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Importance of sticking to the Formal Procurement Processes

How can a formal procurement process help make savings when purchasing events?  The procurement function in some companies is delegated to the employees. If employees don’t stick to the procurement process the organization incurs losses. This post looks at the benefits of adhering to the formal procurement process when purchasing events.

Most companies either have a centralized or a devolved system in relation to procurement. In the devolved system employees are highly involved in the purchase of products for the company. Companies usually have guidelines to ensure that employees do not over-spend, for instance, great caution should be taken when purchasing events (where an organization books a venue to be used to host an event for a few hours, days or even months). When booking for an event, there are many factors that need to be considered. Some of them include location, traffic, services offered and accessibility.

How AP handles purchases

Accounts Payable (AP) is the division/department that is responsible for making payments that the organization owes suppliers or creditors. Greater value can be brought into the organization when the AP and procurement department collaborate. The procurement department usually agrees on a contract with the suppliers, check that employees make the necessary purchases then hands over the bill-payment to the AP. When these two departments work together, the organization benefits a lot - be it from faster processing of invoices or quick deliveries from suppliers. For large purchases, the organization checks to see that all the figures presented are correct and that the products bring value to the organization. AP can easily approve an invoice presented for payment by ensuring that all the details in it are as per the agreement. Vendors need to go through their invoices and check to see that figures such as the purchase order number, invoice address and description of the quantity are as agreed.

Setting the amount employees have to spend

Depending on how an organization/institution handles its procurement of events, it could save or lose a lot of money. There are various ways used to ensure employees do not use excessive amounts during procurement. The first is having a definite budget and plan. Considering the volatility of the financial environment, there is need for a clear plan and budget for say, six months. The management can use the current costs and revenue to come up with a budget for the future. It is also important to monitor the purchases of employees regularly to make sure that they rhyme with the organization’s budget. These reviews are crucial because they will dictate whether there needs to be an adjustment to the budget. Another way is by selecting a few employees to analyze the various prices of goods or services required by the company. For those products which are too expensive, the employees can look for cheaper alternatives. The organization can also review the current suppliers and determine how much they charge for their goods/services. Negotiating for a reduction in the prices or dropping some suppliers helps lower expenses. Last but not the least, the company should ensure adherence to the purchasing procedure. There needs to be a clearly defined purchasing process which prevents the staff from surpassing the set limits. Employees who don’t stick to the buying process should be disciplined.

Organizations are always striving to cut down costs and make profit. Having a smooth procurement process which follows the set guidelines is one way to ensure that there don’t incur unnecessary expenses. Nowadays, it is advisable for companies to invest in an e-procurement in order to have a simplified purchasing process.

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