What are the steps in procurement process?

 

Every procurement management process involves several elements, including requirements determination, supplier research, value analysis, raising a purchase request, reviewal phase, conversion to purchase order, contract administration, monitoring/evaluation of received order, three-way matching, payment fulfilment, and record keeping. These are the important stages in the procurement process flow:

Step 0: Needs Recognition

The preliminary step in a procurement process is recognizing the need for a product. Be it a brand new order or a recurring purchase, needs are analyzed and the availability is double-checked before creating a request for purchase.

Step 1: Purchase Requisition

Typically, a procurement process starts with a purchase requisition. The requester sends a request for procurement (paper form, electronic, or phone) to the purchasing department.

Step 2: Review of Request

The purchase request is then reviewed by the procurement/finance team. Approved requests become POs, while rejected requests are sent back to the requester with the reason for rejection. All these can be handled with a simple purchase order app

Step 3: Budget Approval

In enterprises, once the procurement team raises a PO, it is forwarded to the accounting department to receive budget approval.

Step 4: Quotation Requests

Once the budget is approved, the procurement team forwards several requests for quotation (RFQ) to vendors with the intention to receive and compare bids to shortlist the perfect vendor.

Step 5: Negotiation & Contract

Once a vendor is selected, the contract negotiation and signing are completed, and the purchase order is then forwarded to the vendor. A legally binding contract activates right after a vendor accepts a PO and acknowledges it.

Step 6: Receive Goods/Services

The vendor delivers the promised goods/services within the stipulated timeline. After receiving them, the purchaser examines the order and notifies the vendor of any issues with the received items.

Step 7: Three-Way Matching

At this step, three documents purchase orders, packaging slips (that arrive with the order), and vendor invoices are lined up and reconciled to pinpoint discrepancies and ensure that the transaction is accurate. Discrepancies should be addressed once they are discovered.

Step 8: Invoice Approval Payment

Once three-way matching is complete, the invoice is approved and forwarded to payment processing depending on organizational norms.

Step 9: Record Keeping

After the payment process, buyers make a record of it for bookkeeping and auditing. All appropriate documents right from purchase requests to approved invoices are stored in a centralized location. 

Why Should You Automate Your Procurement Management Process? 

A solid procurement management software can streamline the cluttered procurement process and keep it transparent. No information is lost and stakeholders can raise, approve, or reject items on time. A streamlined procurement process offers better control over every stage of the procurement lifecycle.

Source: What are the steps in procurement process?