Save More Money (Purchase Request Form)

Today I wanted to talk about something really practical. This is something you can implement in your business today that is easy, does not cost you anything, and can save you a lot of money.

VIDEO SUMMARY

Today I am going to show you how accounting can save your business money. What we are talking about is the Purchase Request Form. This is part of your accounting procedures, or your internal controls. I think this is an element that a lot of people overlook in their business, but if you use it correctly, it can be really effective.

Definition

What is a Purchase Request Form. The main idea is that every time your business spends money, it is documented. This is why we keep accounting records in the first place. You want to be able to look back and see what you spent your money on. The Purchase Request Form is the first step in the purchasing process. If an employee wants to purchase something, the first thing they are going to do is ask if they can buy it. That request is captured in the Purchase Request Form.

Purchase Process

Let us look at the typical accounting process.

• Employee requests a purchase – Purchase Request Form
• Accounting authorizes the purchase – Purchase Order Form
• Goods are delivered or service is performed
• Vendor issues an invoice for payment

Benefits

The great thing about the Purchase Request Form is it is your opportunity to capture all the information about the purchase up front. You want to know what is being purchased, why it is being purchased, from which vendor, for how much, and whether everyone has approved it. If everything is determined up front, the rest of the purchase process flows very quickly.

This sounds like a lot, but we are talking about a one page sheet of paper. That is it. Your employees can fill this out for every purchase, and everything is known, approved, and documented up front. And it does not cost you anything. There are more complicated electronic systems that can handle all this for you, but all you really need is this piece of paper.

Issues

If you implement something like this, you will probably receive pushback from your organization. People look at this as more paperwork and bureaucracy. But this is not something that is difficult. This is ten minutes of filling out one piece of paper. The benefits are impressive.

The goal of the Purchase Request form is to encourage thoughtful purchases. Anytime money leaves your organization, you want to make sure that people have thought through that purchase. You can add questions to the form to focus people on specific initiatives. This is another way you can integrate your business processes with your strategic goals.

FREE TEMPLATE

To give you some ideas, I am going to link in the description the Purchase Request Form for my business. This form is going to be different for every business depending on your strategic goals. This example shows the types of things I want to make sure I think about every time I make a purchase.

Download the form here: https://wolvesmainsite.wpengine.com/wp-content/uploads/2018/11/Purchase-Request-Form.pdf

How it Works

The form starts out with the general information: Employee, Date, Item, Vendor, and Cost. Then there is a series of questions that I want to think through.

• Is this a local vendor? This question encourages people to support local small businesses.
• Is there a free alterative? This question encourages people to consider free options before spending money.
• If the purchase is over $1,500, did you get three quotes? (attach all quotes to this form) Written quotes make it clear what is being purchased. Multiple quotes help ensure you are getting the best value in the market.
• How does this purchase tie to a strategic goal? This question focuses purchases on company priorities.
• How will this investment generate a return? This question encourages purchases that are valuable.
• There are more things you can add to this form, like specific vendor information, depending on what is useful to your business.

I am hoping that you can see how useful this can be. The employee spends ten minutes thinking through their purchase. Once they decide the purchase will generate value for the business, they can hand this completed packet to the Manager for approval, and the Manager knows exactly what they are signing off on. Then when this goes to accounting, accounting knows exactly what to issue the Purchase Order for, and that the Manager has approved it.

Example

I have seen a lot of small businesses that do not do a Purchase Request Form at all. They jump straight to issuing Purchase Orders. I find that unfortunate, because it is such a missed opportunity for your business. Let us say your business does not have a strong process around Purchase Requests. What that typically looks like is an employee wants to purchase an item, let us say it is a new desk set up for their office. The employee goes to the manager and says, “Hey, I want this new desk. It is on sale, and it will really increase my productivity. They manager says, “Sounds good. Go ahead and tell accounting to make the purchase.” This is an example of no Purchase Request Form being done.

Now imagine the new office setup shows up, and it is an all metal design, when the rest of the office furniture is wood. The Manager is going to see that and say, “Wait, is that what I agreed to?” Since they never saw a quote, they did not exactly know what was being purchased. And it also cost double what you expected because there was delivery and set up charges. And by the way, why are you spending money on furniture, when you company strategy says that purchases should be focused on marketing. There are a number of things that go wrong, when the purchase is not thought through at the start of the process. That is why the Purchase Request Form is so important.

Conclusion

Ultimately, this one piece of paper ends up saving you a lot of money. When you have to think through all your purchases, a lot of times you end up deciding, you do not need to buy the item in the first place. The items that you do purchase, end up being the best items that everyone agrees on.

I hope this video gave you some ideas on how you can use a Purchase Request Form to improve your business. Again, you can download my form in the description. But feel free to change it fit what is important for your business.

Leave a comment down below letting me know what you think!

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Neither Zach De Gregorio or Wolves and Finance Inc. shall be liable for any damages related to information in this video. It is recommended you contact a CPA in your area for business advice.