In businesses, there is a procedure to follow to meet your work-related requirement. Manual purchase order procedures will not work in a medium-sized or big-sized organization.
The purchase order is the term used in maintenance, information technology (IT), the financial industry, manufacturing almost all major industries.
For purchase order, a lot of paperwork needs to be done which is time-consuming, prone to error & slow process. Therefore, the manual purchase order process can harm your business rather than doing good.
What Is the Purchase Order?
Purchase order (PO) is an official document from a buyer organization to seller in which generally details are mentioned such as product or service they required, in how much quantity, delivery date & location, etc.
The advantage of the purchase order is that the organization can put an order without making an immediate payment. Every purchase order has a unique number that assists the buyer as well as the seller to know the delivery status. The purchase order is an important part of asset management software.
What Is the Purchase Order Process in an Organization?
Here is the purchase order procedure but it's a little different in every organization:
Also Read: Why is Requisition Management Important for an Organization?
1. Purchase Order Request
This is the first step of the purchase order procedure; Purchase orders are created after purchase requisition is done. Let us understand with an example, a maintenance technician discovers that inventory is finished & it is required to complete all maintenance work orders. This can be any specific part of the inventory.
2. Workflow Approval
After that technician sends the request to the manager and then the manager looks into the request and checks if the requirement is important. Later, the quantity is checked and approve it as per the budget.
3. Purchase Order Forwarded
After that purchase order is sent to the selected vendor via mail. The vendor delivers good & inventory partially or completely. Meanwhile, the buyer checks the quality of the product and informs the same to the vendor.
4. PO, GRN & Invoice
In this purchase order process, a complete inventory is taken and goods received note (GRN) is sent to the vendor from the organization's end. At last, the invoice is generated by the vendor to the finance department if no issues are found and the purchase order journey is completed.
This purchase order procedure is based on the belief that there are no mistakes or errors in the purchase order.
What Are the Problems in the Manual Purchase Order Process?
The manual purchase orders procedure is expensive, ineffective, and tedious to keep up. There is an excessive number of paper-records needed to handle a single purchase order.
Moreover, keeping them in order, storing them for approval and it need be ensured that papers are not lost. Therefore, making manual purchase orders procedure hectic, exhausting & time-consuming as well.
Securing, putting away, and sending purchase orders through the approval circle while guaranteeing they don't get lost or torn off, is very irritating.
Also Read: What Is Work Order Management Software? What Are Its Benefits?
In short, a manual purchase order procedure has the following issues:
- Lacks visibility
- Raises expenses
- Prone to error
- Not accurate
- Slow process
- Several bottlenecks & blockage issue
- Lots of paperwork
- Needs human intervention
How Purchase Order System Can Be Beneficial for Organizations?
The purchase order system is easy to use, proceeds quickly and enhances the productivity of all team members in an organization. Other than this, a purchase order system can be beneficial for organizations to manage inventory efficiently.
With this system in place, there will be no delay in the process, on the contrary workflow will be quicker. Moreover, when all documents are in order chances are better for approval and increase purchase order speed. This software also improves vendor management.
Furthermore, you can check the status of purchase orders as open, partially received, or closed. One can also directly add assets into the asset register through the GR process.
According to the data represented by Supply Chain in Digital,
“43 percent of organizations recognized immediate inadequacies in their PO practices and almost two-thirds (64 percent) indicated 'urgent' plans to address purchase order management inefficiencies in the future.” This data shows how crucial is purchase order management, for an organization.
This application also comes with cloud technology means you can manage purchases from anywhere. It means you don't have to stay in the office for purchase order review.
A manual purchase order process may work well for small size organizations but when your organization grows you need to improve workflow as well. You will be amazed to see the benefits of an automated purchase order system. The order lifecycle will be automated which will be helpful to your business.
The ultimate objective of all purchase orders is to smooth out the way toward allocating and acquiring assets or inventory. You cannot achieve these sorts of goals with the manual purchase order process.
Therefore, an automated & digital purchase order process is not only required for proper purchase order management but also for saving time & money as well.
Also Read: How Does Asset Management Software Help in Non-Profit Organizations?
Frequently Asked Questions (FAQs)
1. Which type of business will require a purchase order system?
All type of business but it is well suited to those organizations which have a lot of employees. In simple words mid and large size organizations. It does not matter what your organization deals with, this system digital and automated features about how procurement & purchase order processes, will blow you away.
2. What is a purchase requisition?
Purchase requisition and purchase documents, both are the documents used in goods or service procurement. So, a purchase requisition is a form filled by the employee in which the employee requests for his or her goods or service requirement. You are informing and requesting to management. Initiating the process to fulfill your business needs.
3. What is the need for a purchase order system?
It increases visibility, makes sure clear communication is done. It is helpful in tracking purchase orders and lets you know the status all the time. It centralizes information & assists in auditing. Most importantly it provides legal protection to both parties (buyer and vendor).