The receiving department receives the materials supplied by the vendor. The quantity is verified and tallied with the purchase order. The receipt of the materials is recorded on the specially designed receiving slips or forms which also specify the name of the vendor and the purchase order number or into a computer. It also records any discrepancy, damaged condition of the consignment or inferiority of the materials. The purchase department is informed immediately about the receipt of the materials. Usually a copy of the receiving slip is sent to purchase department. In computerized system the Purchase department concerned staff member is supposed to keep a track of all the receipts through the computer.
If the materials require any quality control or inspection, they are sent for such testing. The inspection department tries to verify that the incoming materials comply with the standard quality as specified in the purchase order. It may involve mechanical, electrical, chemical or such types of testing. The accept reject decision may be taken on the basis of either sample testing or testing the entire lot. The inspection may involve in house testing or testing done at the vendor’s plant.
The inspection report along with the Test certificate and the recommended acceptance or rejection should be sent to the purchasing department. On the basis of the recommendations made by the inspection department, the purchase department arranges for the segregation of the rejected materials. They are sidetracked from the normal flow towards the stores or production departments. If they involve some further shipments at supplier’s end, they are suspended immediately. The concerned departments such as stores department, production department, accounting department, scrap and waste disposal section etc. are immediately informed about the rejections. If the defectives are within the established tolerance limits, they may be accepted as their returning to the vendor may disrupt the production schedule. However, the vendor should be informed about this and if possible, the credit should be claimed from him.
Receiving function is usually of a routine nature and sometimes it is kept independent of purchase department but within Material department usually Stores. However, it is desirable to treat the receiving departments as a subordinate function of purchase department due to following reasons:
1) Before the settlement of the invoices, the purchase department has to verify that the consignment agrees with the purchase order in all respects. This can be verified only with the help of the receiving department.
2) When the shipment is received in damaged condition, the purchase department must have first hand prompt information about this, so that it can initiate immediate legal action against the vendor or the carrier. It can also take necessary action for tapping the substitute sources of the supply for the urgently needed materials.
3) In case of the short shipment from the suppliers, the rush orders can be managed so that the work stoppages caused by the lack of materials can be eliminated.
Payment of the invoice: When the goods are received in satisfactory condition, the invoice is checked before it is approved for the payment. Generally the invoice is checked to see that the goods were duly authorized to purchase, they were properly ordered, they are priced as per the agreed terms, the quantity and quality conform to the order, the calculations are arithmetically correct etc. It is a matter of controversy, whether the invoice should be checked by the purchase department or by the accounting department. The popular argument in favor of purchase department are:
1) It is the purchaser who can accurately verify that the consignment is billed properly.
2) As he is familiar with the routine details and terms and conditions of the order, he can correct and adjust any discrepancy in the execution of the order before an invoice is paid.
3) It allows the purchaser to watch the price of the materials closely increasing his consciousness for the future purchase.
This is now changed and the Stores within the Materials department can take care of receiving as one copy of Purchase order is already marked to them or they can get all the necessary information through the internal computer system.