Managing your company’s procurement process can be tricky. However, having a proper procurement management system in place is crucial to the success of your business. When applying for purchase order funding or when you want to be more organized, you must know how to effectively manage your company’s purchase orders.
- 1 What is a Purchase Order (PO)?
- 2 Save Time and Money with an Effective Purchase Order Management System
- 3 How to Effectively Manage your Purchase Orders
- 4 Learn More About Purchase Order Funding Today!
What is a Purchase Order (PO)?
A purchase order is a document issued by buyers who are looking to purchase goods from their suppliers. It contains all the necessary information regarding the order, such as type of items, prices, date of delivery, etc.
It’s easy to confuse purchase orders from invoices because both documents involve payments for goods/services, suppliers, and customers. However, the main difference between the two lies in the timing. Purchase orders are issued at the initial transaction stages, forming a binding contract between the supplier and the customer. On the other hand, the seller issues invoices to customers once they’ve received the goods.
Save Time and Money with an Effective Purchase Order Management System
Many people think that purchase orders are just order forms for goods and services. While this is true, procurement teams know that processing purchase orders involve more than just issuing them. The entire process needs approving workflows, tracking every transaction from beginning to end, as well as dealing with other details related to inventory and contract management.
With such an extensive process, it makes absolute sense that business owners would want to streamline their purchase order process. With an effective purchase order management system, you’ll have a healthy procurement function that minimizes the risk of errors.
Additionally, by streamlining your PO process, you can reduce labor, time, resources, and expenses. More importantly, you can free your employees from PO processing tasks so they can perform higher-value tasks that can further improve your business.
How to Effectively Manage your Purchase Orders
At first glance, processing purchase orders may sound straightforward, but a single PO processing error can complicate your entire supply chain process. With that said, there’s nothing more important than investing in effectively managing your company’s purchase orders. Here are five tips you should remember:
1Automate Purchase Order Processing
The first step in managing your purchase orders is to automate the entire process. You need to choose and deploy an automated purchase order management software. This can be integrated with your existing processing software or it can be a part of your comprehensive automated PO processing management plan.
An efficient AI or automation tool gives you the full advantage of the best PO processing practices while minimizing human errors that can disrupt your workflow. With the right tool, your procure-to-pay (P2P) will become more efficient and productive.
2Order in Bulk
Many business owners order in bulk so they can take advantage of steep discounts that save money and improve their bottom line. If done correctly, you can cut the cost per unit of the goods you sell. However, be sure to calculate everything carefully to know whether ordering in bulk makes financial sense for your company.
Doing this means you need to spend more money upfront, so it’s important to have enough working capital to pay for the goods.
If you don’t have enough funding to fulfill large purchase orders, fortunately, you can turn to purchase order financing. This funding option gives you the capital you need to pay your suppliers so they can manufacture and deliver the goods to your customers.
3Send Invoices, Purchase Orders, and Supplier Service Contracts on Time
It’s harder to streamline your procurement processing if invoices, purchase orders, and service contracts are not sent in a timely manner. It’s important these necessary documents are promptly sent seeing they outline the terms of agreement that protects your business.
What would your partners think if you send these documents a day or two late? Sending invoices, POs, and contracts on time shows a degree of professionalism on your part, instilling confidence in your business partners.
4Follow a Simple Purchase Order Process
A company’s procurement process is anything but simple. It can be challenging to keep track of everything you do, but fortunately, automating the process makes it easier. As mentioned, the right tool simplifies the entire process. Every document, email, message, and tasks will be included in an individual purchase order.
There are some software tools that will even let you add documents via scanning to your electronic database, giving you complete visibility. In this way, you wouldn’t have to waste time and money to organize and keep everything in its place.
5Immediately Connect Budgets to Purchases
You don’t have to waste time and resources on purchase requisitions for products that don’t fit into your budget. Empower your department managers to plan their purchases that are in line with your budget. Having purchase order software lets you and your employees gain visibility on the total spend, so you can properly plan for the purchases you will make.
Learn More About Purchase Order Funding Today!
When it’s all said and done, purchase order funding gives you the working capital needed to fulfill large purchase orders. Unlike other forms of funding, it’s relatively easy to qualify for purchase order financing.
Just be sure to have clients that are financially healthy and will be able to make invoice payment on time. For more information on purchase order financing, you can turn to the experts.