What is Procurement Audit? How To Do?

Procurement departments need to be established as a separate unit in order to develop purchasing strategies and conduct audits more easily. The procurement department is the unit that determines the quality, price and increase of materials. Strategies aimed at protecting quality as well as reducing costs should be created by this unit. Material inspection and management should be carried out well.

For purchases, you need to hire a supplier that is large enough to meet your needs. Procurement related procedures need to be followed in a good manner. What is purchase control?

Procurement audit is a long-term audit of all possible risk assessments and procurement processes. How is the purchase audit conducted? Necessary risks must be evaluated for purchase control. The unforeseen budget demands and the procurement procedures carried out regardless of budget conditions are possible hazards.

If necessary, the necessity of the materials to be purchased should be examined to see if the purchases made match those requested. The fact that price surveys for products and services are also required is one of the necessities of purchasing audits. An examination should be made to see if sufficient market research has been conducted and materials are paid in excess of their value.

Supervision of the processes related to the delivery of materials is an important part of the inspection of the purchase. Risks such as missing deliveries of materials, payment before delivery or undelivery of materials should be checked.

Whether the persons managing the business processes have any interest in these purchases should be investigated. It must be ensured that the technical specifications have been carefully prepared and that all details regarding the procurement process are fully incorporated into these specifications. Check whether there is a guarantee related to the purchased products or services and whether the product is of the required quality. After the purchases, product and service support should also be available. Purchased products must not contain old technology and be useless.

Why Procurement Audit Matters?

Lack of purchasing control will result in loss of time and effort. Failure to comply with the annual budget discipline will result in increased costs. Unscheduled movements will cause disruptions. Failure to use resources effectively, economically and efficiently will in turn trigger transactions for the loss of your business. Fraud can cause losses for the organization and lead to legal problems. Excessive payments on products and services without a market research would increase costs. Failure to purchase and control inefficient materials will result in economic losses.

Important Criteria for Making Profitable Purchases

Basic 6 Steps in Procurement Audit

If you want to find out if things are going well in the purchasing department and you need a few precautions in terms of increasing costs, it is useful to increase the controls. Creating and acting on a control mechanism for your business will make it easier for you when auditing. A few steps that will benefit you from an audit;

Designate an Auditor

You will need to determine the internal controls of the purchasing processes, manage the decision process, and find a responsible person who will manage your entire purchasing system.

Allocating Business and Personal Finance

Separating your personal and business accounts is important for purchase control. In urgent purchases, the use of personal accounts or cards will make it difficult to control.

Inventory Control

Frequent checks of the current inventory are needed. Internal inventory checks and building a system help you track sales and shipping.

Formalize Purchases

Ensure the purchasing processes are executed in line with the agreements and certain policies. This way it will be possible to perform quality control audits and take measures.

Build Purchasing System

In order to strengthen internal controls, you can create a system to buy at a certain price or under certain conditions, perform transactions according to this system and shape audits accordingly. Purchasing software will make your job easier at this point.

Exemptions for Large and Continuous Purchases

In large and continuous purchases, you can prepare a contract instead of an order. Doing so may help you with discounts. Sellers will be sure of the purchases in such cases, which will provide opportunities, and contracts will allow you to proceed more supervised.