Excellence in Financial Stewardship 


Stanford Financial Management Services (FMS) provides this quarterly newsletter as a part of its vision to inspire and enable excellence in financial stewardship.

Issue 4 | Winter 2022

How purchasing influences stewardship

The purchase of goods and services plays a big part in helping to achieve the university’s mission. As discussed in Issue 2, faculty and staff who purchase goods and services, as well as those who approve these transactions, have a key role at the university. With the millions of dollars of purchases each year at Stanford, every purchase has an impact on our ability to ensure excellence in financial stewardship.  

One of the most important decisions when purchasing goods and services is utilizing the appropriate purchasing method. Purchasing methods are designed with varying controls to mitigate risks and safeguard our resources. This newsletter focuses on balancing risk and benefit considerations in determining the appropriate purchasing method, including addressing questions such as: 
  • What is the most appropriate method to use given my specific purchasing need?
  • Is the selected method the best choice to help Stanford mitigate risk?
Additionally, we have highlighted some of the resources available to support you throughout the purchasing process. I hope you take advantage of these updated and new resources which are meant to help you understand why and when certain purchasing methods are preferable. When purchasers make more informed and thoughtful choices about which method to use, they directly impact our collective efforts in ensuring financial stewardship excellence.
Anne Sweeney-Hoy
Senior Associate Vice President of Finance
Which path is best when making a purchase?
Whether it’s the day-to-day purchase of office supplies or a higher-cost item for research, it’s important to be thoughtful about how a purchase will be made.

Stanford Financial Management Services provides a range of choices for various situations and types of goods or services needed by a department. 
The recently refreshed overview of purchasing and payment methods on Fingate details some of the methods for purchasing goods and services, including:
  • Amazon Business is Stanford’s method of making business purchases on the Amazon platform.
  • SmartMart Catalog Suppliers, sometimes referred to as catalog purchases, offers a range of products from pre-identified suppliers.
  • Non-catalog Requests, also referred to as Purchase Orders and Contracts, are used to purchase a variety of goods and services not available in the above options.
  • Purchasing Cards (PCards) are designed for eligible purchases of $4,999 or less. 
What makes one method different from another?
These methods have varying purposes, processes and policies, but the bottom line is that each one offers a different balance of purchasing efficiency and built-in controls to help manage financial risk

Comparing and contrasting purchasing methods
For example, Amazon Business and SmartMart Catalog Suppliers provide access to built-in controls such as pre-identified suppliers and integration with the university's purchasing system, so there’s an automatic trail of documentation recorded with each purchase. The pre-identification, or pre-vetting of suppliers, is a kind of “internal control” that supports stewardship and compliance. This control supports the university’s commitment to price competition and diversity and provides a higher degree of customer satisfaction. 

Another powerful control is a pre-purchase review and approval by the designated financial approver. This allows the approver to check for appropriateness of the purchase, alignment with university and department policy, and validation of the funding source before the purchase occurs. This key checkpoint ensures that the transaction approval process happens prior to the payment being made and supports accurate, reasonable and appropriate use of our financial resources.

In contrast, the Purchasing Card (PCard), has fewer controls because it was intentionally designed to quickly purchase items that are needed right away or, like food or other small dollar occasional business purchases, are not available through Amazon Business or SmartMart Catalog Suppliers. With this method, the financial verification and approvals happen after the purchase, which, while saving time on the front end, leaves room for heightened risk. Before using the PCard, the purchaser should consider if another method may be more appropriate and, if not, take steps to ensure that the purchase is approved and meets university policies for expenditures. In addition, it’s important to note that university policy prohibits PCards from being used for certain purchases, such as computers, software, mobile devices and capital equipment.

At a Glance: Risk Considerations of Common Purchasing Methods

  Amazon Business SmartMart Catalog
Suppliers
Purchasing Card
Supplier vetting
(to support compliance and quality)
Yes Yes No 
Pre-purchase financial approval
(to check for appropriateness, compliance and validation of funding sources)
Yes Yes No
Standard Terms and Conditions Yes Yes No
Embeds price competition into the process Yes Yes No

Consider the real time savings

When a purchasing method does not have a built-in control, it may require the purchaser, department or a central office to take extra measures to effectively complete and properly steward the transaction. This may ultimately negate any up-front efficiency savings that were gained using a method that seemed more efficient at the time. 

For example, if the vendor goes out of business, it may be difficult to return or fix the product purchased on a PCard, and the university could lose the amount paid to the supplier and precious staff time. Purchasers also need to consider the time it takes to verify and completely close PCard transactions. PCard verifiers and finance managers need to actively work through reconciling any aging transactions on the books to ensure the university is able to accurately account for its expenditures and avoid risk.

When purchasers use lower risk purchasing methods, they allow financial staff and management to focus on more complex purchases and financial activities. 

In summary
Purchasers at Stanford play a key role in supporting stewardship at the university. When selecting a purchasing method, consider the overall impact on the university’s ability to manage risk and whether it truly will save time. Sometimes the benefits to a purchasing method are not as visible up front, but this is most often because they are built into the system or process. 
A new toolkit to support stewardship
The landscape of purchasing may not always feel like a straight path, given all of the choices and different methods at the university. This is why Stanford Financial Management Services has embarked on an initiative focused on enabling our purchasers to make the best choices possible. 
Here are some of the resources that are already available to support stewardship:


Fingate content 

New Courses

Support and Assistance

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