Low Value Purchases

Low value purchases are transactions where the individual (and order quantity value) of the unit being purchased is of little economic importance. The opportunity to create value lies in streamlining the acquisition process, rather than solely in reducing the purchase price of the goods or service. For example, assume that the cost of raising a requisition, budgetary approval, selection of supplier, purchase order generation, receipt of the goods, reconciliation of the invoice and proof of delivery, and effecting payment all costs $100 in administration time and effort. If the order value is $100 or less, the real cost is in the administration. The definition of what is low value varies from organisation to organisation, with values from $75 to $500 being defined as ‘low value’, depending upon the organisation. Procurement cards and e-commerce are examples of the use of technology to ‘systematise’ and streamline the process.