Match receipts to purchase order authorization. Once an order is re­ceived, the warehouse staff should enter the receiving information into a receiving report and send the receiving report to the accounts payable department for later matching to the supplier invoice and purchase order. It should also send a copy of the report to the purchasing department for further analysis.

Cancel residual purchase order balances. Upon receipt of the receiv­ing report from the receiving department, the purchasing staff com­pares it to the file of open invoices to determine which orders have not yet been received and which purchase orders with residual amounts outstanding can now be cancelled. Otherwise, additional deliveries may arrive well after the date when they were originally needed.

Three-way matching with supplier invoice for payment approval. Upon receipt of the receiving report, the accounts payable staff matches it to the supplier invoice and authorizing purchase order to determine if the quantity appearing on the supplier invoice matches the amount re­ceived and that the price listed on the supplier invoice matches the price listed on the purchase order. The department pays suppliers based on the results of this matching process.

The next controls are supplemental to the primary controls just noted for the inventory acquisition process.

• Segregate the purchasing and receiving functions. Anyone ordering supplies should not be allowed to receive it, since that person could eliminate all traces of the initiating order and make off with the inven­tory. This is normally considered a primary control, but it does not fit into the actual transaction flow noted earlier in Exhibit 1 and so is listed here as a supplemental control.
• Require supervisory approval of purchase orders. If the purchasing staff has a low level of experience, it may be necessary to require su­pervisory approval of all purchase orders before they are issued, in order to spot mistakes. This approval may also be useful for larger pur­chasing commitments.
• Inform suppliers that verbal purchase orders are not accepted. Sup­pliers will ship deliveries on the basis of verbal authorizations, which circumvents the use of formal purchase orders. To prevent this, peri­odically issue reminder notices to all suppliers that deliveries based on verbal purchase orders will be rejected at the receiving dock.
• Inform suppliers of who can approve purchase orders. If there is a sig­nificant perceived risk that purchase orders can be forged, then tell suppliers which purchasing personnel are authorized to approve pur­chase orders and update this notice whenever the authorization list changes. This control is not heavily used, especially for large purchas­ing departments where the authorization list constantly changes or where there are many suppliers to notify. Usually the risk of purchase order forgery is not perceived to be that large.

[tags]inventory acquisition, basic inventory[/tags]

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