing officer will identify potential suppliers. For purchases below {{quotation_threshold_1}}, one quotation is sufficient. For purchases between {{quotation_threshold_1}} and {{quotation_threshold_2}}, a minimum of three written quotations must be obtained. For purchases exceeding {{quotation_threshold_2}}, a formal tender process may be initiated as per the {{tender_policy_reference}}.

**4.4. Supplier Selection:** Suppliers are evaluated based on price, quality, delivery time, terms of payment, and reputation. The most suitable supplier is selected, and a justification for the selection is documented.

**4.5. Purchase Order Issuance:** A Purchase Order (PO) is generated based on the approved PR and selected supplier. The PO must clearly state the PO number, supplier details, item description, quantity, agreed price, delivery address, payment terms, and any special instructions. The PO is then sent to the selected supplier.

**4.6. Goods Receipt and Inspection:** Upon delivery of goods or completion of services, the receiving department or requesting employee must inspect the items against the PO to ensure accuracy, quality, and completeness. Any discrepancies must be immediately reported to the Procurement Manager.

**4.7. Invoice Verification and Payment:** The supplier's invoice is matched against the PO and the goods received note (GRN) or service completion certificate. Once verified, the invoice is forwarded to the Accounts Department for payment processing according to the agreed payment terms.

5. Roles and Responsibilities

• **Requesting Employee:** Identifies needs, completes PRs accurately, and inspects received goods/services.

• **Department Head/Manager:** Reviews and approves PRs, ensures budget availability, and oversees departmental purchasing compliance.

• **Procurement Manager/Department:** Sources suppliers, obtains quotations, generates POs, manages supplier relationships, and ensures adherence to this policy.

• **Accounts Department:** Verifies invoices against POs and GRNs, and processes payments to suppliers.

6. Documentation and Record Keeping

All purchasing-related documents, including Purchase Requisitions, quotations, Purchase Orders, goods received notes, invoices, and payment records, must be retained for a minimum period of {{retention_period}} years. These records are essential for auditing purposes and future reference.

7. Authority Limits

• Purchases up to {{limit_1}}: Approved by {{role_1}}.

• Purchases from {{limit_1_plus_1}} to {{limit_2}}: Approved by {{role_2}}.

• Purchases exceeding {{limit_2_plus_1}}: Approved by {{role_3}}.

8. Non-Compliance

Any deviation from this purchasing process without prior authorised approval may result in disciplinary action. Unauthorised purchases may not be reimbursed by the company.

9. Review and Amendment

This Purchasing Process document will be reviewed annually or as needed to ensure its continued effectiveness and relevance. Any amendments require approval from {{review_authority}}.

Signature Block

_________________________

Name: {{authorised_name}}

Title: {{authorised_title}}

Date: {{date}}

_________________________

Name: {{approver_name}}

Title: {{approver_title}}

Date: {{approval_date}}