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May
05

Creating a Corporate Purchasing Policy for Your Small Business

office max — nov 3

As your small business grows, more and more tasks will need to be delegated to employees.  This includes the ability for employees to make external financial and contractual commitments to purchase supplies, materials, and services for the company.  It is important for every company to have a clear internal Corporate Purchasing Policy that outlines the rules of company credit card use and authorizations necessary for various levels of spend.

A good Corporate Purchasing Policy has the following elements:

  1. Authorization Levels:  Which employees have the authority to approve purchases?  For example, a policy could state that all employees have authority to approve purchases up to $100, Managers have authority to approve purchases of $1,000 or less, and only the company President has authority to approve purchases over $1,000
  2. Purchasing Process:  The process that an employee must follow to make corporate purchases should be detailed.  For example, inputting the spend amount into an appropriate accounting system, which company credit card or account to use for the corporate purchase, and what employees should do with receipts.
  3. Enforcement:  Every Corporate Purchasing Policy should be strictly enforced to ingrain accountability in a business.  Employees discovered to be violating the Corporate Purchasing Policy should be subject to disciplinary action, up to and including, termination of employment.
  4. Policy Exceptions:  Any exceptions to the policy should be identified.   For example, can Managers authorize large purchases in emergency situations?

Image by Flickr user theogeo (Creative Commons)

2 comments

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  1. Leif says:

    I need to say thank you a whole lot for your work you have made in writing this blog post. I am hoping the same most effective job by you later on as well.

    1. smlbizlaw says:

      Glad the post was useful! Also, we love to hear topics that entrepreneurs may be interested in for future blog posts so please share.
      -Sharon

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