Procurement

Process:
A Guide to
Modern
Procurement

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 Usually, when people think of the procurement process, negative
thoughts come to mind: time-intensive forms, uncertainty around
procedures, and complex negotiations. Procurement also typically
involves pulling and managing data from multiple sources, such as
spreadsheets that track contract renewals and document management
systems that contain purchase orders. On the whole, it can be tedious.

All these complaints are real. They’re the reason why, in companies of
all sizes, it’s not unusual for employees to try bypassing procurement —
a reality that poses a detriment to the business over the long term.

But it doesn’t have to be that way. While small and medium-sized

businesses (SMBs) may not have the resources to implement and
manage the sophisticated systems large companies use for
procurement (like SAP or Oracle Financials), other solutions can address
many of the most common issues.

Many new technology offerings are relatively economical and easy to

con gure and deploy. With a bit of knowledge and the right resources,
SMBs can design a highly ef cient and effective procurement process
that takes minimal time and money — and reduces employee
complaints.

This guide offers ideas and solutions to help streamline the entire
procurement process. See the chapter synopsis below.

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Chapter Synopsis

Chapter 1: Introduction

Chapter 2: What is the Procurement Process?

This chapter presents an overview of the procurement process and how
it compares with the purchasing process.

Chapter 3: Procurement Process Best Practices

Here we’ll cover the methods that are most useful for improving the
overall ef ciency and effectiveness of the procurement process.

Chapter 4: Identifying Needs

Here are the best ways to identify your company’s speci c needs and
analyse inventory.

Chapter 5: Supplier Selection

Learn why establishing effective supplier partnerships leads to success
for both parties.

Chapter 6: Contract Negotiations

In this chapter, we’ll offer advice on how to simplify the overall contract
negotiation and document management process.

Chapter 7: Receiving and Validating Goods

Once your goods arrive, here’s how to ensure they meet expectations
and properly add them to inventory.

Chapter 8: Procurement Payments

Learn how to institute a validation process to ensure payment is
appropriate and legitimate.

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 Chapter 1:
Introduction

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Introduction:
All companies require certain goods and services to operate. Almost
every business needs the basics, like pens and printer paper. Others
require specialised raw or processed materials, like T-shirts and ink for a
T-shirt company, for example.

Retail shops need cash registers and digital payment processing

services. And most companies need the various components of
employee bene ts packages, such as healthcare offerings, life
insurance, and payroll systems.

Obtaining the above — and a whole lot more — requires a procurement

process.

Procurement covers the entire life cycle of acquiring the goods and
services a company needs to operate. There are numerous steps
involved in that process, including

1. Identifying Needs

2. Tracking Inventory

3. Researching, Evaluating, and Selecting Suppliers

4. Conducting Contract Negotiations

5. Establishing Supplier Relationships

6. Creating Requisitions and Purchase Orders

7. Reviewing Goods Upon Receipt

8. Processing Payment

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 Chapter 2:
What is the
Procurement
Process?

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 Procurement vs. Purchasing
Many people confuse procurement with purchasing. Purchasing is a
subset of procurement and refers to the speci c transactions that
surround the buying process, including

• Creating Requisitions
• Submitting Purchase Orders
• Reviewing Goods Upon Receipt
• Processing Payments
Purchasing is a standard set of activities that take place to buy goods
and services, especially for repeat orders, established suppliers, and
basic items.

Procurement is more strategic than purchasing. The rst step of

procurement — identifying needs — is crucial and can have a major
impact on a business. Often driven by company strategy, it considers a
variety of factors, such as company growth initiatives, cost-cutting
mandates, and efforts to streamline processes.

In general, procurement is about more than just transacting for goods or

services; it’s about getting the resources a company needs in a way
that’s ef cient, cost-effective, and timely.

Why is Procurement Important?

Done right, procurement contributes to business growth in more ways
than one.

First, it boosts the bottom line. Companies that have a clearly outlined
procurement process and follow it consistently (without any instances
of bypassing) enjoy greater bulk order discounts.

They also have better supplier relationships and fewer supplier support
issues. And they experience fewer legal challenges related to buying

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 goods and services, such as signing up for an online service without
legal review and approval.

A solid procurement process helps avoid critical shortages of necessary

goods. When inventory isn’t effectively tracked, for instance, your
business could face dif culties ful lling customer contracts, which in
turn

could negatively impact customer satisfaction. Ordering the necessary

items at the last minute forces you to prioritise delivery speed over cost
— a strategy that, employed regularly, could lead to nancial losses.

The procurement process helps you make smarter decisions when

buying complex products or services. For example, many suppliers
provide desktop support services for small and large companies, but
nding one that matches your company’s particular requirements takes
research.

A well-designed procurement process will involve reaching out to

several potential suppliers, evaluating their offerings in detail, meeting
with a shortlist of suppliers, and choosing one for contract negotiations.
The result is likely to be a product that’s a good t for your needs and
will serve you well in the long run.

For all these reasons, it’s worth your while to put a good procurement
process in place. But what if you have one already and it’s regularly
bypassed? In that case, your business is probably experiencing one or
more ef ciency-related issues that require examination.

Next up, let’s talk more about how you can improve the overall ef ciency
and effectiveness of your procurement process.

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 Chapter 3:
Procurement
Process Best
Practices

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 Procurement Process Best Practices:
All the bene ts mentioned in the previous chapter can only be realised if
your procurement strategy has a strong foundation and clear, de ned
processes. Below are some procurement process best practices to
ensure your approach is optimised and serves the company effectively.

Six Procurement Process Best Practices

1. Encourage Interdepartmental Collaboration

While people naturally associate procurement with external suppliers,

internal relations play a role in its success, too.

Not only should you clearly outline and communicate your process to
each department, but it’s also essential to encourage information-
sharing across departments concerning purchasing needs.

Cross-departmental conversations about product usage could reveal

money-saving opportunities; similarly, the introduction of new products

may require the help of multiple departments for the effort to go

smoothly.

For example, if the sales department is planning on increasing personnel

by 30 percent the next calendar year, it will probably require additional
laptops and mobile phone services. If the IT department is already in the
process of reviewing new software-as-a-service offerings, it should
consider this new information in a purchasing decision.

Periodically reviewing requirements and upcoming projects or changes,

as well as establishing mutual understanding, is vital for organisational
ef ciency.

2. Make the Process Transparent

It’s important to be clear and open about your procurement process.

Internally, it increases the likelihood that employees will work within the

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system, rather than go around it. When everyone knows what to do and
why, it creates an environment of trust, and people tend to buy into the
process. Plus, making procurement needs more visible helps eliminate
duplication and promotes collaboration (see Point 1 above).

Transparency is crucial for external supplier relations as well. Making

sure quali ed suppliers have access to relevant speci cations and
evaluation criteria simpli es the process for everyone and ensures you
connect with vendors who are the best match.

Last, only transparent procurement practices and processes allow for an

audit. Using an online tracking system signi cantly streamlines the
process of reviewing purchases and prices.

3. Take a Partnership Approach to Vendor Relationships

Browbeating your suppliers to the lowest price isn’t the most effective
strategy. While it might create some savings, they are often short-term
in nature.

Instead, view the relationship as a partnership — one that will bene t

both sides. By helping vendors learn more about your business, you gain
a partner who can help nd savings, manage risk, and introduce new and
useful products. They may also be more responsive during emergencies.
In return, suppliers win by gaining your trust — and potentially a long-
term client.

These collaborative partnerships evolve in several ways. Account

managers should strive to make vendors feel like they’re part of the
team, and, if multiple account managers deal with a single vendor, those
managers should take a consistent approach to their negotiations.

Suppliers should take an interest in your business. If they don’t, they may
not be the right partners for you.

4. Periodically Review Long-Standing Relationships

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Supplier relations evolve. Companies get acquired; account managers
change; new offerings are introduced — any of these situations might
prompt a review of a relationship. For critical suppliers, periodic reviews
are very valuable.

These discussions provide an opportunity to address issues and

upcoming projects, as well as future purchases. Suppliers, in turn, can
preview product enhancements, offer product demonstrations, and
highlight training opportunities.

Supplier scorecards effectively track various metrics, such as quality,

number of returns, and delivery times. It can be particularly effective to
implement these scorecards in an online system and then tally the
results over time, so you can discuss them with suppliers during those
periodic reviews.

5. Use an Electronic Inventory System

Inventory tracking can be an inef cient, manual, and even inaccurate

process. Periodically counting inventory only provides a snapshot in
time, which isn’t very useful. Technology can optimise inventory tracking
in several ways:

Bar code scanners or radio-frequency identi cation (RFID) technology

increases accuracy and, in the case of RFID, supports real-time
reporting.

Capturing data with online forms produces a more reliable data

source, and makes it easier to manage and order stock.

An electronic inventory system helps track and report on inventory.

Reporting can identify usage trends, such as seasonal requirements
during the holidays, or reveal anomalies that may require further
investigation.

6. Implement Digital Procurement Systems

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 The recent concept of modernizing various business functions to remain
competitive applies to procurement too. Taking advantage of technology
can help maximise savings, reduce risk, and improve ef ciency.

Procurement teams are increasingly using technology for contract

management. Contracts form the basis of procurement transactions,
and, thus, must be managed closely. But it isn’t always easy to keep
track of the details associated with multiple contracts, both in terms of
time and compliance.

A digital contract management system offers a centralised, secure

location for contracts, increasing overall procurement ef ciency and
accuracy. It helps maintain consistency across agreements and can
even automate parts of the contract work ow.

Frequently, these systems track markups from both companies, provide

routing for approvals and online signatures, and can even give alerts
well in advance of contract expirations. Streamlining these processes
enhances the overall ef ciency of the contract process.

Another idea is to adopt a full life cycle procurement process technology

solution. Not only do these systems provide standardised work ows
and forms, but they can also streamline processes in all stages of
procurement, such as approvals and supplier payments, making the
overall process more ef cient.

With new cloud-based offerings, costs are often based on the number of
users and potentially the number of forms, instead of traditional,
complex hardware and software licensing models.

These cloud-based offerings are equally attractive for both small and
medium-sized businesses that currently rely on manual processes and
spreadsheets, as well as large companies that would bene t from highly
con gurable and easy-to-use systems.

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 Chapter 4:
Identifying Needs

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Identifying Needs:
Different departments need different goods and services. That’s why it’s
helpful to develop a procurement planning process — one that identi es
those demands and who they’re associated with. This activity is crucial

because it sets the stage for strategic thinking about how to acquire
goods in the timeliest and cost-effective way.

Before initiating any purchasing process, begin with a needs

assessment to clarify the goods and services required by every
department and consolidate them in one place. Creating this list gives
you better visibility into the purchasing needs of your entire
organisation.

How to Conduct a Needs Assessment

To gain a complete picture of your organisation’s needs, you’ll need to
discover three important things: what purchases are required, when
they’re needed, and which budget will pay for them. Make sure to include
information related to both historical purchases and upcoming projects
and initiatives in your assessment.

Historical Purchases
Evaluating historical purchases provides valuable reference information
for future purchases. Analysing this data may reveal

- Periodic vs. Scheduled Needs. Some purchases occur regularly —

daily, weekly, monthly, or quarterly — while some are only needed
periodically and aren’t easily scheduled. Other purchases might
appear to be irregular, such as printer ink, but data analysis could
reveal a more regular pattern.

- Consolidation Opportunities. After reviewing historical purchases,

you may nd ways to consolidate orders from multiple departments

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 into a single order, increasing ef ciency and possibly inviting bulk
discounts.

- Strategic vs. Standard Suppliers. Evaluating the current list of

suppliers helps you distinguish between strategic and standard
suppliers based on annual spend or product/service criticality. Taking
steps to develop strategic partnerships with your most critical
suppliers, as discussed in the previous chapter, will serve you well in
the long run. Now is an excellent time to discuss current supplier
issues and shortcomings; in some cases, new suppliers — or at least
further research — could be warranted.

- Wants vs. Needs. Employees and departments often order desired

items, not truly necessary ones. These wants can be costly to a
company, both in terms of the initial purchase and the ongoing
support. Historical data can reveal where you can cut back on these
items.

Upcoming Projects and Initiatives

Next, determine needs for upcoming projects and initiatives. New
product rollouts, building remodels, of ce moves, signi cant product
design changes, growth initiatives, cost-cutting initiatives, new af liate
partnerships, and reorganisations are all examples of activities that will
impact future demands for resources and services.

Some projects and initiatives may require new suppliers or discussions

with current suppliers to ensure they can meet additional needs. Others
may also have extended lead time requirements, so starting those
discussions sooner rather than later can reduce the chances of future
problems.

Demand Forecasting and Inventory Review

A needs assessment may reveal past challenges in the areas of demand
forecasting and inventory tracking, both of which negatively impact the
procurement process ow.

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Both scenarios can create unexpected costs. Making emergency
purchases to prevent shortages of inventory items is expensive, not only
in terms of the goods themselves but also for customers, who could
walk away if too many orders aren’t ful lled promptly.

Demand forecasting is even more critical for items that have long lead
times for ful lment. Conversely, having too much inventory on hand is
also problematic. Avoid tying up cash on items that you won’t use soon;
you might also end up spending more on storage space.

Online Inventory Forms and Tracking

Online forms can assist with the procurement planning process in a
number of ways:

- A stock inventory form comes in handy for most types of businesses

and can be used as is or customised to capture the exact information
you need.

- This inventory checklist helps you create an up-to-date account of all

items in your inventory. The data is stored in a centralised online
system that makes reporting easy.

Forms can also simplify other steps of the procurement process,

including

- Requests for Approval. Depending on the department or dollar gure

of the purchase, approvals (sometimes several) are necessary. A
purchase request form can replace cumbersome email
communication. It standardises the request process, making it
possible to automate approval routing.

- Creating a Purchase Order. After a purchase is approved, converting

that data into a purchase order is easy. You can transfer the
requisition to a product purchase order form. You can set up the form
so the vendor can access it directly. Or you can have the purchase

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 order automatically send an email to the supplier’s account manager.
Suppliers can even acknowledge and provide status updates in the
form itself, further streamlining the procurement process ow.

Next up, let’s take a closer look at supplier selection and what some of
the most important considerations might be as you weigh your options.

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Chapter 5:
Supplier
Selection

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 Supplier Selection:
For some products and services, choosing the right supplier can be
challenging. Purchasing of ce supplies is fairly straightforward, but the
requirements for highly complex products and services may be harder to
de ne, making supplier selection more complicated.

Complex or not, supplier selection is an important part of the vendor

procurement process. This step involves identifying potential suppliers,
evaluating them, and negotiating with them to obtain the resources you
need.

The goal is to evaluate vendors’ suitability to provide those resources in

both a pro table and reliable way. Ideally, you want to nd vendors who
will be a good t for the long term, not only because of the high cost
associated with switching to another vendor but also to create strategic
alliances that will bene t you both.

In this chapter, we’ll look at various factors to consider during the

supplier selection process, as well as some of the tools companies use
to nd and evaluate suppliers.

Supplier Selection Considerations:

The following are some of the key determinants for supplier selection.

Location
For physical (and usually standardised) supplies, location tops many
other considerations. Even with extensive online shopping and shipping
options, some products, such as perishables, aren’t well suited for long-
distance travel. Heavy equipment and engineered products also benefit
from local vendor partnerships.

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Cost
Cost is almost always a consideration. Some companies evaluate the
return on investment and perform quality comparisons, along with
pricing and convenience as additional considerations.
Engineering talent
For technical industries or IT departments, the supplier’s engineering
talent may be the most critical consideration. Gathering intricate
details about the materials, the required hardware or software, and the
ongoing support for their offerings takes homework but ultimately
results in higher quality selections.

Service Offerings
In most cases, if a potential supplier doesn’t offer the necessary
services, they aren’t the correct vendor. But occasionally these
situations aren’t so simple.
An example is IT desktop support. Several suppliers provide this
service, but the best option may address only 90 percent of the
company’s initial requirements — and that might be sufficient.
In these situations, it’s important to maintain open communication and
collaboration between the department and procurement to head off
potential future issues.

Industry Reputation
Awards and industry ratings are good sources of information about a
vendor’s quality and reliability. For complex services and products, also
look for reports produced by industry evaluation firms, such as JD
Power or Gartner, to learn more about quality metrics and
recommendations.

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Customer Recommendations
Customer reviews aren’t available for all products, but if you can find
them, they provide great insight into a supplier and their product or
service. Knowing how current and even former customers feel about a
particular supplier may help determine their suitability for you.
It may take some digging, but the information is usually available
somewhere. You can also ask potential suppliers for references —
though you should realise they will be curated and positive. During
those discussions, don’t be afraid to broach difficult topics, such as
areas their customers think need improvement or situations that they
felt may have been poorly handled.

Supplier Selection Tools

Once you’ve begun to narrow down your vendor options based on the
considerations above, it’s time to dig for more details. A request for
quote (RFQ) and a request for proposal (RFP) are tools you can use to
learn more about how vendors will serve your particular needs.

RFQ
For some items, an RFQ is effective. The process is relatively simple:
Send this form to vendors you have an interest in working with as a
way to gather information about product specifications, delivery
timelines, and itemised costs.
Suppliers will respond to the RFQ with a quote and any comments
regarding the specifications. In general, an RFQ is a straightforward
document that’s better for product purchases rather than services. RFQ
templates like this one streamline the process and can be customised
to include whatever information you need to know.

RFP

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In situations with many variables or where the company is exploring
different market options, an RFP is the best choice. Compared to an
RFQ, an RFP is more time-consuming for all involved because it’s
intended to solicit vendor proposals for business solutions rather than
price quotes.
Not only do you need to spend more time outlining your needs and
requirements, but the vendors you send the form to must devise and
propose possible solutions. An RFP can reveal a lot about vendors,
their services, and how you might work together to meet your business
goals.

Online Marketplaces
Recently, there has been a new trend in finding suppliers: online
marketplaces.
Online marketplaces bring buyers and sellers together. Buyers conduct
searches based on essential criteria, such as location, items needed,
and more. The marketplace then finds relevant merchants and service
providers that meet their criteria.
Ariba, Alibaba, and Amazon Business are just three examples of such
online marketplaces.
Companies can find primary suppliers on these marketplaces and even
use them for emergencies when a primary supplier cannot fill an order.
The previously mentioned RFQ is highly effective in an online
marketplace environment.

Vendor List Maintenance

If you contact or work with numerous vendors as part of your vendor
procurement process, you’ll need a way to keep track of the details.
Online forms can help collect the necessary information for a variety of
scenarios:

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 • To maintain a database of supplier information, send a supplier
registration form to new vendors as you embark on partnerships.
• Use a simple vendor contact form to collect address and contact
information from potential vendors.
• If you’re hosting a trade show, send a new vendor setup form to
each participant.
Once you’ve decided on a vendor, the next step is negotiating a
contract.

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 Chapter 6:
Contract
Negotiations

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Contract Negotiations
Congratulations — you’ve chosen a supplier and are ready to move
forward.
The next phase in the process is contracting, where you and the vendor
agree to the terms of the purchase, outline them in a written document,
and sign that document to indicate agreement on both sides.
Some purchasing contracts are straightforward, while others are more
complex, with multiple variables and contingencies. No matter their
complexity, all contracts should undergo a thorough legal review.
The contract stage of the procurement process may or may not include
negotiations. Any element of a purchasing contract could be up for
negotiation, including details related to responsibilities, financing,
delivery dates, payment schedules, and more.
Naturally, both parties have their own objectives, but when everyone
bargains in good faith, negotiations can go a long way toward
producing a solid contract that everyone is committed to honouring.

Drafting Contracts as Part of the Procurement Process:

1. Clarify the Main Points of the deal Before Drafting a Contract

Sit down with your supplier and write down the main terms of the
agreement as a list or outline. This takes the focus off the legalities of
contracting and puts it on fulfilling the requirements for the job. The
main points include what needs to be done, when, and by whom. These
points will serve as the basis of your contract going forward.

2. Use Customisable Online Forms to Draft the Contract

Online templates provide a good starting point for the structure of a
purchasing contract. Alter them as necessary to include your most
important terms, and reuse your templates for future deals.

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Not only does this process save time, but it also reduces the likelihood
of mistakes. Free, customisable contract templates can be reviewed
and signed electronically or printed as PDFs.

3. Include Any Necessary Exhibits or Attachments

The contract itself is the primary document, but in some cases,
relevant ancillary documents may help clarify and expand on contract
terms.
Some exhibits or attachments are lengthy and, thus, too unwieldy to
include in the contract itself. An example might be the terms and
conditions of sale (payment methods, product warranty rules, and other
included services under a purchase) or various schedules to be
followed as part of the contract.

4. Have a Legal Expert Review the Contract

It’s never a bad idea to ask a legal professional for input. For
complicated purchasing contracts — complex IT services, highly
engineered products, and healthcare services, for instance — seek
guidance from a skilled legal team with expertise associated with that
type of service.
But even if your contract is simpler, a legal expert has the experience to
spot potential problems and may be able to point out where key
information is missing. Note that this step isn’t intended to benefit just
you. An objective third party will make sure the contract is fair for both
parties, which helps foster trust in the relationship.

5. Store Your Contracts Online for Future Reference

Drafting and completing contracts is hard work; don’t let it all go to
waste. Save your contracts online for easy accessibility. You may need
to reference them in the future for terms and conditions, pricing

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amounts, or responsibilities, especially if key people in your workforce
leave — and take that knowledge with them.
When you use Jotform contract templates, like this supply agreement,
all your customisations are securely stored in Jotform’s cloud storage
database, so you can access them anytime for easy reference,
reporting, or auditing.
This template also offers life cycle tracking, such as terms, automatic
renewals, pricing changes, and notification requirements. Be sure to
include notification rules ensuring review before the contract expires or
auto-renews.
Beyond online forms, another option is to invest in a contract
management platform that allows for better oversight through the
entire contract process and provides digital storage space for
purchasing contracts.
Next up: Your goods are about to be delivered — so what’s involved in
the receiving process?

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 Chapter 7:
Receiving and
Validating Goods

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Receiving and Validating Goods
After your business has drafted the purchasing contract and placed an
order with the supplier, the next step is receiving those goods or
services.
Though it might seem like the most crucial procurement hurdles have
already been handled in previous steps — and in many cases, they have
— receiving the product can present its own set of challenges. Having a
solid receipt-of-goods procedure in place ensures that you get what
you expected — and paves the way for smooth completion of the
procurement process.

9 Components of Effective Goods Receiving Procedure:

The following are nine components of a thorough receipt-of-goods
process. The details of your procedure might vary depending on the
purchased goods or services, but your overall receiving process flow
should be the same in every case and with every supplier to make sure
nothing falls through the cracks.

1. Order Receipt
Contrary to what you might think, the receiving process begins well
before the goods arrive in your building or warehouse. The process
starts when the supplier confirms the order.
While vendors most often fulfil orders in a straightforward manner,
there may be times when suppliers ask questions for clarification. As
the customer, you may also need to communicate last-minute changes
about order modifications, revised shipping dates, etc.

2. Order Processing
When the purchase order is clear and questions have been resolved,
the supplier begins processing the order. Some suppliers use sales

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order processing systems capable of giving customers insight into the
progress of their order fulfilment.

3. Order Shipment
When your order has been fulfilled, you (or the designated party as
identified to the supplier) should receive a shipment notification from
the supplier.
In the contract stage, you may have supplied the vendor with
specifications as to how they should package and ship your goods. If
not, the supplier will use their standard packaging and delivery
methods, as well as their preferred courier service.
Regardless of the method, the supplier should provide you with
shipment tracking information so you can stay on top of the
anticipated delivery time.

4. Order Receipt
When an order arrives, compare the contents and shipment label to
verify all items are included. Some orders may be split into multiple
shipments, and companies should be aware of items arriving at a later
date. If anything doesn’t match, contact the supplier immediately for
clarification or resolution.
Online tools can help streamline this process. For instance, you can
customise Jotform’s receiving checklist to collect the important
information about a delivery. That information is automatically stored
online for future reference.

5. Quality Review
A quality review is also critical. Quality checks can be time-consuming,
but it’s essential to do them at the time of arrival for quick issue

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resolution. For items like perishables, contact the supplier immediately
if those items don’t meet freshness expectations.
Jotform’s sample inspection form templates standardise quality
information and remind personnel of all the necessary checks during
the quality review.

6. Item Returns
If any item fails the quality review, set it aside and contact the supplier.
During the discussion, be sure to gather return shipping information
and a return merchandise authorisation (RMA), a document that gives
consent to return a purchased product.
Be sure to include the RMA on any returned items and packaging, and
add the RMA information into your online system, along with shipping
information.

7. Purchase Order Completion

Assuming all materials arrived as expected, mark the PO as complete.
Then record the packing list and any other pertinent information.

8. Supplier Scorecard
Evaluate the transaction using a supplier scorecard system. Basic
areas of measurement include quality, responsiveness, timely delivery,
and price variance, but there may be other metrics you find useful.
Include both qualitative and quantitative data that will help you recall
the context of the transaction — and make it more useful for future
reference.

9. Inventory Update
Add the newly purchased goods to your inventory system. That could
mean adding a barcode and scanning the item with the reader. Some

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items might require an RFID tag. Using an online system, as discussed
in an earlier chapter, simplifies this process.

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 Chapter 8:
Procurement
Payments

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Procurement Payments:
Once your business has received the goods or services, suppliers
expect prompt payment. This means your accounts payable
department is crucial in this last stage of the procurement-to-payment
process.
In our final chapter, let’s take a closer look at the accounts payable (AP)
function, as well as some steps you can take to streamline the approval
and record-keeping processes.

The Role of Accounts Payable

When you purchase goods or services from a supplier or vendor, your
company most likely won’t pay for them at the time of purchase but
instead will agree to pay at a later date (usually within 30 or 60 days).
Whenever that happens, you create an account payable, which is
money your business owes to suppliers for completed purchases.
An accounts payable team — or, for small companies, possibly just a
single person — handles those payments.
Depending on your organisation’s procedures, this team is responsible
for paying preapproved purchase orders, as well as invoices sent by
supplies after you’ve received the goods. Occasionally, they will
process payments before all items have actually arrived, but this only
happens under mutual agreement between your company and a
supplier.
Accounts payable teams are charged with paying legitimate and
accurate invoices only. False billing, overbilling, and duplicate invoices
are common types of accounts payable fraud that can only be stopped
with rigorous processes and conscientious, vigilant employees.

Tips for Effectively Managing Procurement Payments:

Here are some tips for ensuring all vendor bills are properly paid.

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1. Use an Authorisation Process to Approve Invoices
Many accounts payable teams use a “three-way matching” method to
confirm the legitimacy of an invoice. They compare three different
documents — the invoice, the purchase order, and the order receipt —
to make sure the details match.
Doing such a comparison is a sure-fire way to uncover discrepancies,
which can then be reviewed before you pay the invoice. Only invoices
that have passed this test move on for final approval from
management.
Organising and managing large numbers of paper-based invoices can
quickly get overwhelming. That’s where digital forms — like
Jotform’s payment authorisation form — come in handy.
You can fill in the details at the comparison stage and pass the
document along for digital approval. The AP team stores the digital
authorisation form online so it’s easily retrievable.

2. Keep Records of Receipts

Payment receipts document your company’s expenditures and
purchases, so it’s important to organise and retain these records.
Digital forms are also useful here because they can be stored in a
single central repository.
You can customise this standard payment receipt form to record
transactions with suppliers, including the vendor name, date, payment
amount, receipt number, goods or services received, and the name of
the receiver.

3. Align Procurement and AP

One of the top challenges of procurement identified by 30 percent of
organisations is its lack of communication with AP. Traditionally, these
functions operate separately, but this lack of coordination can slow

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down payments and create an environment that leads to wasteful
spending.
To foster collaboration, take advantage of digital forms and
procurement systems that are compatible with AP to provide better
visibility of the process for both departments. Also, encourage
information sharing among both groups.
For instance, AP should inform procurement if and why they’ve not yet
paid a past-due invoice, so procurement can be transparent about the
issue with the relevant supplier.

4. Track Relevant Metrics to Improve Your AP Operations Flow

The functioning of your AP department can have a big impact on
relationships with your suppliers. Invoices that are consistently paid
late or incorrectly could damage the partnership.
Tracking the performance of accounts payable with some key metrics
can help identify problems with AP operations. It can also give you a
better sense of what’s working and what’s not in terms of how AP
connects with the larger procurement process.
Relevant metrics to consider tracking are
• Invoice cycle time: the average receipt-to-pay time
• Average cost per invoice, including items like software fees and
staffers’ time
• Number of supplier inquiries, discrepancies, and disputes

Conclusion
Securing the right goods and services to carry out your organisation’s
work is a crucial part of your survival — and one that affects your
bottom line. An efficient and effective procurement process will not
only improve your profitability but also keep your business running
smoothly.

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Jotform’s forms can help optimize your procurement process flow —
just check out our numerous, easy-to-use templates that make
processing procurement data easier and faster. Our forms can get
nearly any job done — and if you don’t see a form you need, you can
create one yourself or ask us for help. Visit https://www.jotform.com/
contact/ today.

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