In practice, the responsibility for invoice certification prior to payment may be assigned to a special section in the purchasing or stores department, or may be retained in the accounts departments.
The procedure of dealing with suppliers invoice for goods supplied is to marry up each invoice with the appropriate copy of purchase order form and goods received note, and by visual inspection and/or calculation to check for agreement. The following procedures are useful for passing invoice for payment and should be strictly adhered to.
i. Check the invoice to ascertain if it relates to the order placed by the organisation.
ii. Check so as to determine if the invoice had already been paid for or not.
iii. Check on the receipt (GRN) so as to find out if the right goods were actually received.
iv. Cross-check if the quantity of goods received were infact correct.
Check if the price as quoted and agreed as well as recorded on the invoice along with possible discounts is correct.
v. Cross-check the unit price values, extended values and finally the arithmetic summation of the total value on invoice.
Where it is certified as stated above, the supplier’s purchase invoice will then be approved by the purchase invoice section of stores and passed on to the accounts department for payment. But where the invoice is found to be unsatisfactory, purchasing must be informed immediately so that it can take the appropriate action. From the above, it can be seen that the processing of purchasing invoice requires a water-tight clerical procedure.
Organisation for Left-over Materials
Salvage and Reclamation Departments
Nearly all manufacturing firms (large and small) and many non- manufacturing firms should have a salvage and reclamation (S&R) department. Depending on the quantity and value of the salvageable material involved, the department can operate full or part time from either a salvage yard or the department head’s desk. Many small firms, unfortunately fail to establish a salvage department, primarily because they believe their volume of left-over does not justify a full time operation. Industry loses millons of Naira annually by neglecting Salvage and Reclamation programmes.
In productive organisations, left-over materials include:
1. Redundant Materials
They result from the process of obsolescence and represent materials which are more than necessary to provide adequate service to the production activity. The excess over the norma holding is said to be redundant. Redundant materials are created when the use of such materials may have been superceded by a change in method, or the equipment may have been replaced. It also includes obsolete materials and components from discontinued finished products or may be due to mistakes or inefficient in stock control or purchasing.
2. Surplus Materials
They include materials in excess of an organisation’s reasonable future requirements. Such excesses may have arisen due to over optimistic sales forecast and resulting reductions of manufacturing programs, or from over buying to obtain discounts, or from inefficient buying for a special project or contract.
3. Scrap
This is discarded material which has some recovery value and which is usually either disposed off without further treatment (other than reclamation and handling ) or reintroduced into the production process in place of new material. They are usually the result of off-cuts, trimming and swarf that arise in the processes of transforming raw material into component part and finished product. It can be minimized into component part, good design, good process planning and control, and through effective purchasing. Such residues must therefore be disposed off as surplus if no other use is put to it in the organisation
4. Wastes
Wastes are discarded substances having no saleable value (as distinct from scrap), they usually result from in efficient purchasing. Such materials include those that have spoiled beyond redemption or for which no return can be expected. Infact, it will cost the organisation some money to dispose it
5. Damaged materials.
Damaged materials may result from wrong processing, in the production line, inefficient handling and/or inefficient transportation of materials.
Damaged materials may also result from the inefficient nature of materials, e.g. glass wares and materials can break with little shock. Some other material may in their nature be brittle or walpable and may not pass through certain production process without having some being damaged.
Machine tools and equipment can also at some point in their life become surplus or damaged through wear and tear or they may become technologically obsolete. When all these happen, the material will cease to satisfy the purpose for which they were originally intended
6. Obsolete Materials and Equipment.
Materials and equipment may become obsolete as a result of wear and tear, by reason of technological changes, new and improved methods of production overthrowing the old method.
Changes in demand, taste and in fashion sometimes occasioned by effective competition among firms on matters of product quality, price, etc. Obsolete materials and equipment may also result from rationalization of organizational operations.
However the following procedures abound for waste and obsolete materials control. The procedures will keep the incidence of redundant, obsolete and surplus materials at a minimum level.
1. Ensure that stocks needed for the day to day activities of the organisation are kept to operational demands, especially, where it is envisaged that a change would be imminent in the shortest foreseeable time.
2. Organise an efficient stock review system based on stock movements as recorded in the organisation’s stock records.
3. Be constantly aware of technological developments and changes in the industry. This type of information is necessary and must be constantly monitored. It will serve as a warning to further stocking of such materials that had hitherto been stocked.
4. Maintain smooth and an uninterrupted communication system amongst the major departments of the organisation notably sales, design, production and purchasing who have knowledge of changes in the product.
5. Purchasing must maintain a close relationship with the stores so that if changes were made especially with new orders, it could be communicated to the stores.
6. Take appropriate action for the immediate disposal of the items declared obsolete. This is necessary so that further losses do not occur.
However, the total volume and value of the stock involved, alternate use possibilities, action of competitor and the possibility of increased rate of usage in the future will inform obsolete stock decision regarding when to reduce it or change to another new material.
Ways Of Disposing Surplus, Obsolete And Redundant Materials.
The following are the ways by which left-over materials can be recovered, recycled, salvaged or dispose of.
1. Re-use in the company
Items like offcuts, blanks and substandard parts can be re-used for other purposes thus avoiding the purchase of prime materials.
2. Sale to other Manufacturers
Some redundant or surplus materials in one company might be of value to other companies who would be willing to pay slightly below the market price so giving a handsome return to the seller.
3. Sale to Prime Producers
Where large quantities of scrap materials or waste (e.g. Waste paper) is produced, the best return may be obtained from selling to prime producers who can re melt or re-pulp to produce prime materials.
4. Resale to Suppliers
Where materials or components are considerably in excess of requirements or no longer used, but are still in demand elsewhere the supplier may be happy to take them back at cost.
5. Sale to Scrap Merchants
The best return for scrap materials which have no other purpose can be obtained when the different classes of materials are properly segregated.
6 Sale to Purchasing Agents
Redundant machinery and equipment to one company may be useful to many others. Many purchasing agents exist in this field to find suitable customer.
7. Sale to Re-processors
Waste oil, fluid and effluents can be often be reproceed, to produce by products, and waste fabrics, cotton, wood, can also be reprocessed for alternative uses.
8. Sale to Employees
Whilst this is not a method for dealing with large amount of disposable material, it can be used to good effect in the right circumstances.
9. Donation To Educational Institutions
Machine tools and other types of industrial materials may be donated to educational institutions for use, and institutional materials in laboratories. Whatever method is used, it should be properly administered. Disposable materials should be collected, segregated and stored, proper records should be maintained, and the most profitable means of disposal should be selected.
The job of purchasing is not confined only to the purchase of new and sale of surplus materials. It can also purchase need materials where this might be necessary for the operation of their organisation. So purchasing executive must not only pursue sellers or supplies of new materials but also “surplus dealers”.
Control of Packages and Containers
Many goods arrive at the receiving bay in some form of container. Most of these are disposable after they have fulfilled their purpose of protecting the goods in transit, these should be consigned to the waste compound for disposal.
Others are needed to hold the materials during storage and use and then become returnable or waste. With the increase use of pallets and specialized containers more and more need to be returned after the materials have been transferred to stock or distributed to users.
There should therefore, be a good physical and administrative arrangements made to deal with containers which include:
1. Suitable storage area provided for waste, receivable and returnable containers.
2. Proper records maintained for returnable containers received and returned.
3. Proper records should be maintained for returnable containers held temporarily either in stores or at users locations.
4. Receipt of returnable containers should be endorsed on Goods Receivable Note (GRN) to inform the invoice-passing section.
5. Suitable arrangements made for collection of returnable containers from user departments.
6. Proper arrangements should be made for the dispatch of returnable containers to the suppliers with copy of dispatch note to invoice processing section.
7. Agreement made with supplier on how changes for returnable containers should be treated.