Procurement Control Systems - Essay Example

If the material is a standard item, the selection should be on the basis of competitive bidding to assure the best price and reduce costs (Dall and West, 22). Buyer relationships or a vendor attribute system could be used for specialized material. This would help assure cost containment as well as reduce undue buyer-vendor influence and corruption of the process.When the material is received, a receiving report should go to the stores as well as purchasing and accounts payable. There also needs to be an interface with the inventory system to update the count and material level.

In the example, receiving does not match the material to a purchase order to check for accuracy or completeness. This has the potential of accepting incorrect shipments or backorders that may have been canceled. There is also too little control over the invoicing process. In the example, purchasing matches the purchase requisition, purchase order, and receiving the report and generates an invoice. The invoice is sent to the controller for payment. Though accounts payable verifies that the documents match, there should be an independent review of the documents to assure their legitimacy.

This step could alert the firm to double billing, falsified receiving documents, and any other process irregularities. Step F in the payment process should be delayed until the due date of the invoice. Currently, the flow chart indicates that he takes place as the documents are received and can result in a misappropriation of the firm's resources. In addition, there should be a voucher register and a voucher journal entry to track the payments. An independent review of the transaction before payment is authorized could eliminate any potential for waste or abuse.

Procurement control is largely centered on employee integrity and the buyer-vendor relationship. However, information systems need to be designed to reduce the potential for error and abuse. The most effective means of controlling the procurement process is through the use of independent reviews. The requisition process, as well as the payment process, needs to be examined by someone from outside the department. Receiving needs to accurately match the purchase orders to assure the terms and quantities received.

These are the important steps that the firm in the example has failed to institute in their procurement business process.