Procurement Terms
Subject
A-Z
This simplified matching method is commonly employed when there is no need to verify the receipt of goods or services through a receiving report. The 2-way match helps ensure accuracy in invoice processing and assists in preventing errors or discrepancies in financial transactions.
The quantities and amounts on the receiving report and the vendor's invoice are compared against the purchase order. If all three documents align and match, the invoice is considered valid for payment. The 3-way match helps prevent errors, fraud, and discrepancies in financial transactions.
The accounts payable process includes activities such as invoice verification, matching purchase orders and receiving reports, initiating payments, and maintaining vendor records. Effective management of accounts payable is essential for maintaining good relationships with suppliers, managing cash flow, and ensuring the financial health of the organization.
Decentralized procurement is a procurement approach in which the authority and responsibility for purchasing decisions and transactions are distributed across various departments or business units within an organization. In this approach, each department or unit is responsible for its own procurement decisions and transactions, including identifying suppliers, negotiating prices, and finalizing contracts.
The goal of decentralized procurement is to provide departments or units with greater autonomy and flexibility in their procurement activities, enabling them to respond more quickly to their specific needs and requirements. However, this approach can also lead to inefficiencies, duplication of efforts, and reduced purchasing power due to the organization's lack of coordination and standardization.
It involves centralizing resources, expertise, and systems to deliver services efficiently, improve quality, and drive cost savings. GBS enables collaboration, standardization, and harmonization of processes, enhancing operational effectiveness and enabling the organization to better support its global operations.
The information captured includes details such as the date of receipt, the supplier, the quantity received, and any discrepancies or damages observed. This documentation serves as a reference for subsequent processes like payment verification, inventory updates, and vendor evaluation. A proper goods receipt helps ensure accurate inventory management and enables efficient order processing.
Effective inventory management helps businesses avoid stockouts, minimize excess inventory, and optimize cash flow. It requires accurate forecasting, monitoring sales trends, implementing inventory control systems, and establishing inventory policies. By maintaining optimal inventory levels, businesses can improve customer satisfaction, reduce holding costs, prevent stock obsolescence, and enhance overall operational efficiency.
An invitation to tender (ITT) is a formal invitation to suppliers or vendors to submit a bid for the provision of goods, services, or works. An ITT typically outlines the requirements and specifications of the project, the evaluation criteria, and the submission process for interested parties.
Organizations issue an ITT when they want to procure goods, services or works through a competitive bidding process. The ITT process ensures that the organization can evaluate bids from multiple suppliers and select the best offer based on price, quality, and other factors.
The ITT typically includes information on the scope of work, technical specifications, delivery requirements, and any other relevant details. Interested parties must submit their proposals by a specified deadline, and the organization evaluates the bids based on the criteria outlined in the ITT. The organization may then negotiate with one or more suppliers before selecting the successful bidder and awarding the contract.
An ITT is a common tool used in public procurement and is often required by law or regulation. However, it may also be used by private sector organizations to ensure that they receive competitive bids and select the best supplier for their needs.
Effective invoice management ensures accuracy, compliance, and timely processing, reducing the risk of errors, duplicate payments, and delays. It streamlines the accounts payable process, enhances financial control, strengthens supplier relationships, and contributes to efficient cash flow management within the organization.
A Pre-qualification Questionnaire (PQQ) is a document organizations use to pre-screen potential suppliers or contractors before inviting them to participate in a tender process. The PQQ aims to assess the supplier's suitability and capability to meet the organization's requirements and determine whether they should be invited to participate in the tender process.
The PQQ typically includes a range of questions that evaluate the supplier's experience, qualifications, financial stability, health and safety record, and other factors relevant to the project or procurement. The questions may be scored, and the suppliers are typically required to provide evidence to support their responses.
The PQQ process allows organizations to streamline the tender process by ensuring that only qualified and capable suppliers are invited to participate. It also helps to reduce the risk of awarding contracts to suppliers who may not have the necessary skills or resources to deliver the project successfully.
The PQQ process is commonly used in public sector procurement, where it may be required by law or regulation. However, it is also used by private sector organizations as a best practice to ensure that they select the most suitable and capable suppliers for their projects.