Discover the sales cycle steps for purchasing with airSlate SignNow

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in this video i'm going to walk you through the six steps of the purchasing process it all starts with a request for goods or services then the company purchases the goods or services the goods or services are received the company gets an invoice the company pays the invoice and the accounting records are updated ingly so let's walk through this in greater detail and we'll start with step one the requisition for goods or services so there's an authorized individual at the company that says i need something i need maybe raw materials i need supplies i need some type of service okay that request is then approved and then it's going to go to purchasing now this purchase requisition typically there is a form that you have to fill out so the last university that i was a professor at if i needed some kind of equipment for example if i needed a laptop or i needed a desktop or something to do my job what i would do is i would have to fill out a form and say look this is specifically the computer or whatever it is that i need i need one of them i need two of them okay i specify exactly what it is that i need and then i sent that to the admin department and then someone had to approve it and then it went to purchasing okay so there's a request for goods or services assuming that that request is approved then it goes to purchasing okay i didn't actually go and purchase the laptop okay somebody else at my organization went and purchased the laptop now when they go and purchase that laptop they're typically buying from from what is called an approved vendor list by the way you'll hear this word vendor a lot when we talk about the purchasing process vendor just refers to one of the company's suppliers so there might be a list they might say okay there's there's dell okay that's that's an approved vendor we can buy stuff from dell if they're not on their proof vendor list typically the company can't buy from them there are things you can do to get someone on the approved vendor list and stuff this is an internal control that we'll talk about later okay but let's just say i make this request for this dell laptop dell is on the approved list of vendors okay how might they have got on their proof list of vendors well my organization uh my university that i was teaching i have worked out a deal for certain pricing that okay if we buy enough computers from dell or whatever they'll give us preferential pricing okay so basically i make this request for this computer there's a form i fill it out it gets approved and then there are other people at the organization that go and make the purchase now there are different types of purchases like one thing is just for someone to go and just submit an order from dell but another thing is if a company is buying a lot of a certain product they could go and say well actually we're going to solicit bids from multiple vendors so we're going to go and we're going to say you know what we need uh we're starting at university and we're going to need 10 000 desktop computers and we're going to solicit bids which company would give us the best price on these 10 000 computers another way of making a purchase is where it's just automated okay sometimes when a company has where it's set where their inventory level gets below it gets it hits a certain threshold like oh we sold through enough inventory they have it automated where it just automatically reorders okay so there's a purchase happening there no one's actually even doing anything it's just happening automatically you could also have a blanket purchase with multiple delivery dates so for example you could say all right we want to buy 120 000 units from this vendor but we want it spread over 12 months so every month we're going to receive delivery of 10 000 units so we're buying 120 000 units but we don't want them all to arrive at once okay so every month for for 12 months we're going to receive 10 000 units so the order was for 120 000 units but you're taking delivery on a periodic basis okay so there's again multiple ways to purchase goods and services now you you you requested the goods and services you purchase them the next step is you receive the goods and services now when those goods show up okay assuming that so let's say we're talking about inventory that was purchased and the goods show up there's gonna be what's called this form called a bill of lading that you're gonna get so the delivery truck shows up there's this bill of lading and it says okay here's here's what is on this truck that you're receiving you're receiving a hundred units of whatever okay so the bill of lading should have the purchase order number uh it should be matched to the purchase order you want to make sure that like if you're on the receiving dock for this company and these goods show up from the vendor you want to make sure did we actually buy these okay maybe by accident uh the the vendor just says hey look here's 100 units of this and you didn't even order that okay now also the people in the receiving department for your company are going to inspect the goods you want to make sure you're not receiving damaged goods or the wrong goods or the wrong number of goods so they're going to inspect the goods for quality they're they're going to count the goods and then they're going to prepare a receiving report and say okay look you know we ordered a hundred units of of this product and we received 100 units of this product now this is the point this is the point where the company has technically incurred a liability right they've received the goods or if they were services that were provided okay there's typically a form that's filled out to say hey we receive these services and then the company has incurred a liability to that to that vendor after you have received the goods or received the services you're going to receive an invoice from that vendor okay so the accounts payable department is the department at the company that is typically responsible for processing the invoices that's what accounts payable does and so they're going to enter the invoices into the system ideally and this is an internal control we'll talk about in a future video that you want to match the invoices to the related receiving report and purchase order okay this is called three-way match for everything to ensure that this was a valid purchase of this company it should be a purchase order saying hey we actually bought these goods you know we ordered these uh we actually received them and now we're being billed for them okay that that indicates that it's a valid purchase okay now typically there's this thing called a voucher packet or voucher package where there's this document called a voucher okay so if you work with accounts payable at all or something you hear about people oh we've got this voucher or we're paying this voucher so this voucher so you've got the receiving report you've got the purchase order you've got the invoice those are three documents in this voucher is this fourth document okay and you can think of it as a cover sheet so if you think of we got these this document um we got this document we've got this document then we put one document on top okay and that is the voucher the cover sheet and that's like if anyone in the accounts payable or anyone at the at the organization is looking at all these different instead of just getting a bundle of papers there's this thing called a voucher on top okay and the voucher says okay here's the name of the vendor here's who we bought them bought this from here's the amount we owe any discount terms maybe we get a two percent discount if we pay in 30 days the date when we need to have made the payment approval signature and so forth so you've got ideally again the invoice the receiving report the purchase order all match and then you have this voucher document on top just kind of summarizing all the information and serving as the cover sheet and then all these documents together again we'll call the voucher packet or voucher package okay so you got the voucher summarizing everything that happened and then you've got the supporting documentation and then you put that all together that's your voucher packet or about about your package so you've received the invoice the next step is to pay the invoice okay a disbursement so you you've been billed by the this uh vendor they provided goods they provided services you sell you know what we've got a receiving report that shows that we actually receive those goods or services purchase order shows that we made a purchase so now we need to to pay this this invoice you could pay by check you can make an electronic transfer okay now the voucher so that top page of that package should be stamped paid to indicate that look this has already been taken care of okay then again that's in our internal control you don't want to end up paying the same invoice twice and we'll talk about that in a future video finally okay so you've you've made the payment you received the invoice you paid the invoice you want to make sure that you've updated the accounting records now back when you receive the goods and services and they have been performed remember i talked about the step of the receiving report that's the point where you've technically incurred a liability okay so you should have credited accounts payable and then debited some other account so if you had received inventory you would have debited inventory if you'd receive supplies you would have debited supplies and so forth okay now when you go and make the disbursement okay this step here when you made the disbursement so to update the records for that disbursement what you should do is debit accounts payable remember accounts payable is a liability so it increases with a credit so you would decrease it because once you've made the disbursement you have paid that account payable so it's no longer payable so you would debit the accounts payable and then you would credit the cash account so now that you've updated the records the purchasing process is complete