TT16 The Procurement Process

Guide to Financial Management

Top Tips 16

Top Tips: The Procurement Process

It is important to have a clear procurement policy to avoid confusion and to make sure we get value for money when buying goods or services. The policy also removes the suspicion of fraud – and the temptation!

Often we need to make sure we comply with donor rules and regulations so having our internal stages clearly defined helps us compare and adjust to donor regulations as required. Where a donor’s rules are stricter than our own internal policies we must make sure we comply with the donor rules for that particular grant agreement.

The typical stages in a procurement process are illustrated below. Of course, your own organisation’s process may vary, with more or fewer steps, and use different terminology and forms.

1. Check the budget and the specification of goods or services to be purchased

The exact quantity, standard and guide price of the goods or services required, as described in the project budget, must be checked to ensure funds are available and the correct items are purchased.

2. Prepare a purchase requisition

An internal request on a standard form is prepared to formally request the purchase of the goods/services specified.

3. Authorise purchase requisition

This will usually be checked and authorised by the budget holder or another nominated person to verify that there is a genuine reason for the purchase. The available budget is re-checked at this stage.

4. Obtain quotations

Quotations from reputable independent suppliers are obtained, as specified by the internal rules and/or donor rules.

5. Select the supplier

Quotations are reviewed and a supplier is selected based on price, quality, delivery and ‘after sales’ terms to ensure value for money. For larger purchases, it is usual to have a ‘Purchasing Panel’ or ‘Procurement Committee’ to select the supplier.

6. Issue purchase order (PO)

After the supplier is selected a Purchase Order, authorised by the budget holder, or other authorised signatory, is sent to the selected supplier with a copy kept on file. The quotation will be attached to the PO. This then forms a legally binding agreement between the supplier and the NGO.

7. Receive goods from supplier

When supplies are delivered/received, they must be checked against the purchase order to ensure they are the correct items. A Goods Received Note (GRN) is usually signed and a copy filed.

8. Receive and check supplier invoice

Once received, the invoice should be checked and matched up with the GRN, PO and quotation to make sure the goods have been received and the prices charged are as agreed.

9. Prepare and authorise the payment

The Payment Authority form is attached to the invoice and all the supporting documents. It includes budget and accounting codes and must be checked and authorised by the budget holder or another nominated person

10. Pay the supplier invoice

Payment should be made to the supplier within the specified payment terms, usually 30 days. However, in some countries suppliers require payment on delivery or even before delivery. 

11. Enter payment into the accounts

The final stage is to record the payment in the organisation’s books of account and add to the asset register, as soon as possible .

Want to learn more?

Mango’s Training Course Getting the Basics Right covers procurement, as well as budgeting, accounting, financial reporting and internal controls.  Join us and have your fear taken out of finance!

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See Mango’s Guide to Financial Management for NGOs for free advice and tools, including a section on procurement.  See:

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