The Purchase Order (PO) process starts with a need for goods or services. For the procurement of goods, Stanford purchasers should start by taking advantage of negotiated agreements with Amazon Business or SmartMart catalog suppliers. When goods are not available in Amazon Business or SmartMart, non-catalog requests are initiated.
Purchases begin with a requisition that requires approval by someone with financial authority over the account (PTA) charged. Approved purchase requisitions turn in to purchase orders which act as an official contract between Stanford and the supplier of the goods or services. Depending upon the value and type of purchase requisition, a more formal contract may be required between the supplier and Stanford. Suppliers invoice Stanford when goods or services are delivered and Stanford remits payment per the purchase order terms. Some purchases require receiving. The purchase order life cycle ends when a purchase order is finally closed.
This page will review the stages of a purchase order from Pre-Ask to Close as indicated in the process flow below.
All POs will begin with an identified need for goods or services. Prior to initiating the purchase requisition, the requester should:
- Understand Topic Overview: Purchasing and Payment Methods and Topic Overview: Purchasing Policies and Guidelines.
- Ensure proper use of Expenditure Type Codes. For more information, refer to Topic Overview: Purpose and Use of Expenditure Type Codes and the Resource: Buy/Pay Guide.
- Understand the requirements related to special categories. For more information, refer to Topic Overview: Categories of Purchases.
- Understand when a contract is required. For more information, refer to Topic Overview: When a Contract is Required.
For non-catalog requests, the requester initiates a non-catalog request by doing the following:
- Query to see if the supplier already exists within Stanford’s Supplier Query and Request database. Refer to Step 1 and 2 of How To: Make a Supplier/Payee Request
- If necessary, the requester may need to request a new supplier, activate an inactive supplier or update supplier records before a purchase requisition can be initiated. It is recommended that all Stanford staff who do business with suppliers, take the Course: FIN-0509: Supplier/Payee Setup
- The requester creates and submits the non-catalog request in iProcurement. For more information, refer to:
- The preparer will need to monitor the requisition as it flows through approval. For more information, refer to How To: View Requisitions, Purchase Orders or Invoices. There may be a need to correct the requisition if the requisition is returned
Ask - Requisition
All Stanford purchase requisitions must be financially approved by someone with financial approval authority over the account (PTA) being charged to ensure appropriate spend and adherence to established policies. The financial approver may approve the requisition or reject with an explanation to the preparer. The preparer can resubmit the requisition for financial approval after addressing rejection reasons.
Approvals are based on what you are buying, how much is being spent and what PTA is being used. One or more approvals may be required prior to a purchase requisition being approved and the PO being created. To understand approval requirements by type and amount of purchase requisition, refer to Resource: Requisition Approval Requirements.
Refer to Topic Overview: Authority to Approve Financial Transactions for more information on approvals.
Agree: 1 to 21 Days - Purchase Order/Contract
A purchase order is considered a legally binding agreement between Stanford and the supplier. It outlines the agreement to purchase goods or service at a specific amount, with a specific delivery timeframe and payment terms. The full terms and conditions (for Stanford PO’s) governing the purchase order are contained in a hyperlink at the bottom and the purchase order contains the signature of the AVP of Procurement Services. By performing, such as shipping goods and accepting payment, the supplier accepts the Stanford PO Terms and Conditions. While all Stanford Purchase Orders are a type of contractual agreement, there are cases where a more explicit and detailed written contract must be signed by both Stanford and the supplier (this is referred to as a bi-lateral contract). Any agreements with the supplier that require signature on behalf of Stanford need to be signed by Stanford Procurement. For more information, refer to Administrative Guide Policy 1.9.1: Signature Authority.
In the agreement phase, the following key factors contribute to determining whether or not a bi-lateral contract is necessary.
PO Total Under $25,000 (and no signature requested by supplier)
If the purchase order is below $25,000 and the supplier requires no Stanford signature on their document, the PO is sent to the supplier after all financial approvals are complete.
PO Total is $25,000 and Above or a Contract is Necessary
If the purchase order is $25,000 and above, or a Stanford signature is necessary, Procurement Services will review the documents attached to the requisition and draft the appropriate contract on Stanford’s template, or edit the supplier documents.
The process may include reviewing requisition attachments for compliance with university policies (e.g., conflict of interest, certificate of insurance, etc.), drafting and/or editing the contract terms, advising on the scope of work from the contract’s perspective and consulting with university subject matter experts if necessary (e.g., privacy, OGC, risk management, etc.) as well as the requesting department. Procurement Contracts often negotiates terms with the supplier for the purpose of minimizing risk to Stanford and to the department.
Procurement Contracts has a Service Level Agreement (SLA) to complete the contracting process within 21 business days from the time the requisition has been fully approved by the requesting department. However, the processing time may vary depending on the individual requirements/complexity of each request. Absent urgent circumstances, Procurement Contracts tries to work through incoming requests based on the date of requisition submission in order to ensure all departments receive help with their requests as promptly as possible.
Once Procurement Contracts and the supplier have agreed upon the legal terms, Procurement Contracts will route the final document electronically for all required signatures.
Once this is complete the PO is approved in Oracle and the funds are available for invoicing. For additional details, refer to Topic Overview: When a Contract is Required.
Receive and Pay - Invoice
Once the supplier delivers the products or services per the purchase order agreement:
- Supplier invoices Stanford, refer to:
- Accounts Payable team confirms the invoice information and matches it to the PO.
- Accounts Payable team pays the supplier according to the invoice date and established payment terms.
Certain purchases require “Receiving” prior to the invoice being paid. For more information, refer to Topic Overview: Purchase Order Invoice Processing.
Invoices for amounts greater than $5,000 require departmental approval.
- Requester tracks the invoice payment; refer to How To: View Requisitions, Purchase Orders or Invoices.
Manage Purchase Orders
Depending on the situation there are several options for the preparer to consider when managing a PO.
Cancel a PO
If the PO will not be used and there is no invoicing activity, it is possible to have the PO canceled. For more information, refer to How To: Cancel a Purchase Requisition/Purchase Order (PO).
Change a PO
When a PO is open and needs to be changed (for reasons such as changing the PTA or increasing the amount, refer to:
- How To: Change a PTAE on an Approved Purchase Order
- How To: Change a Standard Non-Catalog Purchase Order
Suppress a PO
Open remaining balances on lines of a PO can be suppressed which results in removing commitment amounts on Stanford financial reports. Suppressing purchase order commitments does not, however, remove the commitment from the purchase order. The PO will still be open and the balance can be paid to the supplier. For more information, refer to How To: View and Suppress Commitments.
Finally Close a PO
Once all goods and services have been received, invoiced and paid, the PO can be finally closed. When a PO is finally closed, any outstanding commitments are relieved and the projected remaining balance on the award is increased.
Prior to finally closing a PO, the requester should confirm that there will be no further activity on the PO. For more information, refer to How To: Finally Close a Purchase Order (PO).
To review how purchasing commitments are relieved, refer to Topic Overview: Commitment Management.