A purchasing order system is a computerized system that streamlines the process of ordering and receiving goods and services. It automates many of the tasks associated with procurement, including creating and sending purchase orders, tracking deliveries, and managing invoices and payments.
Purchase order software can be used by businesses of all sizes, but they are particularly beneficial for large organizations that procure a large volume of goods and services. By streamlining tasks through an automated purchase order system businesses can save time and resources, and improve the accuracy and efficiency of their operations.
How Are Purchasing Order Systems Used?
Requesting And Quoting
PO systems' request and quote framework enables businesses to simplify the process of requesting a new product or service.
With it, employees are able to easily search existing suppliers and the products or services they offer. They can specify what specific items they are in need of , in what quantities, and by when they need them. This request is then sent out to relevant suppliers who can quickly respond with a quote that meets the buyer's needs.
Spend Authorization And Approval
Approval is a critical phase in the purchase order process. It can also be an unnecessarily lengthy one when done through traditional back-and-forth emailing. PO systems automate this process by routing purchase requests to the appropriate approvers and notifying them as soon as a purchase requisition is submitted. This way, there's no need to wait for someone to check their email; the request goes through as soon as it's been submitted.
PO software budget modules support organizations in tracking their spending and ensuring that procurement teams do not exceed budget levels. With them, companies can easily configure budgets, define their limits, set appropriate owners and track all expenses against the budget in real-time. This information can then be used by accounts payable departments to generate insightful reports that help businesses make more informed decisions about their spending.
Generating And Sending Purchase Orders
Employees use purchase order management software to generate digital purchase orders upon receiving authorization to do so. They're able to either create a PO number and document from scratch through the information included in the request or they can generate one automatically. After the PO has been created, it's then sent to the supplier where they can view, track and manage the order.
Purchase Order Tracking
Purchasing order systems have the ability to track purchased items from the moment an order is placed and acknowledged until it's received. This information is valuable to both the buyer and the supplier as it can be used to monitor the progress of an order, identify any potential issues and ensure that products are delivered on time.
Receipts And Three Way Matching
After goods or services have been delivered, businesses need to reconcile the purchase by matching the supplier invoice with the purchase order and the goods received. This is known as a three-way match and is a key part of the PO process. PO systems streamline this process by automatically verifying that the correct items have been received and that the invoice price matches the purchase order price. This way, businesses can be confident that they're only paying for what they've received.
Supplier management is another important aspect of a purchasing order system. With it, businesses are able to track supplier performance, manage supplier contracts and create purchase orders directly from supplier catalogs. This information can then be used to identify potential issues, improve supplier relationships and make more informed decisions about future purchases.
Examples of what this component of purchasing software has to offer include:
- Supplier profiles
- Delivery and remit locations
- Contact information
- Performance data
- Credit and payment terms
- Commodity codes
Contract management is a key part of any purchasing order system. It allows businesses to store all of their supplier contracts in one central location and track important information such as contract expiration dates, pricing and performance metrics. This function is valuable because it can be used to negotiate better deals, improve supplier relationships and ensure that businesses are getting the best value for their purchases.
Companies use PO systems' inventory management capabilities to maintain an up-to-date and accurate record of their inventory. This information is important because it can be used to track product availability, identify potential issues and ensure that products are delivered on time.
Reporting And Analytics
Purchasing order systems offer a variety of reports and analytics tools that businesses can use to gain insights into their purchasing data. This data can be leveraged to improve decision-making around purchasing, negotiate better deals with suppliers, and more.
Some of the reports and analytics that may be available include:
- Purchase requisition and order history
- Supplier performance
- Item cost analysis
- Spend analysis by department or business unit