Businesses establish purchasing procedures to ensure that purchases are in the best interest of the company and that money is spent efficiently. These procedures cover everything from small purchases from a single vendor to extensive bidding processes. In a bidding process, a purchasing manager selects the best offer from a list of vendor bids, based on cost, reliability and time frame to receive the goods.
Businesses set a limit for petty cash purchases, such as $25 or $100. An employee making a purchase with petty cash often does so with his own money. He keeps the receipt and submits a form to his supervisor or the payroll department that includes the cost of the item including tax, the reason for the purchase, the date and the vendor. He then receives reimbursement for the purchase from the petty cash fund.
Open market purchases do not require a bidding processes, but often need the approval of a purchasing department because the price of the goods is above the petty cash limit. A requester makes a request for goods, sometimes naming a specific vendor, and if the request is approved, she makes the purchase directly from the vendor. She can shop around and receive verbal price quotes from vendors, but she does not have to and can choose the vendor herself.
A business sets a purchasing limit to determine when the requester will handle most of the purchase bidding process and when the purchasing department will. If the cost of goods is below that limit and a bidding process is necessary, the requester compiles a list of bids from vendors and submits the bids to the purchasing department, which selects the vendor with the best offer. The requester bidding process may include a time frame for accepting bids.
Purchasing Department Bidding
When the cost of goods or services goes above a purchasing limit, the purchasing department handles most of the purchase bidding process, with assistance from the requester. The requester explains why he needs the goods and the purchasing department solicits bids from vendors for a set number of days. Once that time expires, the purchasing department selects the vendor with the best offer.