8 steps of an effective business purchasing process

Building a scientific and effective corporate purchasing process is extremely important. A good purchasing process helps businesses obtain quality input products, ensuring smooth operations behind the scenes. So how to build a quick and accurate purchasing process? Let's find out with 1C Vietnam in the article below!

1. What is the business's purchasing process? Illustration

The business purchasing process is purchasing activities, performed in a certain order and process that has been built based on the business nature of that business.

A business's purchasing process is often more complicated than the typical personal purchasing process. A person wants to buy a shirt, it only takes them about 10 minutes to make a decision and usually does not consider too many factors. However, a company deciding whether to purchase or not requires at least a period of 3 - 6 months with the coordination of many departments within the business.

Below is an example of a business's purchasing process : A business X wants to buy tires from a supplier, they need to go through processes from evaluating product quality, comparing prices, drafting contracts. , sign, proceed with purchase and delivery. The above processes all need to be performed by a team of highly specialized staff, accurately grasping the needs and desires of the business to choose the most suitable input products.

2. What benefits does an effective purchasing process bring to businesses?

A purchase transaction in a business requires coordination from many departments. Therefore, the clearer the corporate purchasing process, the more benefits it will bring to the company, typically:

• Avoid fraud or collusion between employees and suppliers, limiting additional costs.
• Effectively manage relationships with suppliers, thereby easily obtaining high quality goods at reasonable prices.
• A standardized process can be applied to the purchase and sale of different types of goods, creating uniformity in the process.
• Provides a basis for evaluating the company's purchasing activities as well as supporting administrators in making supplier selection decisions.
• Establish general standards for input goods so as not to affect the production process or product quality.
• Optimize procurement processes and related procedures.

3. 9 steps to build a simple business purchasing process

Understanding the importance of purchasing management in production and business operations, many businesses have focused on building a specialized process for themselves. Based on the research and synthesis results of 1C Vietnam, the corporate purchasing process usually includes the steps below:

3.1 Determine purchasing needs

Purchasing activities of the business will take place when there is a need from managers, departments and most commonly the production department. In order for the purchasing department to determine the exact items to be purchased, departments will send the desired request to the responsible person for approval and proceed to search for suppliers.

3.2 Make a purchase request

Based on the purchasing needs compiled from the departments, the purchasing department will make purchase requests for each specific category and quantity. Based on that suggestion, the purchasing department will search for the purchasing unit and request a quote from them. The number of suppliers needed is usually over 3 units to have the most objective evaluation and comparison.

3.3 Search for potential suppliers and request quotes

Most businesses have long-term cooperative relationships with product and service suppliers. In case there is no satisfactory supplier, businesses can search through online websites, exchange by phone number or attend exhibitions and fairs. In the next step, the business will ask suppliers to send quotes for comparison and selection in the next step.

3.4 Evaluate and select suppliers

Based on the list of potential suppliers, businesses will compare and evaluate based on many different criteria. Some criteria include operating time, reputation, and ability to meet service and goods requirements. In particular, the price quote is an important factor that directly affects a business's decision to choose a supplier.

3.5 Negotiate and sign contracts

Negotiation aims to more clearly discuss terms and requirements related to services and goods to ensure a smooth supply process. After the negotiation ends, the company and supplier will sign a contract to create a legally binding agreement between the two parties. A contract is a document that clearly shows the commitment, requirements for goods services and responsibilities of both parties.

3.6 Prepare contracts/purchase orders

After successfully signing a contract and becoming an official supplier, the business will move to the stage of creating a purchase order. One signed contract can be used for multiple purchase orders. But in many cases, the contract will be signed multiple times (for each order, the business will sign a separate contract). Once created, the contract will be transferred to the departments to conveniently track the import process and quantity of goods in stock.

3.7 Make a request to import goods and request a goods inspection

After the supplier sends the goods according to the purchase order, the purchasing department needs to make a "request for goods inspection" and "request to import goods". Responsible departments need to monitor, check goods and restock according to schedule.

3.8 Proceed to warehouse goods

Businesses need to develop a set of criteria to evaluate the quality of goods before warehousing. This activity will help ensure that the supply of goods meets the requirements for the next steps of production and business.

3.9 Completing payment ends the purchase process

The final step in the business purchasing process is to complete payment. Based on the actual amount of goods imported into the warehouse compared to the quantity of goods as well as the relevant terms in the contract, the purchasing department will prepare payment documents. After that, the Accounting department will be responsible for authenticating documents and making payments to suppliers.

4. Business purchasing process diagram

Purchasing goods is the first activity in the process of converting capital from monetary form to commodity form - businesses have ownership of goods, lose ownership of money as well as have responsibility to pay suppliers. grant. This is the step that creates the foundation for the enterprise's downstream production and business activities.

Depending on the size and characteristics of the business field, the purchasing process of businesses will be different. Below is the most general corporate purchasing process for administrators to refer to.

5. Common mistakes in the purchasing process

Corporate purchasing activities are often much more complex than individual purchasing activities. Because it needs to be done through many steps and involves different parts. Therefore, businesses cannot avoid making some mistakes in purchasing activities such as:

• Abuse of power in selecting suppliers

When building a purchasing department, businesses need to clearly separate the functions of buyers, order approvers and users. If these positions are not specifically divided, it can lead to abuse of power, relationships, and acquaintances to choose suppliers that do not meet the requirements for the purpose of receiving commissions.

• Risks in purchase offers

Because the users of goods and the buyers of goods are different, there is a situation where requests to buy goods that are not of the right type are needed, causing waste in the business. Therefore, when purchasing, buyers need to be responsible for carefully considering issues such as inventory availability? Is that item necessary to buy? Are the items in the proposal reasonable? Before sending, purchase vouchers need to be checked for reasonableness with relevant departments.

• Choose the wrong supplier

Supplier evaluation and selection are the main operations of the purchasing department. To avoid choosing an unsuitable supplier, businesses need to conduct an inspection of all aspects such as production, capital, personnel, investment items, annual output,...

• Flaws in goods inspection and receipt

This case occurs when the supplier incorrectly delivers the purchased item but is still stored. To avoid this situation, the process of receiving goods must be controlled by a specialized department (QC - Quality Check) or a specialized unit directly using the goods (for example, a factory engineer checking the mold).

• Bought the wrong product

For items with high technical requirements, buyers need to request full specifications before purchasing to avoid incorrect specifications and unusability.

• Payment risk

The payment process may encounter some risks related to incomplete payment documents or invalid documents. To avoid this situation, the accounting department needs to check accurately to complete the records before sending them.

6. Some notes to build a professional purchasing process

Building an effective corporate purchasing process does not just stop at the planning steps, but applying it in practice is also very important. Businesses need to ensure the process is suitable for general operations as well as other tasks. Besides, for the working process to be smooth, businesses need to note the following points:

• Time needed to have goods: Time of ordering needs to be clearly determined to ensure there is enough raw materials for production and business activities. Determining the correct delivery time can help businesses save on storage costs as well as maximize capital for other business opportunities.
• Production quantity and safety inventory level: Purchasing decisions are greatly influenced by safety inventory levels. Therefore, the purchasing process must ensure that the total inventory is equal to or greater than the warehouse limit.
• Waiting situation from supplier: Same type of item but each supplier will have different waiting time and price. For example, importing goods from abroad will have a longer waiting time and additional costs related to customs clearance, transportation, etc. These factors need to be specifically calculated in the purchasing process to avoid affecting production and business activities.

7. 1C:Company Management - Effective purchasing management solution for businesses

An effective and scientific corporate purchasing process will help businesses ensure the quality of input products for downstream production and business activities. With a diverse product list, businesses can apply software with professional automation features to support purchasing process management such as 1C:Company Management. 1C:Company Management's features can all be customized to suit the characteristics of each organization, ensuring convenience for users.

In particular, the software provides outstanding features, allowing management of corporate purchasing processes on the same unified data system:

• Manage supplier information in a scientific, easy-to-follow tree structure.
• Calculate purchasing needs based on minimum inventory, maximum inventory, material inventory and the quantity of materials needed to produce goods to meet customer needs.
• Record and compare prices between suppliers.
• Record additional costs during the actual purchase in the cost of goods.
• Set up purchase orders with multiple order statuses such as created, processing, and closed.
• Create purchase reports.

Thus, in the above article, 1C Vietnam has compiled knowledge related to the corporate purchasing process as well as notes during practical application. Businesses can refer to specialized purchasing management support solutions such as 1C:Company Management to optimize processes as well as improve work efficiency. If you have any questions related to this issue or have questions about 1C:Company Management software, please contact Hotline (+84)247 108 8887 for advice.