This section elaborates on the purchasing of goods and services from external suppliers and provides some templates, tools and examples to consider.
The procurement process involves managing a variety of activities, including ordering, receipt, review, approval of items from suppliers, endorsing supplier payments and managing suppliers against their contracts. Although supplier relationships might be less important for a VOPE, procurement procedures should specify how you manage these relationships, to ensure a high level of service is received. It is advisable to start off with developing and streamlining the procedures and policies relating to purchases in the VOPE’s Financial Management policies and procedures document.
If a VOPE does not manage this aspect of the finances effectively and efficiently, it may result in unnecessary expenditure, incorrect goods or services being delivered, or frustrations due to dealing with unnecessary administrative burdens and unsatisfactory customer service. Unauthorized purchases can increase the cost of operating the VOPE, and as such deplete the organization’s resources.
The purchasing objective should be to: "buy the right quality and quantity of materials or products at the best possible price and at the appropriate time from the best vendor. (http://www.entrepreneur.com/article/79798-2)
A VOPE’s purchasing policy and procedures should address the following issues:
Example of a very basic purchasing procedure (http://swni.org/CMS-Uploads/Guide%20to%20financial-controls-policies%20-%20Cindy%20Cumfer.pdf )
The Treasurer can authorize purchases of $ 5000 or less which conforms to the Board’s budget.
The Board must approve purchases above that amount. The Board must authorize any purchase which does not conform to the Board’s budget.
If your VOPE purchases many items from external suppliers it might be necessary to develop an ordering system and make use of purchase orders. The ordering system will specify the steps an employee / Board member / volunteer must follow to request, order, receive and approve payment for goods and services. The purchase order is a formal request (document) that is sent to the supplier once you have agreed on the items, price and quantity with the supplier.
A preferential suppliers list might ease the administrative burden of looking for suppliers and comparing prices each time you make a purchase. Use the following list from http://www.entrepreneur.com/article/79798-2 to evaluate suppliers for the preferential supplier list:
In the case of hosting a workshop, conference or other special event, it is likely that a large number of purchases would be necessary. It may be possible to sub-contract a service provider like a conference organizer who handles all purchases, payments and reconciliations. The VOPE should, however, have checks and balances in place to ensure that the purchases are adequately administered, and that it complies with key event-sponsor requirements.
Capital Purchases A capital purchase happens when an organization acquires equipment or other assets that have a useful life of more than one year and cost more than a certain predetermined amount. The process of recording the purchase as a fixed asset and then “expensing” it over its useful life as it depreciates (is used up) is called capitalization. The capitalization threshold is simply the dollar amount over which it makes sense to capitalize the purchase and expense it over a number of years rather than recording it as an unusually large expense in one single year.
Capital purchases should be tracked on a depreciation schedule (spreadsheet) showing:
Ideally, the organization will have a capital budget and will have planned for and preapproved the purchase. Policies regarding capital purchases should include the threshold amount and any other approval requirements and funding arrangements the Board and management deem appropriate. Don’t forget to include new capital purchases in your insurance inventory.
As with other financial aspects of the VOPE, it is important to have your policies and procedures documented and communicated to all employees, Board members and volunteers. A delegated person must also do regular checks to ensure adherence to policies and budget amounts and keep all documents (quotes, orders, delivery notes, invoices, payment approvals, etc.) on file.