Purchasing
....Purchasing is the process of ordering, paying for and stocking an item of material. It is the first action taken after a careful decision has been made to add a section or item of telephone plant, or to add to the stock of in-site supplies.
....Telephone plant can be purchased in two ways, through a contractor or by purchasing material through a supplier and placing it with your own crews. When plant is purchased by contract, the contractor's invoice includes an itemized list of each unit's cost. the units are debited to a Construction in Progress account where you may have to add some of your own costs or your engineer's costs to the unit's cost. In ordering your own plant, the quantity, type, size, and cost for large plant additions should be made to you by the engineer.
....Controlling the costs of purchases is a must these days. Consider three ways to do this: 1) Call each supplier and obtain the current prices. 2) Have the supplier keep you posted on current prices. 3) Use your experience on which supplier has the lowest price on each item.
....The inventory record form also should be arranged so the quantity in stock and the timing of order placement can be controlled, thereby making it possible to budget costs through the year.
....In the past, the person responsible for making purchases may have handed a list to a supplier making a routine call. Or the purchaser may have telephoned the supplier to give the order. These actions should be practiced only in emergencies. Instead, have printed your own company pre numbered ordering form. Use it for all purchases made. See Figure 1 Doing this, you will always know what you actually ordered, when you ordered and why you ordered. Finding what you ordered, when there is a  question, will be simplified because you follow a set routine in making purchases.
....If you are an REA borrower, have your assigned number set in the heading of your order form, with instructions on the back. This way, you will have on each order, written notice to the supplier that the items shipped must be approved items.
....Remember to have your inventory record in front of you when making out an order. Always check it to make sure that you have not missed an item.
....All orders must be approved by the manager or by an assigned agent. Copies should be distributed within the company to three points. One is the person responsible for receiving the material. This person will know exactly what is being ordered, have an idea when it will arrive and to whom it is to be delivered. A second copy should go to "accounts payable", so they will know who has ordered material, what item is expected and what cash should be available to pay for the purchase. A third copy should go to persons responsible for completing a project, so it is known that the project is being followed through, as planned.
....If material must be ordered by telephone, have a purchase order number ready, telephone the order and give the supplier the order number. Then send a copy of the order to the supplier, confirming the call, and handle the order within your company as a normal order. This will keep the routine normal, both at your company as well as at the supplier's offices.
....Some companies, especially those with district offices, must have a form which precedes the making of a purchase order. This is called a Material Requisition. See Figure 2 Small companies may type a purchase order from a list written on a scratch pad; however, the larger company's purchasing department must know permission has been given before the typing of a purchase order is done.  The requisition form therefore is necessary. Telephone orders must be confirmed in requisitions also. You may even have to call long distance to your purchasing department to obtain an order number. Keep the routine normal.

When the Order Arrives
....Receiving material is the process of opening freight or parcels, checking the enclosed packing slip against the actual contents and filling out the Record of Receiving form See Figure 3. This form sets up a consistent routine on keeping a good record of material. Also, this form makes it possible to eliminate indicating which account or accounts a check is made out for, only the receiving number need be recorded on the supplier's paycheck. Of course, only one supplier's material can be recorded on any one Record of Receiving.
....Having the person who receives the material, fill in the stock numbers is more reasonable because that person usually is more knowledgeable about the material. The spaces marked "A" on the sample in Figure 3 will be filled in by the receiver. The packing slip then is kept in the receiving files, or it can be sent as a notice of receiving to persons responsible for a specific project.
....Accounting personnel, filling in the spaces marked "B", will use the form further to price out the units, pay for them and then transfer the costs to the proper accounts.
....Paying for units of a contract also can be achieved on the Record of Receiving from. The contract units then are transferred to a Construction in Progress account.
....When receiving and checking a shipment reveals an item that cannot be used because it is damaged or it is the wrong item, place a "D" for damaged or a "W" for wrong in the Condition column. Then set the item aside and make arrangements to have it returned. The Notice of Goods Returned or Transferred form then is filled out See Figure 4. The company still will receive an invoice for all the items shipped and pay it in full. A credit will be issued by the supplier for goods returned. The Accounting department keeps the goods returned form on file, which is a record of cash paid out, even though it is not put into inventory. Checking this file periodically can reveal any credit not honored, and then proper steps can be taken to see that credit is issued. This form also is filled in by the person sending the goods spaces marked "A" and accounting marked "B".

Inventory
....Inventory, to company supervisors and executives, means to have materials or a record of materials in stock, ready for labor employees to place in plant. Inventory, to a labor employee, can mean that he or she will count and list all of the material in stock on a given day each year. Both of these definitions are correct; however, a more meaningful one is that inventory is money invested, which the company cannot earn a return on.
....It takes a pretty good plan to keep the inventory down and have material in stock when it is needed. You have to know when you can buy at a larger quantity in order to cut purchase cost. There must not be excess material that will sit around for years. Also, if money is not spent, it is available for other needs or is in the bank earning interest. Nowadays, there are suppliers who give good prices on small quantities and can give 24 hour delivery. Shop around.
....There can be three methods used to keep a record of your stock. One is to keep count and cost of each separate item you buy until it is actually working in plant. The second is keep count and cost only of the items which are identifiable as installable units, then combine the costs of the small items, such as screws, tape, etc., into an Exempt Material account. The exempt material costs are spread by percent of average use, over several accounts. The costs do not need to be on record as being in stock. The third method is not to put the material cost on inventory but charge it directly to a Work Order in Progress account and store the item in a separate location until it is in plant. This is not a good practice because some person may pick up an item and put it in plant somewhere else by mistake, or even if he knows he should not do it. Use this third method only with vehicles tools, etc.
....The first inventory method should be used at warehouses where the small items move quickly as large items, and the inventory must be on hand to distribute to branch or district stockrooms. However, it may be necessary to inventory all items if there has been a history of theft or overstocking, using this method only until the problem has been corrected. The large stockroom may do all items also, but costs in bookkeeping still will not include exempt items. There are extra costs encountered by counting and reporting the use of each screw and bolt: (1) it requires one third more time to fill out a time report or cost out a work order; (2) it takes twice the time to keep inventory throughout the year; (3) in a small company, all stock would have to be locked up, making it necessary to have one person available full time to distribute material.
....The use of the exempt material method is recommended for all companies with more than 2000 stations. The cost difference for smaller companies to record all items will not be significant, and they still may elect to use that method, if law permits.
....Inventory procedures must be set up so that transfer of costs and materials from stock are easily understood and free from errors. The process starts with the receiving of material. After the material is received and placed on the inventory record, it is ready to be distributed.
....As previously mentioned, the cost record of the material will end up in a ledger book, by account. To aid the process of transferring the costs, it is best to assign stock numbers to each item on inventory. The numbers can be made up of five, six or seven digits, whichever works best. They should be designed to be descriptive of the piece of material. The engineer then can use the number on the work order plans, which in turn tells the laborer what unit to place. The laborer then can place that same number on his or her time sheet, without having to check which number to use.
....The first two "digits" in the stock number should be letters that describe the type of unit it is. The remaining digits describe size, in the metric system, where applicable, If the first two letters can be the same as property records, use them.

Examples:

Figure 5.

....The stock numbers must be placed on labels which are on the shelf under each item in the store room. The daily time sheet must be designed to accept these numbers and so should service orders and work order closings. ....The example shown in Figure 5 is for a splice closure. When the inventory is down to about four, order 12 more. The card should be made of a material which can be written on or changed. .......................................................................

Exempt Material:      Material being invoiced which is commonly used on many different items or parts of items but is costly to inventory is partially charged to an Exempt Material Account and the remainder is spread over Maintenance. As inventoried items are put to use in plant through a work order or service order, Exempt Material is also charged out. The ratio of total inventory in stock in relation to total exempt material in stock, is applied to the inventory just placed in plant. The result is the value to be credited from Exempt Material and charged to Plant.      The ratio used will not remain the same because of the continual purchases being made. If more exempt material is purchased, more will be charged out.      The card used to keep record of each different inventory item can be used to keep the balance of

Figure 6

Figure 6 lists some units with code letters. A sheet used to spread the material in holding, according to the code, is shown in Figure 7. The total cost, listed just left of the code number on the receiving report, is placed on the spread sheet under the corresponding code. Receiving report costs, with several units of the same code, are added together, with that total being placed on that spread sheet.      A routine time is picked to credit this holding account and debit the Maintenance or Exempt Material accounts. On your spread sheet, total each coded column and spread that total according to the percentages noted within the boxes below, placing the broken down costs in