How to Create Purchasing Procedures

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Allowing employees to purchase without guidelines in place can increase costs and shrink profit margins. Wise purchasing starts with buying the right quantity and quality of items at the best price then creating a procedure that allows monitoring of the purchasing process. Using a budget and establishing a standard review process can reveal market trends to take advantage of and pricing structures that might otherwise be overlooked.


Write a list outlining all the materials and items that the business needs to purchase. Group similar items together and give each group an appropriate heading. For instance, items such as pens, legal pads and copy paper would all go under the heading of "Office Supplies." Coffee, tea, cups and plastic spoons might all be listed under "Kitchen Supplies." Items such as binders, DVDs and DVD cases might go under the heading of "Packaging."

Identify all departments or areas in the company that will be purchasing supplies and document the groups of items each area will purchase from. For instance, the marketing department might be purchasing from the "Packaging" and "Office Supplies" headings. The administrative staff might be the only ones purchasing "Kitchen Supplies" but will also purchase "Office Supplies."

Plan a purchasing budget for each department by using the company's yearly budget as a starting point. Set a monthly budget for each department's purchases -- this may involve the participation of each department head for final approval.

Gather vendor information, such as company name, address, phone numbers, contact person and your company's account number. Link each item being purchased to a particular vendor or vendors. It is wise to have a vendor list for each item that is three deep so that if the preferred vendor is out of stock, there are back-up vendors to go to. Having more than one vendor to purchase from prevents delays in ordering. This is especially important in businesses where parts or other items must be ordered and received in a timely manner to meet deadlines.

Establish relationships with vendors to negotiate pricing discounts and manage special orders. A designated sales representative within a vendor company can accommodate and expedite emergency orders or short manufacturing times.

Write Procedures

Write a step-by-step process for each department to follow when making purchases. Consider how a purchase will be requested, authorized, ordered, received, delivered and paid for. Consider the establishment of purchasing caps for the various levels of employees and staff. Include procedures for ad-hoc purchases, payment options and purchases that may require a response from other departments. For instance, purchasing new computers by the administrative department will require the IT department's involvement and input to purchase installation items, such as cables, modems and routers.

Formulate a step-by-step process for managing the paperwork in the purchasing process. Depending upon the needs of the business, an electronic purchasing process instead of a paper-based one may be required.

Design the forms required for each purchase or buy standard agreement forms from an office supply vendor. Forms might include a purchase request form with room for authorization, an order form to send to the vendor, a form for receiving the items in a main warehouse and another that recognizes delivery to the requesting department.

Design a process for managing complaints and accountability, reviewing supplier relationships and discount structures, monitoring purchasing budgets and reviewing and improving the purchasing process. Tweaking and modifying the purchasing process can produce better returns if approached in a methodical fashion. Quarterly and annual reviews could add to the company's bottom line.

Create a purchasing procedures manual that outlines a step-by-step guide for the staff to follow. The manual should provide clear steps that each staff member must follow to request, obtain authorization and place a purchase order. It should also identify those who will manage the process and are authorized to approve a purchase, as well as an approved vendor list and a forms list that shows the physical location of the forms or where they are in the company's computer network.