If you're like most hardware startups, you're focused on building amazing products that change the world. But as your company grows, you'll quickly realize there's much more to running a business than just engineering. Building mind-blowing stuff is only part of the equation.
The other part is ensuring your organization and all back-office operations run smoothly and efficiently. That's why you need purchase order automation to streamline your purchasing process by automatically generating orders based on real-time data from your sales and inventory systems.
Still not convinced that you need to automate your purchase order process? Here is a detailed explanation of what purchase order automation means and how it could benefit your company.
What Is Purchase Order Automation?
Purchase order automation is the process of using software to generate purchase orders automatically. A centralized software uses the data in your system to send out a purchase requisition to the appropriate department or staff for approval. After purchase order approval, the software automatically sends the PO document to your vendor. The purchase order includes all the necessary information about the product or service, such as quantity, price, delivery date, and payment terms.
When the software sends purchase orders through your ERP system to vendors, the suppliers can easily acknowledge them. They can immediately turn the electronic orders into invoices that accurately capture the owed amount. The best thing is that these invoices integrate seamlessly with your accounting system, so your accounts payable department can easily track what's been paid and what still needs to be paid.
Some purchase order automation software allows for three-way matching. This is when the software compares the purchase order, goods receipt, and invoice to ensure they match up. If there are any discrepancies, the software will flag them to help you resolve them quickly.
How Can Purchase Order Automation Benefit Your Company?
Purchase order automation will be a key starting point in helping your company operate efficiently by saving time and money. When you automate the purchasing process, you will reap the following benefits:
With purchase order automation, all your vendors are consolidated into one central location. If your employees need to place an order, they won’t waste time digging through different folders to find the necessary information. It will be possible for them to make a requisition within a few minutes and send it to the right person for PO approval.
The recipient will quickly review the requisition and either approve or deny it with a fast explanation of what needs to be changed. All these activities occur in real-time, allowing the PO process to happen faster. You and your staff will have more time on your hands to focus on core tasks like product development.
Less Human Errors
When preparing your purchase orders, you must include accurate information about the types of goods, quantities, prices, and delivery data, among other things. Errors might lead to difficulties controlling departmental budgets or the company’s cash flows. Mistakes will also delay the procurement process as you must go back and forth with the supplier to ensure everything is correct.
You might spend more money in your purchase order process or get sub optimal products that don’t suit your operations. Automation software catches any mistakes employees might make when entering data into the system.
You can also set up automatic alerts to notify you or your staff of any errors so they can be addressed immediately. This reduces the chances of sending out a purchase order with the wrong information, leading to delays in receiving the goods or services you need.
With purchase order automation, you can take advantage of early payment discounts from your vendors. The software can generate and send invoices as soon as the goods or services are received.
You will also save on paper and printing costs because you won’t need to print out any requisitions or purchase orders. All the documents will be stored electronically, so there’s no need to keep physical copies.
Better Vendor Relationships
When you have a good purchase order process in place, it’s easier to develop strong relationships with your vendors. They will be able to receive and process your orders quickly and efficiently.
In turn, they can provide you with the necessary goods or services on time. When both sides are happy with how things are going, it’s easier to negotiate better terms, such as discounts or extended payment terms.
With purchase order automation, you will have access to essential data and analytics that can help you make better decisions about your business. For example, you can track spending patterns to see where most of your money is going.
You can also see which vendors are the most reliable regarding delivery times and the quality of goods or services. You can use this information to renegotiate contracts with your vendors or find new ones that can offer better terms.
The Bottom Line
Purchase order automation is a great way to improve the efficiency of your company’s operations. It can save you time and money while reducing the chances of human error and helping you relate well with suppliers. If you are not already automating your purchase orders, now is the time to start.