Early Warning - All About Procurement Fraud - Part 3

EARLY WARNING - All About Procurement Fraud – Part 3

By Nikki Viljoen – Viljoen Consulting

Last time we looked at some of the different types of procurement

Today we will have a look at some of the different issues that need to be looked at, around procurement.

One of the ways to limit procurement fraud is to ensure that you have a proper procurement policy in place and that it is adhered to and checked on a regular basis.  Issues that need to be taken into account when implementing the procurement process are (but not limited to):

1. Needs Analysis.
It’s a good idea to sit down and establish a strategy.  This of course means that you really have to understand the Company’s needs.  To start off, a ‘short term’ strategy (usually anything between three to five years) should be implemented.  You will also need to “define” the ‘technical direction’ as well as the requirements that this will entail.  Remember technology changes at an incredible rate and therefore you need to prepare yourself for all the changes coming down the road.

2. Timing
When do you need the stock?  How long does it take to get to you?  How quickly (or slowly) do you go through the stock and at what level of ‘stock-on-hand’ are you comfortable with for each product?

Remember stock-on-hand becomes money in the bank, only when it is sold, so having too much stock-on-hand is not a good thing particularly if it is a ‘slow’ moving product.

On the other hand, if you don’t have the stock-on-hand, you won’t have the money in the bank either as you cannot sell what you don’t have, so not having enough stock on hand is not a good thing either, particularly if it is a ‘fast’ moving product.

3. Suppliers
You need to identify your suppliers. In a small environment this is usually done through your networks and then when that fails you will usually resort to Google.  Remember that whilst referrals from friends, relatives, colleagues and in particular staff, can be great, they may also carry a hidden cost in the form of ‘kickbacks’ or payoffs.

You need to ascertain if the product is a specific brand, in which case there will be recognized suppliers, or maybe you would like a product that is similar but less costly.  You may want to use several suppliers for the same product or use a single supplier for all of your products.  You may want to use local suppliers or import your products, the choice of course is always yours.  Here’s the thing though, it is very important that you do the research and identify who best, will supply you with what you require at a competitive price – good value for money is the name of the game.

If you are wanting to import, then attending Trade Shows or contacting the ‘Trade” section of a Chamber of Commerce who will assist you, is the way to go.  Taking a company’s name and contact details out of the yellow pages or its electronic equivalent, without getting referrals and doing your homework is a very clear recipe for disaster.

Next time we will have a look at some more of these  issues.

Nikki is an Internal Auditor and Business Administration Specialist who can be contacted on 083 702 8849 or nikki@viljoenconsulting.co.za or http://www.viljoenconsulting.co.za