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3–34 Create On-line Purchasing Catalog
The accounting staff will know in advance that any billings from the suppliers
to which employees send orders directly do not require purchase order matching,
and so they will expend less effort on paperwork prior to releasing a payment—
just match the supplier’s invoice to receiving documents to prove that the billed
items were really received. Though this is not an approach that can be applied to
all purchases, given the inherent lack of control, it can be used in a few cases,
resulting in increased accounts payable processing efficiency.
Cost: Installation time:

3–34 CREATE ON-LINE PURCHASING CATALOG

The typical purchasing process involves the creation of a purchase requisition by
whomever needs to buy something; this is used by the purchasing staff to search
for the lowest price offered by a supplier, at which point a purchase order is
issued to the appropriate supplier. The accounting department then has to match
the receiving documentation to the purchase order and supplier invoice before
generating a payment. This cumbersome process is being dismantled in many
instances through the use of an on-line purchasing catalog.
When a user buys through an on-line catalog, he or she scrolls through a list
of standard products that have been compiled by the purchasing staff, and selects
the appropriate item. This automatically places an order on an electronic pur-
chase order, on which is noted the number of the blanket purchase order that has
already been negotiated with the supplier from which the item is being bought.
The computer system then sends either an electronic or paper-based order to the
supplier, which fills the order. Upon receipt, the receiving department checks off
the item in the on-line system, which flags the accounting system to make a pay-
ment to the supplier.
This on-line catalog approach has the exceptional benefit of significantly
reducing the workload of the purchasing and accounting staffs, to the point where
they are simply monitoring the flow of transactions, rather than directly creating
them. It also channels the flow of purchases through a small set of preapproved
suppliers, so there is little chance that a new supplier will be foisted on the pur-
chasing staff by an employee. However, there are also downsides to this approach.
The required software is a major programming project that will be quite expen-
sive to create. Also, the time required to set up blanket purchase orders with a
number of suppliers will be very time-consuming, requiring a long lead time to
complete the project. Finally, it cannot be used for inventory purchases, since these
are driven by production requirements rather than employee needs. Nonetheless,
a large corporation can experience a dramatic decline in the amount of manual
procurement transactions by implementing an on-line purchasing catalog.

Cost: Installation time: