Purpose of the Purchasing Policy
This policy guides employees on the proper procedures for purchasing goods and services efficiently, ethically, and financially responsibly. It also ensures consistency and transparency in the organization's procurement process.
Scope
This policy applies to all employees who make purchases on behalf of the company, including, but not limited to, managers, supervisors, and designated purchasing personnel. It covers procuring all goods, services, and works, including capital expenditures and routine operational purchases.
The appropriate management level must approve any exceptions or deviations from this policy.
Authorization
All purchases must be authorized by a designated individual or department based on the company's purchasing approval hierarchy. The authorization process should include the following steps:
Purchase: Once approved, the purchasing personnel can proceed with purchasing according to the guidelines outlined in this policy.
Request: A requisition form must be filled out and submitted to the designated approving authority for review and approval.
Approval: Upon receiving the request, the designated approving authority will review it against budget availability, compliance with policies and procedures, and necessity. If approved, they will provide a purchase order or purchase authorization number.
Vendor Selection
The company strives to maintain good vendor relationships, encouraging fair competition among potential suppliers. Unless otherwise authorized by management, all purchases must be made from pre-approved vendors. The selection criteria should include quality, price, delivery time, and overall value.
Purchasing Principles
Fairness and Transparency
All purchasing activities should be conducted in a fair and transparent manner, ensuring that suppliers are treated equitably and that the selection process is open and impartial.
Cost-Effectiveness
Purchases should be made at the best possible value, balancing cost with quality, reliability, and service. Competitive bidding should be used whenever possible to ensure cost-effectiveness.
Ethical Conduct
Purchasing decisions must be made with the highest ethical standards, avoiding conflicts of interest, favoritism, and corruption. All employees involved in purchasing are expected to act with integrity and professionalism.
Sustainability
Where possible, preference should be given to suppliers and products that demonstrate a commitment to sustainability, including environmentally friendly practices and materials.
Compliance
All purchasing activities must comply with applicable laws, regulations, and company policies, including any specific requirements related to industry standards or contract obligations.
Purchasing Methods
The following methods may be used for purchasing goods and services:
- Purchase Orders: This is the preferred method for ordering goods and services. A purchase order should be issued before any purchases are made.
- Credit Cards: Company-issued credit cards may be used for small or urgent purchases that cannot wait for the traditional authorization process. However, employees must provide a valid reason for using a credit card and obtain approval from their supervisor.
- Contracts: The company may contract with a vendor for recurring purchases to ensure consistent pricing and terms.
- Petty Cash: Petty cash may be used for small purchases that do not exceed a predetermined limit. All petty cash transactions must be properly documented and reimbursed regularly.
Purchasing Procedures
Purchase Requisition
- The requesting department must submit a purchase requisition (PR) to initiate the purchasing process. The PR should clearly describe the goods or services required, the quantity, the desired delivery date, and any other relevant specifications.
- The appropriate authority must approve the PR before proceeding with the purchase.
Supplier Selection
- Suppliers should be selected based on their ability to meet the company’s price, quality, delivery, and service requirements. Where applicable, multiple suppliers should be considered.
- A formal Request for Quotation (RFQ) or Request for Proposal (RFP) should be issued to qualified suppliers for high-value purchases or complex services.
Purchase Orders
- All purchases require a purchase order (PO), which should include the terms and conditions of the purchase, including pricing, delivery dates, and payment terms.
- The PO must be approved by an authorized individual before being sent to the supplier.
Receiving and Inspection
- Upon receipt of goods or services, they should be inspected to ensure they meet the specifications outlined in the PO. Any discrepancies should be reported to the supplier immediately.
- A Goods Received Note (GRN) should be completed and filed with the original PO and invoice.
Payment Processing
Payments should be made following the agreed payment terms, ensuring timely and accurate disbursement of funds.
Before payment is processed, invoices should be matched with the corresponding PO and GRN, and any discrepancies must be resolved.
Documentation
All purchases must be supported by valid documentation such as invoices, receipts, or contracts. The designated purchasing personnel are responsible for maintaining accurate records of all purchases made on behalf of the company.
Roles and Responsibilities
Procurement Department: Responsible for overseeing the purchasing process, selecting suppliers, negotiating terms, and ensuring compliance with this policy.
Requesting Department: Responsible for initiating purchase requests, providing accurate specifications, and assisting in evaluating goods or services received.
Finance Department: Processed payments, maintained financial records, and ensured budgetary compliance.
Approval Authorities: Designated individuals with the authority to approve PRs, POs, and payments based on predefined limits.
Code of Ethics
The company expects all employees involved in the purchasing process to act ethically and with integrity. Any unethical behavior, such as accepting bribes or kickbacks, will not be tolerated and may result in disciplinary action.
Compliance
This policy complies with all applicable laws and regulations governing purchasing activities. The company reserves the right to update this policy as needed to ensure compliance with any laws or changes in industry standards. Regular audits of the purchasing process will be conducted to ensure adherence to this policy and identify improvement opportunities.
Review and Amendment
This Corporate Purchasing Policy will be reviewed annually and updated as necessary to reflect changes in company operations, market conditions, or regulatory requirements. Amendments will be approved by the [Title of the Responsible Executive or Committee].
Acknowledgment of Receipt
I have received a copy of the Corporate Purchasing Policy, have read and understood it, and agree to comply with its terms.
Name: _______________________
Signature: ____________________
Date: ________________________