Having a purchasing policy for IT related hardware and software can be the proverbial ‘can of worms’ that you may or may not wish to open. A strong, well-rounded policy will protect your organization by avoiding some risks and optimizing your business model. Let’s take a look at some reasons why this is important:
Designated purchasing authority
Having a designated purchasing body will streamline how hardware and software are procured because this group or individual may seek the discounts that are available, establish premium policies with vendors (expanded return policies, payment terms, and discounts). This group or individual may also have an established mechanism to direct bill purchases to the company. There is much risk associated with IT staff directly purchasing hardware and software (explained later) with the exceptions of emergencies on site or at a remote location of course.
Discounts may apply
Many IT related purchases are subject to volume commitment discounts. For example, your organization likely has some amount of Microsoft software. Having the purchasing process streamlined with a policy will ensure that software purchases are purchase price eligible for MOLP, select, or enterprise agreements that may be in place. This may apply to hardware purchases also.
Also, most company purchasing models have some sort of credit-card program for purchasing agents. These programs are business streamlining by providing direct payment to credit cards from the company, which will eliminate purchase order and invoicing procedures, targeted management reports, and these cards may work to maintain ‘approved vendor’ status for certain vendors that are approved for company purchases. Approved vendor status is important as there are usually specific agreed upon terms and conditions that are already in place with that vendor.
Check and balance
Having a strong policy will ensure that procedures are followed and that any ‘pet projects’ or unsanctioned activities are subject to the same screening and relevant approval processes. Take for example the TechRepublic sample policy that states that all purchases are required to be made by purchasing agents of the organization. This may seem unnecessary, but consider that your need may have some ‘commodity’ items–such as a monitor as well as something complex like an HP ProLiant server with some configuration services included (firmware flashing, drive array configuration, cabling, etc.).
You may work with your preferred IT vendor to work up a quote for your current project and then turn into your purchasing agent your quote. This agent may see the monitor for a price of $189 and be able to get the same part number from a reseller account program through Ingram Micro (or other reseller) at $118. The end result to you is the same, but you have saved the company/requesting effort/project $71. Now, a single monitor may not seem like worth all the hassle, but that is where the purchasing agent would review the quote and make the best decision; after all, that is their job.
Avoiding fraud and other risks
This may come as an eye-opener to some, but there are many risks associated with no IT hardware and software policy. Consider the following scenarios:
Employee expense reporting
This is the most risky, and hopefully the least common. But an employee could do the following fraudulent acts:
- Obtain and redeem a rebate that differs from the expensed amount.
- Purchase the item, expense the purchase, return the item (unopened/unused) and purchase a black market, eBay, a used equivalent item, or a legitimate item at a lower price.
- Pad the expense report to inflate the expensed amount by falsifying the price (very easy with scanners, PDF editors, web page editors, image editors, etc.).
- Depending on the dollar amounts, you don’t want employees subject to that much financial risk on their personal finances (regardless of how many frequent flier miles they may earn!).
Uncoordinated company purchases
This is a more common practice where someone in IT calls accounting and asks for a purchase order to hand to the vendor. This situation has the following risks:
- Vendor overpricing some items for better yield, at permission of your IT staff!
- Uncoordinated software purchases, thus forfeiting a possible discount.
- No purchasing agent overview of vendor, which may be a financial risk if the vendor is not a suitable business partner for your organization.
- IT staff executing pet projects by issuing 4 purchase orders for $2,500 instead of one for $10,000–which may require approval and be subject to denial (hence the splitting).
With this information, it becomes a little clearer why purchasing agents are important in an organization. So, if you see an item as an ‘in-store only special’ for a certain price that is better than what the preferred vendors are providing–this is why it makes more sense to pay the extra money.
Are the bases covered?
The information above should paint a pretty clear picture of the importance of having a sound purchasing policy. While some of the situations above are worst-case scenarios, they are very legitimate topics for which IT and company management need to be prepared.
Get the IT Hardware and Software Purchasing Policy download from Tech Pro Research (a sister site of TechRepublic).