Chabot College ELEC 99. 05 Business Purchasing Process CISCO NETWORKING ACADEMY
Business Purchasing • Different from personal purchasing: – Who buys? – Stores used – Ordering – Pricing – Delivery – Payment – Tracking CISCO NETWORKING ACADEMY
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. CISCO NETWORKING ACADEMY
Buy from. . . • Purchases are made from these sources: – manufacturers – distributors – government contracts – catalog vendors • Generally, purchases are not made at retail stores. CISCO NETWORKING ACADEMY
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. ” CISCO NETWORKING ACADEMY
Ordering • Before they issue a P. O, the Purchasing Department checks to be sure the employee’s budget has sufficient funds for the purchase. CISCO NETWORKING ACADEMY
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. CISCO NETWORKING ACADEMY
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. CISCO NETWORKING ACADEMY
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. CISCO NETWORKING ACADEMY
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. CISCO NETWORKING ACADEMY
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 CISCO NETWORKING ACADEMY
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 CISCO NETWORKING ACADEMY
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. CISCO NETWORKING ACADEMY
“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. CISCO NETWORKING ACADEMY
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 CISCO NETWORKING ACADEMY
CISCO NETWORKING ACADEMY
Requisition Assignment • Complete a requisition using clear handwriting. • Request a Cisco 2501 router, software and maintenance contract. • Charge to Account #312120 -25550 -6401 -093400 CISCO NETWORKING ACADEMY
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