Tips for automating purchase order management

Brahm Meka
October 12, 2022
9 min
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Small business owner working on purchase order management

Every business needs to buy products, materials, and services to operate. When you make a purchase, you need to create a purchase order. This is the document that tells the supplier what you want and how much you're going to pay for it.

Purchase order management is creating, sending, and tracking purchase orders.

This article discusses the purchase order management process. It explains how to manage purchase orders and automate and optimize your PO management.

What is purchase order management?

Organizations use purchase orders (POs) to ensure that purchase is necessary, justified, and cost-effective. POs help organizations track spending and ensure they are not wasting money on unnecessary purchases.

PO management is the system used to make and track purchase orders. An effective PO management system can help an organization save money by preventing duplicate or unnecessary purchases, reducing supplier prices through negotiations, and improving inventory management. Additionally, a well-run purchase order system can improve communication between buyers and suppliers, leading to better relationships and improved customer service.

Many organizations outsource purchase order management to third-party service providers. If you are thinking of doing this, it is crucial to understand the different types of purchase orders and how they are used.

Further Reading: Different types of purchase orders

How does the purchase order process work?

The purchase order management process is a system businesses use to track inventory and orders.

When a customer orders something from a business, the business creates a purchase order which is sent to the supplier. The supplier fills the order and sends it back to the company.

After the business receives the shipment, they update the purchase order and send it back to the customer. This completes the purchase order management process.

This process is typical if you buy and sell products. If you are a manufacturer, you might place purchase orders to gather all the raw materials needed to produce the items the customer has ordered.

Businesses use purchase orders to track their inventory and ensure they don't run out of anything. This system helps businesses run smoothly and efficiently.

If you own a business, it is crucial to know how the purchase order process works. This will help you keep track of your inventory and fulfill orders quickly.

How to manage purchase orders?

As your business grows, you will need to get a handle on processing purchase orders. Here are a few ways to do it:

1. Use an automated system to stay organized

Many purchase management systems can help you automate the purchase order process. This will save you time and effort tracking information and keeping everything organized.

2. Share responsibility

If you have employees, assign one or more of them to manage purchase orders. This will take some of the work off of you as a business owner and help ensure that things are handled quickly and promptly.

3. Communicate with your vendors

Follow up with your vendors quickly to ensure you get the right products on time. This will help avoid any delays or problems in the future.

By following these tips, you can process your POs efficiently.

Best practices for purchase order management

If you want to improve your purchase order management process, here are five practices that others in the manufacturing industry are using:

1 . Written documentation for processing purchase orders

The first step in streamlining your purchase order management process is identifying the steps involved and who is responsible for each task. It's always a good idea to design specific instructions and describe each role. It can be a printed handbook or a virtual knowledge base – as long as it is easily accessible to everyone across the company.

Ensuring everyone involved in the procurement process follows the same procedures is vital for smooth collaboration and avoiding misunderstandings.

For instance, it is necessary to specify inventory reorder levels, which calls for a purchase request. It should be clear which employees have the authority to request a purchase, who can then issue a PO, and whether it must be verified.

2. Analyze and customize each workflow

Workflows might differ based on the company size and type and even vary internally across departments. Evaluating current inventory management practices and analyzing systematic issues are essential.

Find bottlenecks in the current process and consult them with competent decision-makers and stakeholders. This will allow you to design a solution that meets the specific needs of the department in question.

3. Set up a digital PO system

A digital purchase order system can save time and hassle by automating many tasks involved in managing purchase orders. This includes creating and sending POs, tracking approvals, and monitoring delivery status.

4. Monitor delivery status

Once you place an order, it is crucial to keep track of the delivery status to know when the goods will arrive. This information can help you follow up with suppliers if there are any delivery problems.

5. Manage supplier performance

Keeping track of how well your suppliers are fulfilling your orders is important in purchase order management. This includes:

  • Tracking on-time delivery
  • Quality of products
  • How well they communicate

This information can be used to identify problems early and improve supplier relationships.

Following these best practices and using purchase management software can help make purchasing order management more manageable and accurate.

How to automate your purchase order process in your business

If you're like most businesses, your purchase orders are probably managed manually. You can make it more efficient by automating your purchase order management. This will reduce the chances of mistakes and save you time and money.

Let's take a look at how you can do this.

1. Implement an electronic purchase order system

Instead of paper purchase orders, switch to an electronic purchase order (ePO) system or procurement software. This will help you avoid common problems that occur with spreadsheets.

An electronic purchase order system helps you manage all of your POs in one place. It makes sure that the orders are placed correctly. This system automates the manual process and integrates it with other business systems.

An automated system can help you see how much money is being spent. This will help purchase teams negotiate better deals with suppliers. 

Businesses can take advantage of early payment discounts and save on paper and postage costs.

2. Set up vendor portals

Vendor portals allow your vendors to see their purchase orders and invoices. This way, communication is more streamlined, and there is less chance of mistakes happening. It is important to set up vendor portals for several reasons:

  1. They can help you keep track of your contracts, invoices, and other important documents. This way, you will always know where to find them.
  2. You can track the progress of your orders with them more easily.
  3. Automating many of the tasks involved in the procurement process can help to save time and money. This can be done by reducing the number of errors that occur.
  4. Build better relationships with your vendors by providing a space where you and your vendor can communicate and work together.

3. Automate PO approvals.

Approving POs can take some time, but there are ways to make it go faster.

One essential part of procurement is creating and approving purchase orders (POs). You can save time by automating purchase order management. This will help you approve orders quickly and efficiently.

POs are legal documents that state the terms of a transaction between a buyer and seller. Creating and approving POs can be done, but it is often error-prone and time-consuming. Automating PO approvals can streamline procurement, cut out errors, and reduce costs. Many businesses use barcode inventory management software and manufacturing ERP software to automate their purchase order management process.

Streamlined procurement aims to reduce the costs of getting things done while increasing efficiency and making better decisions. Better communications and greater visibility help improve control, while improved compliance reduces the risk of errors when implemented correctly.

4. Use a purchase order management system

Purchase order software can help you manage your purchase orders in one place. This software can automate repetitive tasks and make it easier for you to find and fix errors.

When looking for purchase order software, find one that integrates with your existing accounting and ERP systems. This will allow you to work more efficiently.

Using purchase order software can help you buy the things you need. This software can help you avoid mistakes and save money. Purchase order software lets you see how much you spend on different things. You can negotiate better prices with suppliers. When used correctly, purchase order software can be a powerful tool for procurement professionals.

Businesses can speed up the purchase order process by automating the process. Automation can help to avoid errors and also get goods and services faster. Automation can also help businesses track spending patterns and supplier prices, which is valuable information when negotiating contracts.

Using purchase order software can have many benefits, but it is important to use it correctly to get the most out of it.

When businesses create purchase orders, they should include all the relevant information, like delivery dates, quantities, item descriptions, and prices.

In addition, businesses should track their purchase orders carefully. They should be aware of any changes in supplier prices or delivery schedules.

By following these best practices, businesses can guarantee they get the most out of their purchase order software.

5. Train your employees

You should ensure that your employees are trained to use the new purchase order system. If they are comfortable with it, they will be more likely to use it correctly and avoid mistakes.

Automating the purchase order process can help make sure that all orders are accurate and that no items are mistakenly ordered. This can save your company time and money by reducing the need for returns or replacements. 

Automated systems can also provide real-time tracking of inventory levels so that you can keep tabs on what is available and where it is located. This information can be beneficial when planning future purchases. 

Overall, automating the purchase order process can help your business run more efficiently and save you money in the long run.

What is a purchase order management system?

A purchase order management system is software that helps you create and approve purchase orders automatically.

Using this software will make the approval process faster, reduce the amount of paper waste, and ensure all POs comply with company guidelines.

No matter how big or small your organization is, you can use a purchasing management system (PMS) to help manage your purchasing process. Large organizations may have more complex systems that work with other enterprise resource planning (ERP) systems. Smaller organizations may use simpler, standalone PMS solutions.

The typical features of Purchase Order Management Systems include:

PO creation

Users can create purchase orders online. The purchase order goes to the right people for approval.

Approval workflow

Purchase order management systems have a built-in process that routes POs to the correct approvers. This ensures that all POs are reviewed and approved on time.

Audit trail

POMS systems keep track of all changes made to a purchase order. This can help when you want to review purchases or investigate potential fraud.

POMS systems can also help organizations save time and money by streamlining the PO creation and approval process, improving compliance with company guidelines, and reducing paper waste.

ERP System with purchase order management system

ERP systems help companies manage their business operations. They offer features and modules that can be customized to different company needs. 

An ERP system can offer a purchase order management module, which helps a company keep track of its orders. 

Purchase order management is vital for businesses. It helps companies to track their purchases, ensure all orders are fulfilled, and manage the money spent on purchases. An ERP system can help companies to save time and money by making it easier to purchase things.

Here are some things to think about when choosing an ERP system with purchase order management features:

  1. Make sure the system has the features you need. There is no point in paying for features you will not use.
  2. Choose an affordable system within your budget.
  3. Make sure that the system you choose is easy to use. You don't want to spend much time figuring out how to use it. Choose a system that is user-friendly and easy to navigate.
  4. Choose a system that integrates well with your existing business processes. You don't want to change your current processes using the ERP system's purchase order management module.

These are a few things to consider when looking for an ERP system. But if you keep these things in mind, you will be able to find a system that works well for your business and helps it run smoothly.

Get started on your path to finding an ERP system with Brahmin Solutions ERP manufacturing software. Manage your sales, manufacturing, and purchasing, all from one platform. And best of all, you can get started for free. Book a demo with Brahmin Solutions and get a 14-day free trial and see why 100's of manufacturers task us with helping them grow their businesses.

Brahm Meka
Founder & CEO

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