PURCHASE CONTROL, PURCHASE DEPARTMENT & PURCHASE PROCEDURE

 “Refers to controlling the cost of materials through systematic purchase of materials so that quality materials are available at right quantity at right time”.

PURCHASE DEPARTMENT:- Is a functional department of on organization headed by purchase manager interested with the purchase of raw materials required by the organization.

FUNCTIONS/OBJECTIVES OF PURCHASE DEPARTMENT

• Ensure uninterrupted supply of materials
• Competitive or economic purchase of materials
• Minimise investment in materials
• Ensure the right quantity of the materials
• Maintain relationship with supplier
• Ensure smooth delivery of materials
• Act as information centre relating to materials
• Preparation of purchase budget
• receive purchase requisition
• Selecting the supplier
• Prepare good received note(GRN) and goods inspection note.(GIN) 

PURCHASE PROCEDURE

1. Initiating purchase requisition: It is a formal request made by the stores department or by the production department to the purchase department to initiate the purchase of materials required for them.
2. Inviting tenders and receiving quotations and selecting the supplier :- The purchase manager will select the supplier who has issued the most favourable quotation
3. Placing the Purchase order:- Purchase order is prepared by the purchase manager showing the details of the goods ordered and the various terms and conditions on which the goods to be supplied by the supplier.
4. Receiving the materials and inspecting the materials:- Purchase manager to prepare the goods received note & The goods inspection note which are needed for settlement with the supplier.
5. Making the payment: - Amount is paid to the supplier with reference to the order for the goods, the invoice given by the supplier, the goods received note and the goods inspection note prepared by the purchase manager.
6. Determination of material cost: - For the purpose of pricing the material issues, the cost of purchase of materials to be determined by the purchase manager. Cost of purchase of material = Invoice price + non-refundable taxes +all incidental expenses incurred by the business till the materials placed in the store.(ordering cost) (all the expenses inquired by the entity) 

CENTRALISED PURCHASE 

“The entire material requirement of the entity are met by the purchase department based the purchase requisition received from various departments.” Under centralized purchase a purchase department is contented by the entity headed by the purchase manager.  

ADVANTAGES OF CENTRALISED PURCHASE:-

1. Trade discount: - The entity can avail trade discount because of bulk purchase.
2. Professional purchase: - The purchase manager is a professional in the area of procurement and he will apply his professional skills for selecting the suppliers and selecting materials.
3. Reduce ordering and transportation cost
4. Low carrying cost: - because of minimizing the quantity of stock.
5. Reduced obsolescence: - because of centralized supply of materials purchased by the purchase department the chance for obsolescence of materials minimized.
6. Centralized recording: - The invoice received from the customer, the goods received note prepared by the purchase manager and the goods inspection note are passed on to the cost accounting section from the purchase manager.
7. Decentralized Purchase: - “A system of purchasing adopted by an entity where purchases are made by the respective departments to meet their material requirements”. 

ADVANTAGES

1. Eliminate the cost of purchase department
2. Eliminate purchase requisition and the lengthy procedure for purchase.
3. Ensure materials of appropriate quality
4. Availability of materials on time.

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