How is everyone handling delegation of authority for non-inventory purchases? Does purchasing responsible for entering in all non-inventory purchase orders?


The answer to your question depends on several factors:
1. How your company is structured
2. The size of your organization
3. Whether or not you are multi-location
4. Your management's philosophy on large dollar material purchases vs. smaller dollar non-inventory purchases

Some companies that have only a single location may require all purchase orders to be processed through the Purchasing Department. This provides such advantages as:

    • Maintaining the integrity and the accountability of the numerical sequence of the purchase orders with one department


    • Centralizing the final review of purchase commitments made by employees to vendors before the PO is issued


    • Allowing the Purchasing Department to identify opportunities or have someone to look for opportunities for volume discounts, pricing, and other cost savings where multiple departments are buying from the same vendor but do not realize it


    • Possible reduction in the number of vendors used


    • Simplifying where AP needs to go to when a PO is needed to match up to an invoice, or to reconcile a discrepancy between invoice and PO


On the other hand, it does add another department in the mix that could delay the non-inventory purchases if the Purchasing Department also had to sign-off on it. Companies with multi-locations and a management philosophy of decentralized operations may delegate the non-inventory purchases to each functional department. Each department would get its series of pre-numbered POs and would be responsible for keeping up with the numerical integrity, issuance, receipt, and authorization of its POs. This process provides these advantages:

    • Smaller dollar non-inventory purchases can be quickly processed for items that may be time sensitive


    • Accountability for cost control is driven to the functional department level Eliminates an organizational layer (Purchasing Dept) in processing POs to match with the corresponding invoice, instead the PO and/or invoice can come directly from the department


On the down side, this structure does create some redundancy in the organization, can lead to an increase in the number of vendors in your database and missed opportunities to consolidate non-inventory purchases to obtain cost reductions. We have not seen surveys that indicate which structure is considered a best practice. We also encourage you to post your question to the Forums/Messaging section of the site to get feedback from your peers as to how they are handling non-inventory purchase orders. They can give you some of their experiences on what works for their organization and what did not seem to work. Be sure to ask for details about their organization.

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