Making the right purchase within a stipulated time frame is a challenging task for procurement teams across businesses. There are many documents that are generated during the procurement process. Not having these documents in place and ready to use, can de-accelerate your purchasing cycle. These documents are the means of communication between buyers and suppliers as they convey the products or service requirements and how the requirements are met. This means that you should either have the documents ready with you or have a well-defined process in place to create these procurement documents on a need basis.
What are the essential procurement documents that every business must have?
The following list comprises documents used in the procurement process (buy-side) that you must possess to streamline your processes and experience smoother business operations.
| Purchase Order |
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| A purchase order also known as PO is an official document issued by the buyer to the seller. This document holds the confirmation to purchase specific goods and services and conveys the buyer’s intention to commit to paying the seller for the same. POs simplify the purchase process by improving accuracy, enabling better budgeting, and ensuring timely delivery. |
| Why is it essential? • Outlines exact order details • Information on arrival date of the order • Easier to track orders • Helps to avoid audit problems with a conclusive audit-trail • Legally binding to providing protection to both the parties |
| Key elements • Quantity of items (goods/services) • A detailed description of items (SKUs or model number) • Price per unit • Date of purchase • Payment terms • Delivery date and location • Billing address |
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| Purchase Agreement |
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| Purchase agreements are legal contracts that outline the terms and conditions related to the sale of goods. The agreement mainly focuses on the sales of goods rather than services. It covers the transaction for the sale of nearly any type of goods. Generally, the agreement is drafted for transactions that are over $500, but they can be used for smaller transactions as well. It is commonly referred to as a purchase contract or sales contract. |
| Why is it essential? • Forms acceptable agreement between buyer & seller • Helps to determine what the buyer is entitled to Note: In case of a poorly drafted purchase agreement where ambiguity ensues, the determination will be held against the writer of the contract (the buyer), benefitting the seller. This concept is called ‘Contra Proferentem’. |
| Key elements • Info on the type of sale (products or goods involved) • Provisions for agreement amendment or revisions • Terms of delivery & shipping (if applicable) • Provisions in event of legal disputes • Price and quantities of sale • Dates for the fulfillment of conditions and requirements • Duration of the agreement |
| Service Level Agreement/SLAs |
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| SLAs are legally binding agreements between the buyer and the service provider. It provides the statement of objectives, list of services to be covered and the definition of responsibilities to be carried out. The document also lists the services and the service standards that the provider is expected to meet on the day of delivery. |
| Why is it essential? • Defines the level of security • Easier to manage other party’s expectations • Defines the performance characteristics of the service to be provided • Provides metrics to measure the performance |
| Key elements • Description of services • Service tracking and reporting procedure • Performance metrics • Provision for termination • Payment terms ( defining compensation for redressing issues, failure to meet the standards) |
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| Master Service Agreement/MSA |
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| MSAs is a contract entered by two parties during a service transaction. The agreement details the expectation of both parties. It allows both parties to spend time and discuss the terms of the deal. This will allow MSA to govern the overall deal and act as an umbrella document for SLAs (and other similar documents) in case of revisions, amendments, or disagreements. |
| Why is it essential? • Useful for long-term arrangements • Assist in decreasing the chances of litigation • An extensive document that contains all the required contractual clauses • Legally binding – protects the parties to the agreement |
| Key elements • Description of services • Deliverables (Each party’s responsibility, Review procedure for deliverables, Consequences, and implications) • Tenure of the agreement • Terms of payment • Confidentiality clause • Indemnity clause • Termination clause • Limitation of liability • Intellectual property rights • Warranty and support information • Insurance and security requirements • General provisions (will include the boilerplate clause) |
| Request for Proposal/RFP |
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| A request for proposal is a formal document that is structured in a way to get specific vendor information that includes pricing details too. You can announce the project through a request for proposal document and solicit bids from contractors who will help in finishing the project. |
| Why is it essential? • Provides short and long-term goals for business • Reflects on the negotiation strategy • Select proposals based on solution and price Note: The RFPs should not be overly detailed to hinder the third party’s creativity and not be very less on information that leaves room for ambiguity. |
| Key elements • Details about the project or task at hand (business needs) • Evaluation process • Describe the selection process – performance measures • Request for a cost breakdown • The due date for submission |
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| Request for Information/RFI |
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| Request for information document helps to obtain general information from the vendor, goods, or product. This document is just a request and is not legally binding to either of the parties. It is sent usually before an official requisition for items. |
| Why is it essential? • A general overview of the current market • Faster method to gather information • Helpful if you are in the early stage of the buying process • Draft effective RFPs with the information |
| Key elements • Company overview • Details of the product or service required • Guidelines on response procedure • Timeline for the response • Clarification points (Any specific requirements) |
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| Invitation for Bid/IFB |
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| IFB is used in situations when the product or service offered is barely different. The only big differentiator is the price. A competitive method where vendors submit their prices for the offering. Invitation for bids is useful for projects that are predictable like when the requirements to provide the end product are clearly defined. |
| Why is it essential? • Provides standardized information to all bidders • Establishes strict minimum requirements to avoid compromise on quality • Zero negotiations with awarded bidder over price concerns |
| Key elements • Overview of the company • Requirement details • Basic information about the project • Submission guidelines (Withdrawal, late bids, modifications) • Evaluation method and criteria • Timeline for response |
| Supply Agreement |
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| A supply agreement establishes the terms according to which the seller will supply the goods, products, or services to the customer. The party drafting the contract should ensure that the terms are communicated clearly to ensure that the end product, goods, or services are handed to the customer quickly involving less complication. |
| Why is it essential? • Ensures that business requirements are met on time • Lays the foundation for a profitable relationship between supplier and buyer • Some agreements are drafted with a specific end date |
| Key elements • Information on parties to the agreement • Minimum quantities of purchase and sale • Inspection and acceptance • Pricing and payment terms • Legal & contract clauses • Time, date & place for delivery of product or service • Boilerplate clauses |
| Reseller Agreement |
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| In a reseller agreement, the vendor grants the right to the reseller to enter into contracts with the customer. The reseller agrees to sell products on behalf of the vendor or wholesaler. |
| Why is it essential? • Contractually the vendor or wholesaler is not bound by the actions of the reseller • Vendor or wholesaler can get into multiple reseller agreements |
| Key elements • Appointment of reseller • Purchase order with provision for modifications • Reseller responsibilities • Price, discounts, and resale prices • Acceptance and rejection of product delivery • Product materials |
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| Purchase Requisition |
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| This document is mainly used for internal purposes wherein a purchase requisition is shared with a department manager or purchase officer, informing them of any purchase made on behalf of the company. With this document, you are not ordering something but getting approval to do so. |
| Why is it essential? • Useful in an efficient audit trail for purchasing • Coordinate reporting procedures with the accounting department |
| Key elements • Details of the supplier • Budget information • Who authorized the purchase • Date of procurement |
The cure to your procurement sores
Jean Moore, 32, is a newly appointed procurement manager at Ray Solutions, Ltd. She has been working in the procurement department for over five years. Her work was mainly focused to connect with vendors and suppliers to negotiate prices over emails and phone calls.
But after getting promoted to the role of Procurement Manager, she wishes to improve the procurement procedure by streamlining the documents used in the – process. She has already worked with the current process and knows the issue that crops up at the grassroots level.
The earlier procurement process followed by the department was old school. The procedure involved a lot of paper trails and manual work at times leading to duplication. And the stacks of documents piling up and filling the file cabinets were looking close to unmanageable. Imagine finding a document from that stack on time.
Procuring your document the Revv way!
The more number of documents, the messier the management. Jean can achieve her goals with the help of Revv document management solution –
- Use of digital documents reduces paper trail
- Working on legally vetted templates to churn out quick documents
- Segregating and managing documents in folders. This makes the process of finding documents easier
- Faster and smoother collaboration
- Getting documents signed faster with e-sign
Inefficiencies within the documents used in the purchasing procurement processes can become a costly affair for any business. – Knowing the documents that you need and having it all in one place and ready to use (with minor customizations as required) will be a game-changer. Document management solutions like Revv enable companies to leverage features as specified above to create a frictionless process when it comes to managing their business documents.
Are you looking for templates to create your procurement documents? Check out our template library, you might end up finding the document template you need. Happy documenting!
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