Cash management is a business activity that controls cash receipts and disbursements. A purchasing policy focuses on placing requirements for employees seeking to acquire goods or services by use for the company.

Defined

Purchasing policies are typically a part of a company’s overall operations handbook. It will describe the purpose for the policy, restrictions placed on employees, responsibility of purchasing department employees and other specific procedures or processes.

Features

Many purchasing policies will include information on how to use a purchase order for the acquisition of goods or services. Employees are often responsible for filling out the purchase order, obtaining management authorization and turning the document into the purchasing department.

Effects

Companies can use a purchasing policy to improve the quality of goods and services in the company while lowering the cost of acquisition. Purchasing managers will often negotiate deals with vendors or running a bid process that allows vendors to compete for a project offered to them by the company.