A team lead needs a batch of monitors. He knows a supplier, orders by phone and the goods arrive. The invoice reaches finance two weeks later, with a price nobody approved, and the supplier turns out to be run by his cousin. Everything about it may have been fair. Nobody can show that it was. A procurement and vendor policy is how a company makes spending open to scrutiny.
The purpose is controlled, transparent purchasing and sensible vendor management. It covers goods, services, software subscriptions, consultants and facilities, and applies to every employee who requests, approves, receives or pays for them. It works alongside the conflict of interest policy, the anti-bribery and anti-fraud policy and the travel and expense reimbursement policy.
Categories and who may buy
Group spending into categories, such as equipment, software and subscriptions, professional services, marketing, facilities and travel. Each category may have a different budget holder and rules. Recurring subscriptions deserve their own line because they renew silently. State who may raise a purchase request, and that budget availability is confirmed before approval, not after the invoice.
The decisions management has to make
- Authority limits: who approves what value. Tight limits slow routine work; loose ones weaken control. Tier them, for example team lead, department head, director.
- Number of quotations: one for tiny purchases, more as value rises. State when a single-source purchase is acceptable and who signs the reason.
- Onboarding requirements: which documents a new vendor must provide, such as company registration, tax registration, bank proof and a signed agreement.
- Payment terms: the standard days after invoice, and any advance payment rules.
- Emergency purchasing: who can approve after the fact, and within how many days the paperwork must follow.
Vendor selection and checks
Selection criteria should be written before quotations arrive: price, quality, delivery time, support, references and financial standing. Compare quotations on a simple sheet and keep it. Qualification means confirming the vendor is real and able to deliver: registered details, tax numbers, a bank account in the company's name, and reference calls for larger spends. Every evaluator signs a declaration that they have no personal interest in the vendors being compared; if they do, they step out.
- 1
Request
The requester fills in a purchase request with need, category, estimated value, budget code and preferred vendor, if any.
- 2
Approve
The budget holder confirms funds. The approver for that value tier signs.
- 3
Compare
Procurement or the requester collects the required number of quotations and completes the comparison sheet.
- 4
Order
A purchase order is issued to the selected vendor, with specification, price, delivery date and terms. Contracts or service agreements are used for larger or recurring work.
- 5
Receive
The requester checks quantity and quality against the order and signs a goods receipt or acceptance note.
- 6
Pay
Finance matches order, receipt and invoice, validates tax details, and the authorised person releases payment.
Separation of duties is the heart of this: one person requests, another approves, a third receives and finance pays. In a small company some roles must double up. Then the policy should name a compensating check, such as the director reviewing every payment above a limit.
After the purchase
Review vendors yearly: delivery, quality, responsiveness and invoicing accuracy. Renew deliberately rather than by default, and keep a termination route in every agreement. Maintain a vendor master list with a named owner so bank detail changes are verified by a call to a known contact, never by an emailed request alone. Splitting one purchase into small orders to avoid a limit, accepting gifts from bidders and paying unapproved invoices are fraud indicators and should be named in the policy.
Violations, records and review
Decide the consequences of buying outside the process: usually a recorded warning for a first, honest lapse and formal action for deliberate circumvention or any personal gain. Concerns about a vendor relationship or a colleague are reported confidentially, through the channel in the HR policies and governance framework, with restricted access. Keep purchase requests, comparison sheets, purchase orders, receipts, invoices, vendor files and the vendor register, and ask each approver to acknowledge the policy with date and version. Review it yearly and when limits stop reflecting the company's size. The 30-policy roadmap suggests where it sits in the order.
1. Purpose and scope: all purchases of goods and services.
2. Categories and budget holders: [list].
3. Purchase request: form [name]; budget confirmed by [role].
4. Authority limits: up to [limit] by [role]; above [limit] by [role].
5. Quotations: [number] up to [limit]; [number] above; single-source reasons recorded.
6. Vendor onboarding: documents [list]; bank details verified by [role].
7. Conflict declaration: signed by evaluators before comparison.
8. Orders and contracts: purchase order for all; agreement above [limit].
9. Receipt and acceptance: signed by requester within [number] days.
10. Invoice and payment: three-way match; payment terms [number] days; released by [role].
11. Vendor review and renewal: every [number] months.
12. Breaches, records, acknowledgement and review: [details].