5 Tips to Improve Purchase Order Management

Mar 7, 2022 | 0 comments

Featured image by Piyawat Nandeenopparit

Purchasing. It’s a tough job sometimes, but somebody has to do it. There are plenty of obstacles to running a smooth procurement department. Many of them, sadly, happen at the purchase order stage.

Purchase orders (POs) are a useful tool for procurement and purchasing. The entire point of using POs is to aid in supply chain transparency and foster clear communication between you and your vendors.

POs serve the function of being a trackable source that provides legal protection for both buyers and suppliers.

A PO is not an invoice. Instead, it’s a way to ensure buyers are getting what they order. Every PO needs a date, description, order number, prices that have been agreed upon, and, of course, the company name.

Managing them is a whole other ballgame. Here are five tips to improve your purchase management processes.

POs Provide Better Visibility

Although purchase orders aren’t actually responsible for acquiring goods and services—the requisition form or purchase requisition serves that role—they are an exceptional tool for managing visibility within your procurement cycle.

A purchase order has pertinent company information and a detailed description of the goods and expectations involved in the requisition. Being able to track your purchase order means that you can retain visibility throughout the entire process. This ensures compliance, smooth operations, and, of course, proper receipt of the goods. Tracking purchase orders in real time provides invaluable insight into your own supply chain and ultimately helps improve everything from vendor relations to risk assessment.

RELATED ARTICLE: MANAGING YOUR FINANCES: IT’S IMPORTANT FOR YOUR SMALL BUSINESS

They Reinforce Contract Standards

The reason you made contracts in the first place was to ensure you receive the maximum benefit from your suppliers and vendors. If suppliers and vendors aren’t holding up their end of the bargain, then there might be time to seek arbitration or to terminate the contract. In your daily life, you wouldn’t want your homeowners insurance policy to only cover some of its provisions. It needs to fulfill its end of the bargain. The same can be said for your suppliers!

Part of the role of a purchase order is to ensure a level of accountability and realization of negotiated contract benefits from the supplier.

A company uses a purchase order to set up and reinforce the actual requisition. Once the requisition gets approved, the PO gets set up to start the process. Tracking the purchase order and noting any issues along the way can help you reinforce contract standards. By leveraging the information available to you in the purchase order and making an effort to follow up with what it describes, both you and the supplier can have a seamless experience.

RELATED ARTICLE: NEGOTIATION SKILLS YOU SHOULD CULTIVATE

Automate Your Purchase Order Process

Automation shouldn’t be a bad word in business. It can actually be a good thing that helps make your operation run smoothly and consistently. Getting away from managing POs with spreadsheets might prove difficult for some companies, but consider using purchase order management software.

It offers so much more scalability and adaptability (not to mention efficiency) when it comes to managing requisitions and purchase orders. In traditional, manual operations the PO process is quite extensive.

It starts with identifying a need, writing up a requisition, getting the requisition approved, writing up the purchase order, sending it to the supplier, receiving the goods or services, paying out the invoice, and tracking everything. That’s pretty convoluted and exhausting at times.

Automation smooths this out to make it as seamless as possible. When it’s integrated into your system, everything from requisition to invoicing can be efficient, saving time and money.

Create a Preferred Suppliers List

Managing POs is much simpler when you have a solid preferred suppliers list. According to Business.com, building a list of suppliers can be as simple as following three quick steps: gathering information, evaluating potential suppliers, and reviewing the list.

However, it’s more of an ongoing process than one might initially expect, especially in the third stage (tracking and review).

Perhaps the most critical part of building a supplier list is gathering information in the first place. It behooves any organization to assess, look into the reputation, and thoroughly vet a vendor prior to initiating a contract. If any part of working with that vendor doesn’t mesh well with your company’s procedures, it may be better to move on to the next one and exclude them from your stable of suppliers.

Building a list of superb, reputable suppliers helps forge meaningful relationships and drive smoother operations for the entire organization. 

Keep Track of Everything Digitally

As we mentioned previously, keeping track of everything is critical to ensuring compliance, realizing negotiated benefits, receiving the product, and making payments. Paperwork can take up a lot of space in addition to being costly and time-consuming. By going the digital route, employees can focus on other aspects of running the business without worrying about manual reporting.

Automatic reporting is useful not just for streamlining things but also because it can give full access to an array of different useful reports at the touch of a button. Being able to easily access reports gives better insight into budgets, spend visibility, and potential risks across the organization.

Ultimately, going digital with purchase order processing is a boon for any organization. If you’re still using manual procedures, consider ditching them in favor of something more compact and digital.

RELATED ARTICLE: 9 TIPS FOR BEING SUCCESSFUL IN YOUR BUSINESS

The post 5 Tips to Improve Purchase Order Management appeared first on Business Opportunities.

This post was originally published on this site

%d bloggers like this: