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Look For Fraud With A Procurement Audit Checklist

Utilize a procurement audit checklist to improve the acquisition of goods and services by facilitating their organization through Lumiform’s digital technologies. Learn how to detect fraud in the procurement process, the four steps on how to conduct one yourself, and anything else you might need to know about the inflow of goods and any related discrepancies in the article below.

See our ready-made templates:

Procurement Checklist Template

A procurement checklist is used to guarantee that internal methods are met to prevent delays or even rejection of procurement.

Procurement Process Checklist

This procurement process checklist can be adjusted to review internal processes and guarantee that all procurement demands are met.

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What Is a Procurement Audit?

It’s estimated that billions of dollars each year are lost to fraud during the procurement process alone, according to the Procurement Fraud Handbook. These statistics are shocking, but there is a reason why businesses are literally paying criminals to take their money—they fail to do their procurement audits.

First of all, procurement is the attainment of goods and services for supporting current or future internal business operations in order to incur profits, and it accounts for nearly half of all business expenses and liabilities.

A procurement audit, then, is reviewing the goods receipts, delivery issues, purchasing histories, and supplier contracts to look for fraud and double-check that the supplier is upholding their end of the distribution agreement.

The process starts with the identification of the demand and the subsequent budgeting, supplier selection, and final payment processing. The goal is to find the ideal supplier in terms of quality, reputation, longevity, and price. We’ll get into more about what goods and services procurement encompasses in the passages below. For now, just know that the procurement process organizes and supports the entire purchasing process.

In this article, we will briefly discuss this:

1. What a procurement audit involves

2. Phases of a procurement process in 4 steps

3. Your procurement audit application & software

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Layered Process Audit App

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What Does a Procurement Audit Involve?

Procurement processes can vary depending on the company's preferences and needs, but generally they include these 5 steps:

Define Expectations - Try to specify what your company's requirements and expectations are. To get started, it might prove helpful to use a procurement checklist templateto keep track of all your purchases for the audit that comes later down the road.
Prepare the necessary documents - Before contacting a supplier, prepare documents on relevant data such as material, time, and cost estimates, etc.
Selecting the right supplier - Depending on your company's specific needs, pricing, and other requirements, this process can be lengthy but is essential to the success of your business. It’s important to look into the supplier’s past performance and compare their prices to the current market rates before selecting them for use in your own company.
Contract & Terms - Once a suitable supplier has been found, agree on a contract with all the necessary terms and conditions.
Documentation - Keep track of all records of the procurement & work processes. A procurement process checklist will help you keep track each step that comes next in the process so that nothing is left forgotten or goes undone.

What Are the Phases of a Procurement in 4 Steps?

1. Determination of Needs

At the beginning of every procurement is the determination of the required goods, materials, or services. For this purpose, an inventory analysis is carried out and then compared with the current orders.

A distinction is made between three common demand groups:

The primary Demands stands for saleable goods
The Secondary Requirements include raw materials
The Tertiary Requirements includes auxiliary and operating materials

There are various options available for accurately determining the optimal order quantity. It can be ordered either by recipe per unit quantity or with the help of the stochastic method based on empirical values. Which method is used depends on the person in charge and the type of procurement.

2. Procurement Request

The procurement request includes the required goods defined in the needs analysis.

3. Substantive Examination

It is essential that the request is checked for correctness. No inferior products should be ordered. Only if the application is flawless should the order be released. Usually different people from various departments check the release.

4. Order

If the approval was successful, the order can be completed.

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A Digital App & Software for E-Procurement

A checklist is a helpful tool to ensure a smooth procurement process that includes all relevant steps. Unexpected problems due to neglected aspects during the process can lead to extensive costs, legal issues, delays, etc.

With the Lumiform app, all responsible persons can access the respective checklists at any time and from any location. If problems or time delays occur and corrective measures become necessary, they can be notified immediately from the app.