Stores Systems and Procedures

To have effective control and proper accounting of materials, a professionally managed Stores has the following main functions:

• Receiving
• Custody
• Inventory Control
• Disposal
• Receiving

Materials Status at Receiving

Materials in the Receiving department are segregated into several categories, based on their quality control status and destination. Procedures in receiving must provide for storage and transport of material in each category. The major categories of materials are:

 Awaiting inspection – This category consists of material that has been received and is awaiting inspection before being moved into stock.

Acceptance upon certification – This category consists of material that may be accepted pending certification.

Rework: In this category are materials that are defective and must be reworked.

Return – This category contains materials that are defective and will be returned to the supplier for credit or replacement.

Materials to be tested – This category consists of materials which have been received and are awaiting delivery to the using/testing department.

STEP WISE RECEIVING PROCESS

Open Purchase Order wise file, once P.O. is received. Maintain Railway Receipt Register, Consignment Note Register, Inspection Request Register, Rejection Register and other relevant documents viz. individual P.O. wise file, advance document file, shipping documents, Guarantee Certificate and inspection certificate, challan etc. and to feed the relevant data into the computer.

Receiving reports/documentation – Receiving keeps records of all deliveries, and notifies the involved parties, including accounts payable, purchasing, and the end users. If the operating systems for the business are computerized, then data for each receipt is entered into the system, and linkage to the purchase order and accounts payable files can occur automatically. Reports of receiving activity can be generated as needed. Manual documentation may also be kept. Normally, even in a computerized business, copies of the bills of lading and the packing slips are retained in the receiving files.

Receive/collect material, make cash payment towards freight and demurrage including transportation charges.

Unloading, checking of quantity (checking the shipment):

The process for receipt of a shipment includes unloading the shipment from the delivery vehicle, verifying the shipment with the delivery, and signing the carrier’s bill of lading. Number discrepancy should be detected at this stage, where the quantity reflected on the bill of lading is not what is delivered. These should be detected and reconciled before the driver leaves. Once the bill of lading is signed, count errors are much more difficult to resolve.

Unpacking / opening of packages and inspecting

The next step in the process is to check the open order file to verify that receipt is a legitimate one, and to verify the quantity due. Feed data like D.B., P.O, and challan etc. in computer and generate the goods received intimation/inspection certificate for sending it to the indenters / users

If a shipment is found to be incomplete, it should be so noted by recording the amount actually received. This action will reflect a partial receipt of the P.O. quantity, and leave the line item open for receipt of the balance. If there is no internal documentation for the material received, it is classified as pending or “in suspense” until its status is resolved.

Material received may be unpacked and inspected either in receiving or by the using department. The same procedures for reporting and managing damaged apply in either case. Obvious damage will probably be detected in the receiving department. Concealed damaged is usually detected when the container is unpacked.

 Lodging of Claim for Discrepancy

As soon as damage is detected, the carrier should be notified and a claim for recovery filed. The carrier must be promptly notified of the damage; agents of the carrier have the right to inspect the damaged goods. This means that as soon as the damage is discovered, the material must immediately be set aside and not disturbed. The carrier’s agents will want to inspect not only the damaged goods, but also the packing and the box in order to determine the cause of the damaged. Photographic proof showing the damage is a good safety measure, especially if the goods are perishable. Lodge preliminary claim for any discrepancy such as non-receipt, partial receipt, damaged and missing items.

Procedure for the return of goods to suppliers:

If goods are received and rejected, they are normally set aside in a segregated area until disposition is arranged. If the goods are to be returned to the supplier, procedures for shipment should include reopening the purchase order for that quantity of material, and arranging for the collection of freight charges from the supplier. Arrange packing, forwarding & dispatch of rejected consignment back to the party. Obtain short/damage certificate from carriers and forward the same to claim section of Finance for on-ward transmission to underwriters.

Follow-up and do necessary chase-up with the carriers, underwriters, suppliers for quick clearance of cases pending with them.

The F.O.B. point on the purchase order determines who will pursue the damage claim with the carrier. If the goods are purchased F.O.B. Origin, the buyer’s organization owns the goods in transit and must pursue the damage claim. If the goods are F.O.B. Destination, the supplier owns the goods in transit, is obliged to pursue the damage claim, and owes the buyer immediate replacement of the goods, since the purchase order is not fulfilled. At the end, once the goods are accepted on inspection generate the necessary document (Goods Received Note) for the good accepted and update the record accordingly.

Handover the material to the Custody Section / Indenter whichever is applicable

Receiving Systems

In a computerized environment, the use of bar coding to complete the receiving transaction makes the process simpler. Suppliers affix a bar code label to the packages which is electronically read at the receiving dock, and this action automatically updates the computerized system with all the information contained in the bar code.

Issue regarding the separation / integration of Purchasing and Receiving:

Auditors examine the roles of purchasing, receiving and accounts payable to verify separation of the functions. Independent verification of material receipts is considered one means of protection against internal fraud, since it becomes more difficult to falsify records or steal merchandise if several people are involved in the series of transactions.

However, it is necessary for purchasing and receiving to work closely together. Purchasing manages suppliers, and both buyers and suppliers are measured on delivery performance. Suspending a delivery or creating a backlog of work so that receipts are not entered promptly, can create delivery performance information that is not reflective of a supplier’s true performance.

Procedures for Receipt, Inspection and Acceptance of Service Purchases

The receipt of services is normally not done by the receiving department but by the end user. Formal notification of “receipt” must be given so that the accounting function is authorized to pay the invoice, and so the Supplier understands that the customer considers the service complete. Contracts for a service should be accompanied by a clear set of instructions and acceptance criteria, so both the supplier and the customer have the same understanding of what completion entails. When the supplier believes the work is finished, the customer normally inspects it and either agrees or disagrees. When both agree, then the customer creates a receiving transaction that closes the order and authorizes payment. All end users should have a formal procedure for accepting and receiving a service so that consistency is maintained.