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.
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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.
Procurement processes can vary depending on the company's preferences and needs, but generally they include these 5 steps:
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:
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.
The procurement request includes the required goods defined in the needs analysis.
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.
If the approval was successful, the order can be completed.
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.