Purchasing compliance

Purchasing compliance

Purchasing compliance is usually defined as compliance with legal and internal rules, procedures and policies regarding the purchase of goods or services. In other words, through purchasing compliance, we measure an organization's adherence to internal and external regulations and standards when conducting purchasing operations, the most significant of which are:

Compliance with external regulations and standards: i.e. e.g. procurement law, consumer protection, intellectual property, data protection and other external regulations directly or indirectly related to the purchasing process.

Adherence to internal purchasing policies: i.e. adherence to established procedures for supplier selection, purchase approval, adherence to financial limits and other internal rules of the organization.

Transparency and proper record keeping: i.e. maintain clear documentation of all purchasing activities and ensure audit trail, transparency of processes and decision making.

Risk control: this includes identifying and managing supplier risks, financial risks associated with compliance and unspoken risks such as corruption, unethical behaviour, etc.

Audit processes:Regular checks and audits are used to verify compliance with established rules and to identify areas where non-compliance may occur.

When it comes to actively managing compliance, there are simple rules and good practices:

(1) If you judge the risk to be of low significance and low consequence, choose operational effectiveness over active risk elimination or risk transfer.

(2) Conversely, risks with high probability or severe consequences should be addressed proactively, with more aggressive measures to eliminate them. For example, the possibility of a customer data leak can have serious consequences (GDPR breach).

(3) Schedule regular audits of the entire purchasing cycle, i.e., review of all documents and decisions related to purchasing, evaluation of existing procedures and policies, assessment of supplier relationships and supplier risks, and any indications of illegal or unethical behavior.

(4) Create a list of approved suppliers. This list makes it easy to quickly identify safe suppliers with whom you already have experience or who have been sufficiently vetted. This will speed up the purchasing process and guarantee compliance with internal policies.

(5) If you are a multinational company, find the right balance between centralized and decentralized purchasing. Centralized purchasing provides better control and reduces the risks associated with purchasing. On the other hand, decentralized purchasing gives more authority to department heads, which can speed up processes. Also consider a hybrid approach, which combines the benefits of both approaches, but again is relatively expensive.

(6) Use software tools to increase compliance of purchasing processes and activities: procure-to-pay, supplier relationship management (SRM), sourcing, risk management, etc.

(7) Establish clear purchasing policies and procedures that include guidelines for supplier selection, purchase approval, financing, regulatory compliance, and other important aspects of the purchasing process.

(8) Train employees on supplier risk, the purchase approval process, and important regulations.

(9) Equip yourself with the appropriate tools: Use specialized software tools and systems to manage suppliers, track purchasing processes and audit trails. We have placed a strong emphasis on compliance when programming and defining Promiteo's architecture and are continually reinforcing this aspect. In compliance, it is 100% true that fortune favours the prepare