Purchasing

1
Purchasing Stock Handling
2
Purchase Order

• A legal contract between the buyer and supplier.
• See Excel Purchase Order

3
Invoices

• Once an order has been completed, the supplier
  will send an invoice.
• Sometimes the invoice is sent with the
  merchandise.
• Sometimes the invoice is mailed directly to the
  accounting department. (Accounts Payable)

4
Shipping Terms

• FOB Destination The title or ownership of the
  goods remains with the seller until the goods
  reach their destination. The seller pays
  transportation charges and is responsible for the
  condtion of the goods until they arrive.

5

• FOB Shipping Point The buyer pays the shipping
  costs and is responsible for losses for damages
  that occur in transit.
• FOB Factory freight prepaid The goods become
  the buyers property. However, the seller pays
  for shipping.

6

• FOB Destination Charges Reversed
• The merchandise becomes the buyers when goods
  are received. The buyer pays for transportation,
  but if the goods are lost or damaged in transit,
  the buyers investment is protected.

7
Dating Terms

• Dating terms state when a bill must be paid and
  the discount permitted for paying early.
• N30 N60 NT N15
• 1/10, N30 1/15, N60 .5/10, NT

8
Receiving Merchandise

• Once the order has been placed and then shipped,
  the receiving company (buyer) must go through
  specific procedures to receive the merchandise.

9

• Checking is the process of going through the
  goods upon receipt to make sure they arrived
  undamaged and that the merchandise ordered was
  the merchandise received.

10
Methods for Checking Merchandise

• Blind check method
• Requires the receiver to write the description of
  the merchandise, count the quantities received,
  and then list them on a blank form or dummy
  invoice.
• The list or dummy invoice is then compared to the
  actual invoice after the blind check is made.
• This method is used when the merchandise needs to
  be moved quickly to the sales floor and the
  actual invoice has not yet been received.

11

• Direct check method
• The merchandise is checked directly against the
  actual invoice or purchase order. This procedure
  is faster than the blind check method, but errors
  may not be found if the invoice itself is
  incorrect.
• Some checkers may not check the total of items
  and may just assume it is correct instead of
  taking an actual count

12

• Spot check method
• A random check of one carton in a shipment (such
  as one out of every 20)
• The carton is checked for quantity, and then one
  product in the carton is inspected for quality.
• If one carton is correct, all others are assumed
  to be correct as well

13
Quality check method

• This is done to inspect the workmanship and
  general characteristics of the received
  merchandise.

14
Inventory

• Refers to an amount of goods stored.
• Includes works in process, raw materials,
  purchased components.

15
Inventory Management

• The process of buying and storing products for
  sale while controlling costs for ordering,
  shipping, handling, and storage.

16
Problems with too high inventories

• Uses valuable storage space, increase personnel
  costs, higher insurance premiums, and may lead to
  increased interest expenses for a business.

17
Too Low inventory problems

• Lose money and reduced profits when stock in
  managed poorly, having the wrong merchandise in
  stock, or holding too many slow-selling items or
  too few fast-selling ones

18
L.I.F.O (Last In..First Out)

• In LIFO accounting, a historical method of
  recording the value of inventory, a firm records
  the last units purchased as the first units sold.
  
• Helps them to maintain costs at a current value.
  Used for accounting purposes mainly.

19
F.I.F.O. (First In..First Out)

• Method for inventory management in which the
  oldest product produced is the first to be sold.

20
J.I.T. (Just-in-time inventory)

• An arrangement in which suppliers deliver parts
  and raw materials just before they are needed for
  production.
• Orders are placed when parts and supplies run
  low.
• Plants keep only small stocks on hand to avoid
  tying up money and inventory space.

21
Perpetual Inventory
Inventory Systems

• Tracks the number of items in inventory on a
  constant basis.
• Tracks/counts inventory of all purchases and
  returns of merchandise, sales and sales returns,
  sales allowances, and transfers to other stores
  and departments.
• Allows businesses to keep track of sales as they
  occur.

22
Physical Inventory

• Stock is visually inspected or actually counted
  to determine the quantity on hand.
• Can be conducted periodically or on a constant
  basis.

23
Which method?

• Based on the information above, if this were your
  business, what methods would you use to track
  inventory to ensure accuracy?