You ask: I work in the R&D department of my company and we have just been subjected to another budget cut. I know things are tight at the moment, but this is really frustrating because this means that another really important research project has to be shelved.
I need some test equipment for the integration project I’m working on and have found a really good deal which will save the company several hundred pounds. I was just about to place an order for the equipment when a colleague told me I shouldn’t do this as that the supplier is not on our approved supplier list. This is ridiculous, surely saving money in this current climate is more important?
Janet answers: It may seem ‘ridiculous’ to follow a purchasing procedure that, on the face of it, appears to financially penalise your company rather than saving it money. However I’m sure those procedures were put into place for a very good reason.
Any business that sources goods and/or services negotiates purchasing agreements with their external suppliers to assure amongst other things quality, delivery timescales and payment terms. It makes good commercial sense to have a written understanding between you and your suppliers that can be followed should problems arise. Why should your company pay for the cost of rework due to a supply of faulty parts? If you consider that this rework may involve a product recall, cause loss of business and possible damage to your company’s reputation having supplier agreements becomes an essential element of doing business. If we widen this to cover purchased services the picture gets more complex. But as you are talking about test equipment we can thankfully put this area to one side.
I cannot stress how important it is to ensure that you have sensible payment terms in place; how many ‘profitable’ businesses have you heard about that have gone under because of cash flow problems?
I’m sure you can appreciate that if a company allowed any employee to buy goods or services from any source they liked it would be a commercial and operational nightmare trying to keep things under control when something went wrong. This is why most companies work to a preferred suppliers list; working with those suppliers that they trust to act responsibly whether things are running smoothly or not.
Negotiating purchase agreements might seem at times like pulling hens teeth, but in today’s litigious business environment the importance of the work your purchasing/commercial department does must not be underestimated.
Of course it’s worth stating that even if you are ‘buying’ goods or services internally, from another department within your company, there will almost certainly be a Service Level Agreement (SLA) in place between you. So wherever you ‘buy’ from the process is basically the same. Although for internal transactions you may not see any actual money change hands; this being via an internal transfer of funds between appropriate cost centres.
Now your colleague has pointed out that your company has an approved suppliers list. This will inevitably mean that your company will refuse to pay for any items purchased from suppliers not on that list. So I’m curious as to how you intended to go out and ‘place an order for the equipment’. I’m hoping that the price of this equipment has prohibited you from considering buying it yourself. If you were thinking of doing this – don’t. You are likely to find that your company will refuse to reimburse you and should you be unable to cancel the order you may find yourself in a financially embarrassing position. If your company policy states that you must follow certain purchasing procedures and you ignore them you may find yourself being disciplined for misappropriation of company funds – this is very likely a stackable offence.
If this supplier is reputable and offering a good overall deal – remember it is not just about price – then it would be far better for you to take your case to your manager and go through the proper channels to get this supplier and their test equipment added to your approved supplier list. As you do this you may well find out that it is possible to ‘fast track’ your order once the official process has been started.
It would be far better that you understand your purchasing procedures and work within them rather than go on a moral crusade that can only land you in trouble.
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