Procurement Process flowchart | FMD Pro Starter Page 1 of 5

TOOLS /  PROCUREMENT PROCESS FLOWCHART

PROCUREMENT PROCESS FLOWCHART

What is it?

How do I use it?

When do I use it?

Who is involved?

Tips

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What is it?
Each organization’s procurement process is unique and designed to
suit its specific context and operations. Whatever specific system an
organization has, the procurement process is made up of three
components, which FMD Pro calls the 3 ‘Ps’ of procurement:

• Proce ss – describes the steps and rules that must be followed

when ordering, receiving and paying for goods and services. We
would use a simpler process to buy small items, such as
stationery, and a more complex process to purchase high value
items like a vehicle.
• People – identifies the names and job titles of people who can
initiate and/or authorize each stage of the process. The higher the
value and risk in the purchase, the more people should be
involved, to protect the process from fraudulent activity and to
get the best value for money.
• Pape rwor k – each stage of the process generates paperwork and
supporting documentation, all of which should be retained and
filed together for each transaction (for reference and audit
purposes).

The flow diagram below describes steps involved when purchasing

higher value items from a supplier. Remember, organizations each
have their own unique procurement process, however, this flow chart
sums up the key steps included in most procurement processes.

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How do I use it?

The following scenario from UNITAS explains how the procurement
process flow chart is employed in its Delta River Project.

Amira and her project team buy goods and services on a regular basis
to achieve project objectives and goals. Most purchases are small,
such as office supplies, training materials, water testing kits and
items to maintain vehicles. But the team also needs to buy more
expensive items, including a photocopier for the office and a new
vehicle.

As a high value item, the purchase of the vehicle requires a more

detailed process to promote transparency, ensure the best use of
project resources and manage the risk of fraud. Amira and the team
have used the procurement process flowchart to guide them in setting
up the steps for the project’s procurement system.

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After determining the specification for the vehicle, Amira makes sure
that there is sufficient money available in the budget and then she
submits an official purchase re quisition to obtain the authorization
she needs to go ahead with the purchase. Once the
requisition is signed off, the next step is to obtain quotations from
suppliers for vehicles that meet the specification. The quotes are then
reviewed by a purchasing panel,
panel which then selects the preferred
supplier.

Amira is how halfway through the process. A purchase

purchas e orde r is then
issued to the supplier, which forms the contract between UNITAS and
the vehicle supplier. When the vehicle is delivered, the team checks
the vehicle is in full working order and reviews the paperwork, to
ensure that the vehicle meets the required specification. The team
checks the invoice shows the correct price and is in line with the
terms from the purchase order and quotation. Finally, Amira submits
the invoice for approval and payment.

When do I use it?

Most procurement transactions will take place during project
implementation, but the rules and processes for procurement are
decided beforehand, during the project setup and planning phases.
This is when the internal control system for procurement is
established and the levels of authority are agreed for the different job
roles and purchase types related to the project.

Who is involved?
The procurement process is built around the principle of separation
(or segregation) of duties and incorporates delegated authority rules,
to ensure proper internal controls. Sharing responsibilities between
different people, and ensuring there is a range of checks, protects
those involved in the process and minimizes the opportunity for
fraud or collusion with suppliers.

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The higher the value of a transaction, the more people (and steps)
will need to be completed. For example, a project team member may
have authority to purchase smaller items up to a certain
value, followed by the budget holder’s approval of expenditure and
the finance team recording the transaction in the cashbook. More
expensive items will require multiple quotations from different
suppliers, and a panel of authorized staff from different teams will
choose the supplier, to ensure the organisation gets the best deal.
The purchase will be authorized at a higher level of authority and
there will be more supporting documents attached to the invoice,
which is passed to the finance team to make the payment and record
the transaction in the books of account.

Tips
The finance team also plays a role in the procurement process: as a
member of the purchasing panel, checking invoices, preparing a
payment voucher, making the payment to a vendor, and entering data
in the accounting system. It is a good idea to share these duties
between different team members, to strengthen the process and
minimize the opportunity for fraud and error.

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