Chabot College

1. Chabot College ELEC 99.05 Business Purchasing Process

2. Business Purchasing • Different from personal purchasing: • Who buys? • Stores used • Ordering • Pricing • Delivery • Payment • Tracking

3. Who Buys? • Purchases usually are not made by the employee • Instead, the Purchasing Department staff makes the buys. • The employee requests that the purchase be made by completing a purchase requisition - a document that describes the requirements.

4. Buy from... • Purchases are made from these sources: • manufacturers • distributors • government contracts • catalog vendors • Generally, purchases are not made at retail stores.

5. Ordering • Purchasing Department staff don’t go to the vendor’s store to buy. • Instead, they send the vendor a purchase order, a document that describes the items ordered, price, shipping address, and delivery dates. • A purchase order is sometimes called a “P.O.”

6. Ordering • Before they issue a P.O, the Purchasing Department checks to be sure the employee’s budget has sufficient funds for the purchase.

7. Pricing • Many items are not pre-priced. • To learn the price, the employee contacts a sales representative at the manufacturer or distributor and seeks a price quotation. • e.g. “I need a quote for a Cisco 2514”. • The quote is usually delivered by E-mail or fax but sometimes is given over the phone. • The quote is usually attached to the purchase requisition.

8. Delivery • Purchased items are usually shipped to the business or organization’s Receiving Department. • Then the business distributes the shipments that were received to the persons who requisitioned them.

9. Payment • After the merchandise has been shipped, the vendor sends the business an invoice - a bill. • After the business verifies that it has received the merchandise ordered, it pays the invoice by check. • It then charges the ordering department’s budget account that was listed on the requisition.

10. Fixed Asset Tracking • Many business keep track of large or costly items purchased by entering them in a database of fixed assets. • For example, when furniture, computers, or major equipment is received by the Receiving Department, it is tagged with a fixed assets barcode tag and the location is entered into the database.

11. Process Summary • Employee • determines requirements • (optionally) obtains quotation(s) • submits requisition (with supervisor approval) • Purchasing Department • obtains quotations (if not done already) • checks to be sure ordering employee’s department budget has sufficient funds • issues purchase order

12. Process Summary (cont.) • Receiving Department • receives shipped merchandise • tags major assets and logs in database • Accounting Department • pays invoice by check • charges cost to ordering department budget account

13. Why All this Procedure? • Fiscal Control - procedures designed to be sure: • employees don’t spend money that their department doesn’t have; • employees don’t steal what they buy; • employees don’t pay themselves; • the business gets the best available prices; • the business keeps track of what it buys.

14. “Open P.O.” • When business need to make frequent, small purchases (e.g. computer repair parts) the traditional ordering process is too slow & cumbersome. • Instead, the issue an open purchase order for a fixed dollar amount. It authorizes a few specific employees to make phone calls orders against this total dollar amount.

15. Example Requisition • To be completed by employee: • Name • Date ordered & needed • Merchandise • Description • Quantity • Estimated Cost (include quote if available) • Suggested vendor • Delivery location • Budget account # to be charged

17. Requisition Assignment • Complete a requisition using clear handwriting. • Request a Cisco 2501 router, software and maintenance contract. • Charge to Account #312120-25550-6401-093400