Question

.   What are the key purchasing objectives?

2.   Explain the ‘procure to pay’ (P2P) process.

3.   What does a routine purchasing process include?

4.   List and explain the most common purchasing forms and uses.

5.   List the normal types of purchases.

6.   List and explain uses for the most common tendering documents

Answer 1

1.The key purchasing objectives are:

a. To find out genuine suppliers and maintain good relations with them.
b. To maintain inventory level as consistent with level of production.
c. To pay fair prices for the best materials obtained from the supplier.
d. To develop good procedures and purchasing policies.
e. To locate new materials as required and good supplier if any.
f. To maintain co-ordination with other departments in the organization.   

2. Procure to pay process helps businesses to procure goods or services at a reasonable price and at right time. It involves the following stages:

Requirement Planning: The first stage in procure-to-pay process is to plan business needs. Once an appropriate need is identified then go to the next stage, i.e., requisition.

Create Requisitions: After finalizing the need, create a purchase requisition. Bring a purchase requisition form and fill the desired fields submit it with necessary administrative works.

Approval of Purchase Requisition: Purchase requisitions are then sent to the concerned department for approval. Procurement officers check the requisition and take decision after evaluating the need and checking the available budget. If the need is a valid one then procurement officers approve it, otherwise reject it.

Creation of Purchase Order: Once requisition is approved, a purchase order is created by the procurement officer or the concerned department. Purchase order is a formal document that contains specific order quantities.

Goods Receipt: Once the supplier delivers the requested products, the buyer examines the products to ensure that all products complies with the purchase contract terms. Then goods receipt is approved if it meets the standards specified in the purchase order.

Creation of Payment Invoice: Once goods receipt is approved, forwarded to the accounts department for invoice generation.

Payment: Once invoice is done, the accounts department will process payments according to the contract terms. Payment to the supplier may be of various types: advance, partial or full payment.