Purchasing System

DEFINITION of Purchasing System

A purchasing system is a process for buying products and services encompassing
purchase from requisition and purchase order through product receipt and payment.
Purchasing systems are a key component of effective inventory management in that
they monitor existing stock and help companies determine what to buy, how much to
buy and when to buy it. Purchasing systems may be based on economic order
quantity models.

BREAKING DOWN Purchasing System

Purchasing systems makes the purchasing process more efficient and help companies
reduce supply costs. Computerized purchasing systems can cut companies'
administrative costs, shorten the length of the purchase cycle and reduce human error,
thereby minimizing shortages. They can also simplify order tracking and make it
easier to manage purchasing budgets by quickly creating expenditure reports.

Purchasing systems play an essential role in controlling a company's cash outflows.

They ensure that only necessary purchases are made and that they are made at
reasonable prices. Purchasing systems make use of outputs from production planning
systems. These outputs include input amounts needed in the production process.

A purchasing system is a set of processes used to acquire goods and services for an
organization. These processes include the following:

 Accept purchase requisitions from users

 Find and evaluate suppliers
 Negotiate prices
 Place purchase orders
 Monitor procurement cards
 Dispose of excess assets
A purchasing system is an essential control over the cash outflows of a business, so
that only what is needed is actually acquired and purchases are made at reasonable
prices.

A key input to a purchasing system is the production planning system, which can be
used to automatically calculate what needs to be purchased and when; it is possible
for the production planning system to automatically place replenishment orders with
suppliers, completely sidestepping the traditional purchasing system.

If you have ever ordered product or supplies for your retail store, you might
have been asked if you have a PO number. A purchase order (PO) is
a written sales contract between the buyer and seller detailing the exact
merchandise or services to be rendered from a single vendor. It will specify
payment terms, delivery dates, item identification, quantities, shipping terms,
and all other obligations and conditions.
Purchase orders are generally preprinted, numbered documents generated
by the retailer's financial management system. In other words, if you use an
accounting software like QuickBooks, when you order products from a
vendor, it will create a purchase order for you in the system. The purpose of
the PO is to create a trackable document within your accounting or POS
system to be used in all sorts of beneficial ways to run your business.

How Purchase Orders Work With an Inventory System

. A PO tells your inventory system what you have on order. If you are using
an open-to-buy system, it knows not to order any more of a product because
they are already some ordered.
. It can establish purchase specifics with the vendor. For example, it obviously
contains the quantities of each product you are ordering, but it also details the
method of payment, the terms of which you will pay for the products
(including dating), and the method in which you want the products shipped to
your store.
Many vendors have a set or default system they use for billing and freight.
So, without any instructions, they will default to UPS ground when
 shipping to you, for example. But you may need it faster, and the PO can
communicate that.
. A PO is an accountability document for all parties. It's very easy for mistakes
to be made when ordering. But when everything is in writing, it's hard to argue.
I can remember many times when I got billed and invoiced incorrectly from a
vendor but had my purchase order to back it up and got it reversed or fixed.
One example of this, I got an invoice for 300 boxes of shoe creme when I
ordered 300 pieces. There are 100 pieces in a box, so you can imagine how
much higher the invoice was than what it was supposed to be.
. When the merchandise arrives from the vendor, you can check it in against the
PO and make sure the shipment is correct.
. Finally, it allows all of your employees to be involved. For example, one
employee can order, and another one can receive.
One of the other benefits of purchase orders is your creditworthiness. Banks will often
look at your POs to determine if you are solvent. A solid purchase order process can
help you get approved. A poor one will result in you not getting a loan. It can also be
used for credit with the vendor. For example, some vendors might require you to pay
cash when you order. After a period of doing business with you, they may allow you
to submit a PO versus a credit card. This is huge in managing your cash flow.
POs are a common practice in retail. And any POS or accounting software you might
install into your store will have a PO component for you.

 Step 1: Purchaser creates purchase requisition – The purchase order process

starts with a purchase requisition, a document that is created by the purchaser and
submitted to the department that controls finances. Consider this the part of the process
where you get the thumbs up to purchase the goods and services you want. You’re not
actually ordering anything, you’re getting the approval to do so. Approvers can choose
to approve, reject, or flag your request for further discussion. The key difference
between purchase requisitions and purchase orders is that a purchase requisition is
about permission and purchase orders are about purchasing. Read our blog post on
purchase requisitions vs. purchase orders for a detailed description of these two
documents.
 Step 2: Purchaser issues purchase order – Once the purchasing or procurement
department has approved the purchase requisition, it issues a purchase order to the
vendor. In essence, POs place the order. Purchase orders are typically created
using electronic purchasing systems like PurchaseControl, which enable businesses to
track POs and submit them electronically.
 Step 3: Vendor approves, rejects, or submits PO for discussion – The vendor
will review the purchase order thoroughly, paying close attention to quantities, prices,
total amount due, and terms and conditions. Once the vendor approves the purchase
order (usually via email or using an e-procurement software), they prepare the goods
or services to be delivered. If they do not have an item that is being purchased or if
there are other concerns with the order, it is flagged and sent back to the purchaser for
further discussion.
 Step 4: Purchaser records purchase order – The final step in the purchase
order process consists of the purchaser recording the PO. As mentioned earlier, filing
purchase orders is a good habit in case of an audit.
Once these steps in the purchase order process are complete, the goods or services are
delivered and inspected. Thereafter, the vendor issues an invoice to the purchaser,
payment is made, and the transaction is complete

Distribution from Storage center

1. Checking

After the invoice is processed, the items taken can be immediately unloaded in the reciving area. And
the reciving party also input number code, Quantity, and expiration period using handhelds. After the
item is received in checking and goes into the warehouse, the item will be checked again by the 2nd
checker (Random), and after passing the check the item will sticker SLP (Slip Location Produck).

2. Storing

After the item is checked by reciving goes into a random area, and then is checked by a random
cheker, which will then be input into the storage rack based on the address specified by the SLP
sticker.

3. Proses picking fraction (in pics)

This image shows the picking process based on the request of each store that is channeled directly
from the admin section in charge of that section. With the program that we use, we can pack the
items requested by the store automatically, no need to use the list of goods requests just by pressing
the DPD (DIGITAL POWER DISPLAY) according to the number of requests that appear in the DPD.

4. proses scaning fraction.

In this process, the scanner receives pickings from the picker which is then scanned using DCP to filter
the correct or not picking results.

before starting the scan process a scanner inputs the line code or barcode into the DCP to be able to
read the data by the DCP. And after the picking and scan process is finished the packing results are
brought by the courier to the gate address that has been specified in the sticker address.

5. Delivery Note

After the results of the dri picking scan arrive at the loading or issuing item, it is checked again
whether it is at the correct gate and whether the results of the picker's and scanner's performance
are correct, and if it is correct, the issuing begins to put the scanner picker into the car to be ready to
send to the store.

6. Picking List

After the issuing has finished entering the items, the issuing company gives the picking list to the
admin section of the BPB to immediately make a travel letter for the items.

7. Shipping Letter

After all that was done, the BPB admin printed a travel letter as an example on the side and was
ready to be sent to the shops that had been prepared in the travel letter.

Payroll System

 Timekeeping Record
This procedure aims to record employee attendance. Present time recording is
organized by the timekeeper function using the attendance list at the entrance of the
administration office or factory.

 Salary List
In the procedure for making employee payroll. The data used as the basis for making
payrolls are decrees regarding the appointment of new employees, promotions,
termination of employees, demotion, salary list of the previous month, and attendance
list.
 Salary Cost Distribution
In the procedure the distribution of salary costs and labor costs is distributed to
departments that enjoy labor benefits.

 Payroll Payment
Salary payment procedures involve accounting functions and financial functions.
Accounting functions make cash expenditure orders to the financial function to write
checks for salary payments.