Purchasing / Procurement Governance Principles in the Client Company
Introduction
Following the introduction of the new Oracle ERP system, the Client Company will introduce new purchasing processes for all goods and services. These processes are being implemented to enable the Client Company to exercise more appropriate controls over our purchasing activity, improve its budgeting and cash flow forecasts as well as bringing financial benefits through more professional management of our spends.
Implementation / Valid From
These principles and procedures have been valid since the Oracle ERP system go-live on January XX 200X.
Authorisation to Purchase
Only Delegated Purchasers or members of the Purchasing team are authorised to make purchases for the Client Company, except in certain authorised cases.
Separation of Three Key Roles
One of the fundamental principles of good "Purchase to Pay" process governance is the separation of three key roles roles. Good governance practise says: the roles of Budget Holder, Purchaser and Accounts Payable must be performed by three different individuals. The Oracle ERP system helps to enshrine this so-called separation of three key roles.
However, as the Global Purchasing Team is relatively small, if every purchase in the Client Company had to be placed by the purchasing team, the business would quickly grind to a halt.
Delegated Purchasers
To keep the three roles separate with a small purchasing team it is necessary to introduce the concept of “Delegated Purchasers”. A Delegated Purchaser acts as an extension of the Global Purchasing Team, and is nominated, usually from local administrative staff, to manage lower value purchase orders in accordance with Global Purchasing policy .
Typically the Purchasing team will delegate authority to purchase (or place contracts) up to € 3,000 (£ 2,000 in the UK) per purchase order to local Delegated Purchasers.
So if the proposed value of a purchase order is less than €3,000 (~90% of transactions), Delegated Purchasers will be empowered to make the purchase. Above this € 3,000 threshold (10% of transactions but 75% of the total value of indirect spend) the purchase will be referred to a member of the Purchasing team.
NOTE: The authority to contract on behalf of the Client Company given by Global Purchasing to Delegated Purchasers should not be confused with the similar (but different) authority to incur expenditure delegated to Budget Holders. Cost centre approval routes are managed by Finance. Queries about the Purchase Order approval process should be made to the appropriate Finance Manager.
So How Will It Work In Practise ?
Across Europe the principle which determines who and how an order for a purchase should be raised is shown below.
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Within the UK
The principles are the same, however the values are slightly different.
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Other information
- the Client Company's standard terms and conditions of contract can be found on the Client's Intranet site and on www.theclientcompany.com.
- Training slides for Delegated Purchasers to raise Oracle ERP system Purchase Orders are shown on Tools for Purchasing.
Questions ?
Read our Frequently Asked Questions page first and if you can't find the answer there email: xxxxxxxx@theclientcompany.com. Queries about the Purchase Order approval process should be made to the appropriate Finance Manager.
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