Small businesses often install purchase order software to ease the burden of managing purchase orders. Instead of relying on manual order management procedures, these companies become better placed to control the usage of their limited resources.
With a purchase order system in place, SMBs can enhance efficiency and minimize the risks associated with manual entries. In addition to improving efficiency in order management, investing in an order management system streamlines the product procurement process.
What Is a Purchase Order Software?
At some point in your business, you’ll need to purchase goods from other companies.
Whether it’s a big, one-off purchase or a bunch of small items regularly, you’ll need a way to track the orders. A purchase order software, or PO system, is software that efficiently manages your purchase order process, end to end. This system allows you to create and execute the orders—from the purchase requisitions to approvals and payments to streamline your operations.
A purchase order (PO) can be defined as a record that a buyer sends to the supplier summarizing all the products that the buyers wish to procure from the supplier.
Purchase orders typically depict all the attributes of the invoicing process because they contain the information found in an invoice. The only difference between the two documents is that a PO is sent before orders are made, while the invoice is sent when asking for payment.
What to Look for in a Purchase Order System?
Before an SMB can install purchasing technologies, some considerations must be made to ensure they get the best purchase order software. The following are some features that small business owners can look out for:
- Automation: - The system should be able to create automated workflows for the business and integrate with available accounting software. The aim is to have a resource that ensures that purchase orders are processed seamlessly from start to finish.
- Access: - An SMB should also guarantee that their purchase order software can provide restricted access. This feature prevents unauthorized personnel from corrupting details and disrupting the order workflow.
- Customizations: - The best purchasing software additionally provides room for customization. For example, fully automated processes should have inbuilt order forms that can be modified in the event changes are needed during any procurement stage. Such features might differ based on the needs of an organization.
- Reporting Capabilities: - It’s important to check whether the system supports real-time reporting. Procurement managers should be able to develop visual reports depicting the PO process’s effectiveness. This way, disruptions, hindrances, and inefficiencies can be avoided and the necessary improvements implemented.
Lastly, these programs should allow department managers to cross-check their records to minimize inconsistencies. Again, the logic is to have software that routinely verifies and matches input data based on the details contained in the purchase requisitions, orders, and invoices.
What Are the Steps Involved When Placing Purchase Orders?
Purchase orders signify the beginning of product procurement. The following are the main steps involved in the process:
- The creation of POs that align with the details placed in purchase requisition documents
- Seeking consent from the procurement management for the purchase request
- Sending PO’s to the vendors or suppliers after approval
- Generating contracts between the sellers and the buyers
- Receipt of products from the suppliers. It is at this stage that product verification is undertaken
- Sending of the invoice by the supplier to the purchasing organization
- Finalizing the purchase order
Why Should You Install a Purchasing Order System for your Small Business?
A purchase order system doesn’t just simplify the order creation process. It brings along many other benefits to your business, including:
1. Faster Procurement Processes:
With a robust purchase order system in place, you can significantly reduce procurement time. A dedicated purchase order system minimizes manual data entries and hastens approval procedures. The time spent on authenticating the audit trail is also reduced.
2. Access to Quality Data
Traditionally, small businesses relied on Word documents and Excel sheets to record purchase requisition and order data. The problem with manual entries is that they are prone to errors.
For example, when a supplier changes their address, it becomes challenging for procurement managers to track these changes across the procurement process. Automation ensures that all purchases can be matched with the correct order numbers and supplier addresses.
3. Budgeting Accuracy
Automation further guarantees that the budgeting process remains accurate.
Purchasing software use algorithms that perform automatic calculations, especially when working with large orders. This way, small business owners can quickly identify how much is needed to fund a specific project.
4. Costs Management
Lastly, purchase order software can help small businesses control costs easily.
For example, before an order can be finalized, manual systems might take a while to register total expenses. However, automation aligns necessary costs with accounting systems in real-time, giving organizations complete control over the expenditure, avoiding cost overruns, and improving reporting procedures.
To wrap it up, purchase order software is a system that efficiently manages your purchase order process, end to end. Installing purchase order software can benefit your organization in many ways, including faster procurement processes, access to quality data, better budgeting accuracy, and effective cost management.
Want to learn more about purchase orders? Check out our post on the differences between a purchase requisition and a purchase order.