The plus side of a purchase order management system

Without a purchase order system, businesses face challenges such as inconsistent purchasing practices, delayed or lost orders, overpaying for goods or services, and difficulty tracking expenses. These challenges lead to increased costs, reduced efficiency, frustrated teams as well as external partners and increased risk of fraud.

In any company size, it is essential to have a streamlined process for managing purchases. A purchase order system is such  a tool that helps businesses achieve this goal. In this article, we will discuss why businesses should use a purchase order system, the benefits of using it, and how it works.

The basics

A purchase order system is a tool that assists businesses in managing their purchases by creating a formal document that outlines details of a purchase. This document, or order,  includes information such as the supplier’s details, what is being purchased, quantity, price, order date and expected delivery date of the items. Such a system provides a standardized process for businesses to follow, ensuring that purchases are made in a consistent and controlled manner.

The importance of a purchase order system for businesses cannot be overemphasized. It provides several benefits that help businesses better handle their purchases, while improving control over purchases. A purchase order system will inevitably improve accuracy and efficiency, enhance communication and collaboration both internally and externally, as well as create  greater transparency and accountability. This will also boost employees to perform better and improve use of their time. 

The benefits

One of the main benefits of using a purchase order system is better control over purchases. With a purchase order system, businesses can establish a clear process for making purchases, ensuring that purchases are made in accordance with established policies and procedures. This helps to prevent unauthorized purchases and reduces the risk of fraud, in other words, you can always follow the money. Such a system will track all purchase orders and their statuses. As businesses usually deal with many different orders in various stages simultaneously, managing updates and changes without a tool can quickly become a nightmare. 

Another benefit of using a purchase order system is improved accuracy and efficiency. By using a standardized process for making purchases, businesses can reduce the risk of errors and ensure that purchases are made in a timely manner. This can help to improve productivity and reduce costs associated with rework or delays. It will ensure that the purchasing department places orders on the right item and prices with the right agreement terms. 

Enhanced communication and collaboration are also benefits of using a purchase order system. By creating a formal document that outlines the details of the purchase, businesses can ensure that all parties involved in the purchase are on the same page. This can help to reduce misunderstandings and improve communication between suppliers, the purchasing and finance department. It will also support any negotiation should an issue occur and a discussion on cost arise. Using a collaborative tool like Vintly allows users to track any and all actions, changes and updates made by either parties, who reviewed it and when. It allows for faster processing of orders while making sure both the business and supplier are always on the same page with evolving orders. 

Finally, a purchase order system provides greater transparency and accountability. By creating a formal document that outlines the details of the purchase, businesses can easily track and monitor purchases. This can help to reduce the risk of fraud and provide a clear audit trail for all purchases. It also allows for businesses to quickly reconcile their orders and invoices by tracking what has been delivered or is still outstanding. Moreover, having a purchase order system will allow you to benchmark, and analyze data from your purchases. You can track which item is purchased most often, price fluctuations and supplier performance. 

How it operates

A purchase order system operates based on a standardized process that includes the creation of a purchase order, an approval process, sending the purchase order to the vendor, and receiving and reconciling invoices. The creation of the purchase order involves gathering all the necessary information about the purchase and creating a formal document that outlines the details. The approval process involves obtaining approval from the appropriate parties, such as the purchasing or finance department. Once the purchase order is approved, it is sent to the supplier, who then fulfils the order. Finally, the business receives and reconciles the invoice to ensure that it matches the purchase order, in other words did you receive what you ordered?

The summary

A purchase order system is an essential tool for businesses of any size. It’s the foundation for scaling a business, specifically for businesses with many types of transactions. By implementing a purchase order system, businesses can not only streamline but simplify the purchasing process and reduce the risk of errors, delays, and fraud but also enable the business to strive.