Automate Purchase Order Approval Process

ControlHub
December 14, 2021

“Getting the items we need to do our jobs shouldn’t be a frustrating process!”

This sentiment has been uttered, perhaps a bit more colorfully in some cases, by every employee who has ever submitted a manual purchase request and waited weeks for approval. 

Maybe the purchasing manager failed to communicate that she was taking two week’s vacation to soak up the sun in St. Tropez. Maybe the purchasing manager simply got overwhelmed and lost track of the requisition. Whatever the case, broken approval workflows are demotivating, frustrating, and a reason for employees to look for opportunities elsewhere. 

That’s why forward-thinking companies are moving to automated purchase approval workflows. By automating purchase order approvals, companies can empower their employees to do their best work, while precisely tracking and effectively controlling spending, delivery, and vendor payment. Try our free Purchase Order Template and streamline your Procurement Process!

The Power of Purchase Order Tracking

Purchase order tracking is a pivotal aspect of procurement, ensuring efficiency, transparency, and cost control. It entails monitoring the entire lifecycle of purchase orders, from creation to fulfillment and payment. The significance of purchase order tracking in procurement becomes evident through several vital benefits:

1. Visibility and Accountability: Tracking purchase orders grants real-time visibility into order statuses, fostering accountability among suppliers and buyers, thus mitigating the risk of errors and disputes.

2. Budget Control: This tool enables organizations to maintain budgetary control by monitoring spending against approved purchase orders, thus preventing overspending and facilitating well-informed financial decisions.

3. Supplier Performance Evaluation: Purchase order tracking aids in evaluating supplier performance, allowing organizations to identify reliable suppliers and address issues with underperforming ones, ultimately enhancing supplier relationships.

4. Efficient Workflow: By streamlining the procurement workflow, purchase order tracking ensures prompt order processing, reducing delays and minimizing disruptions caused by late or missing supplies.

5. Compliance and Audit Trail: Maintaining comprehensive purchase order records ensures compliance with regulatory requirements and provides an audit trail for both internal and external audits, ensuring transparency and accountability.

6. Forecasting and Planning: Historical purchase order data proves invaluable for future procurement planning, enabling organizations to make data-driven decisions, optimize inventory levels, and negotiate better terms with suppliers.

7. Reduced Errors: Tracking purchase orders helps detect discrepancies and errors early in the process, lowering the risk of incorrect shipments, billing discrepancies, or missing items.

Purchase order tracking is an indispensable tool for effective procurement management. It empowers organizations to optimize their procurement processes, exercise budgetary control, nurture supplier relationships, and ultimately contribute to overall business success.

What is a purchase approval process

In the domain of procurement, understanding the distinction between a purchase requisition and a purchase order is fundamental. So, what is a purchase approval process? A purchase approval process encompasses the steps required for an employee to submit a formal request, including managing the PO number, for products and/or services, for the requisition to be approved, and for the purchase order (PO) to be generated and sent to the vendor for fulfillment.

The purchase order (PO) approvals process begins with an employee - typically a team leader - completing and submitting a purchase request - in an automated environment, this is sometimes referred to as an “e-requisition.” In a manual purchase order (PO) approvals environment, the requisition is completed on paper and physically delivered to the purchasing manager or other designated approval staff.

In an automated environment, the e-requisition is sent digitally to the purchasing manager, with records of delivery to help ensure that approved purchase order (PO) forms are quickly generated and sent to vendors for fulfillment.

What is the significance of purchase orders template in streamlining procurement?

Harnessing the efficiency of purchase orders templates is akin to setting a foundational pillar for your hardware startup's procurement processes. A well-structured template provides a standardized format and ensures consistency in capturing vital order details. With the dynamism that hardware startups usually display, any tool that fosters streamlined, repeatable, and error-free operations is invaluable. When embedded within an automated purchase order system, such templates become the bedrock for speed, accuracy, and scalability. While automation is the engine driving the procurement car, the purchase orders template is the blueprint, ensuring the vehicle is built to perfection.

What’s wrong with manual purchase order processes? 

Many professionals in mid- to late-career phases see manual processes as an essential part of doing businesses, because that’s how they’ve become accustomed to doing things. 

A manual purchase order process flowchart, though, introduces significant potential for human error along multiple points of the journey. 

First, the employee must check to make sure that they are using the most recent version of their company’s requisition form. When it comes to paper forms, it can be easy to use an outdated version without knowing it. Of course, submitting an outdated form can lead to rejection, which can delay the process and frustrate the employee. 

The employee must also typically include product codes and other identifying information for each item. If the employee doesn’t have this information, it could lead to delays or delivery of incorrect items. 

Next, a manual process requires physical delivery of the completed form. A requisition could become lost in transition, leaving the employee waiting for a shipment that will never come. 

If the purchasing manager or other authorized approver does receive the paper form, it will likely go to the bottom of a stack of forms just like it. Busy purchasing managers have dozens of tasks to take care of at any given time, so an employee’s purchase request could easily sit for weeks before anyone ever reads it. 

Finally the purchasing manager must copy the details from the manual requisition to the purchase order that they will send to the vendor. Human error can introduce obstacles here as well - transposing digits of a product number could easily lead to the delivery of incorrect items. 

One other quick note - it’s difficult for a company to effectively track spending using a manual purchasing approval system. It might seem worthwhile to hire someone to review the paper files and uncover spending trends, but why incur the expense when automated purchasing management platforms like ControlHub can generate spending and purchasing insights in an instant? 

Sales Orders vs. Purchase Orders: Key Distinctions for Business Success

Sales orders and purchase orders are fundamental documents in the world of business, each playing a distinct role in the supply chain. Sales orders represent the demand side of the equation, initiated by customers when they want to purchase goods or services from your company. These orders outline the specifics of what a customer needs and when they need it. On the other hand, purchase orders are generated by your company when you intend to buy goods or services from suppliers. They detail what you require, terms of the purchase, and when you need it.

Understanding the importance of these documents is crucial. Sales orders help your business manage customer demand, ensuring you fulfill orders accurately and on time. They also serve as a basis for revenue recognition, helping you track your sales performance. Meanwhile, purchase orders are vital for managing your supply chain efficiently. They allow you to control costs, negotiate favorable terms with suppliers, and maintain inventory levels that meet demand without overstocking.

What’s the purpose of a Purchase Order?

A purchase order is a commercial procurement document that is created by a business purchasing department when placing an order with its vendors and/or suppliers. The document specifies the details on the desired items (type of goods, quantity, and price).

What Are Purchase Order Terms and Conditions?

Purchase order terms and conditions are the contractual clauses and stipulations that govern the buyer-supplier relationship during a purchase transaction. They outline the rights, responsibilities, and expectations of both parties, establishing a clear framework for the purchase.

Key Components of Purchase Order Terms and Conditions:

Payment Terms: This section specifies how and when payments will be made, including details such as payment methods, due dates, and currency.

Delivery Terms: These terms outline how and when the goods or services will be delivered, including shipping methods, delivery dates, and any associated costs.

Product Specifications: Detailed descriptions of the products or services being purchased, including quantity, quality standards, and any applicable warranties.

Pricing: The agreed-upon prices for the products or services, including any discounts, taxes, or additional fees.

Cancellation and Returns: Guidelines for canceling or returning orders, along with any associated penalties or restocking fees.

Intellectual Property: If relevant, this section addresses the ownership and usage rights of intellectual property associated with the purchase.

Dispute Resolution: Procedures for resolving disputes between the buyer and the supplier, often through negotiation, mediation, or arbitration.

Confidentiality: Protection of sensitive information shared during the transaction, ensuring it remains confidential.

The Role of Procurement Software:

Automation: Procurement software (AKA purchasing software) streamlines the process of generating purchase orders and ensures that the relevant terms and conditions are automatically included. This minimizes errors and saves time.

Compliance: Procurement software can help ensure your purchase orders comply with industry regulations and your organization's internal policies.

Visibility: By storing purchase order terms and conditions digitally, procurement software makes it easy to access and reference them when needed, promoting transparency.

Auditing: These systems record of all purchase orders and their associated terms and conditions, aiding in audits and compliance checks.

Benefits of Properly Managed Purchase Order Terms and Conditions:

Risk Mitigation: Defined terms and conditions reduce the risk of disputes and legal issues, protecting your organization from potential financial and reputational damage.

Cost Control: Properly negotiated terms can lead to cost savings through favorable pricing, discounts, and payment terms.

Supplier Relations: Well-structured terms and conditions foster positive relationships with suppliers, enhancing collaboration and reliability.

Efficiency: Procurement software ensures that terms and conditions are consistently applied across all purchase orders, reducing manual effort and ensuring accuracy.

Streamlining the Order to Cash Process: Enhancing Efficiency and Revenue Growth

The Order to Cash (O2C) process is a fundamental business workflow that plays a pivotal role in the success of any organization. It encompasses the entire journey of a customer's order, from the initial request to the final payment receipt. This process is of paramount importance as it directly impacts revenue generation and customer satisfaction.

The O2C process typically involves several key steps:

1. Order Creation: It starts with a customer placing an order, through various sales channels or directly with the company.

2. Order Processing: Once received, the order is validated, and inventory availability is checked. Any necessary approvals are obtained, and the order is prepared for fulfillment.

3. Fulfillment: This phase involves picking, packing, and shipping the products or services to the customer. Accurate and efficient fulfillment is critical to meeting customer expectations.

4. Invoicing: An invoice is generated based on the order, detailing the products or services provided, their quantities, and the agreed-upon prices. This is a crucial step in revenue recognition.

5. Payment Processing: After receiving the invoice, the customer makes payment using their chosen method, which may include credit cards, checks, or online payment systems.

6. Cash Application: The received payments are matched with the corresponding invoices and applied to the customer's account. This step ensures accurate financial record-keeping.

7. Collections: In delayed payments or disputes, organizations may need to engage in collections activities to secure outstanding funds.

8. Reporting and Analysis: Throughout the O2C process, data is collected and analyzed to monitor performance, identify bottlenecks, and make informed decisions for process improvement.

Efficiency and accuracy in the O2C process are vital for maintaining cash flow, reducing operational costs, and fostering positive customer relationships. Automation, integrated software solutions, and data-driven insights are increasingly utilized to streamline and optimize this process.

How can you automate your purchase order approval workflow? 

If you’re looking at your current manual workflow and realizing that your company has simply outgrown it, don’t worry - automation isn’t as difficult as you might think. Here are four quick steps you can take today to embrace automation and streamline your purchase order approvals for better results: 

  1. Objectively audit your current purchase approval processes. It’s impossible to transition to an effective, efficient purchase order approvals system unless you understand where you are right now. How is your company currently handling purchase order approvals? Where are the “bottlenecks” that are keeping employees waiting for their requests to be fulfilled? Who is involved in the process? When was the last time the process was reviewed? 
  2. Identify points of decision. Are team leaders authorized to approve smaller purchases, e.g., less than $250? Does one purchasing manager need to review all requests before final approval? Are there cases in which a special one-time approver might be needed - e.g., when an employee needs a highly specialized tool that comes with a hefty price tag.
  3. Establish realistic goals and identify specific metrics. Companies whose transitions fail are those that do not clarify and communicate detailed, measurable goals, along with the agreed-upon metrics that will be used to judge the success of the company’s efforts. 

    Once you have reviewed, documented, and analyzed your existing processes, determine what you want to achieve and when. For example, you might decide that in the next 12 months, your company will shorten purchase order submission time by 50%, allowing employees to receive the items they need much more quickly. You could also decide that by streamlining the approvals process, you want to eliminate 15% of unnecessary spending.
  4. Take advantage of an automated software solution like ControlHub. An automated platform can eliminate product code lookups, outdated requisition forms, and long wait times for employees who need items to perform their job duties effectively. 

    ControlHub’s automated platform lets companies set specific rules for teams and individuals, allowing you to balance efficiency with control. For example, a trusted employee may be permitted to request up to $500 in items without human review - the platform would then:
  • Double-check the request for correct item numbers and other details;
  • Generate the purchase order from the request (eliminating the risk of transposition and other errors);
  • Submit the purchase order to the appropriate vendor for fulfillment;
  • Track fulfillment, shipping, and delivery of the items to ensure that the employee receives them
  • Track acceptance (including inspection and return of any damaged or broken items) and payment.

It also enables approvals at the team level, which can reduce bottlenecks that delay the procurement process. For example, a team leader may act as immediate purchasing manager for a team of 10-15 people. If a purchase request is below a specified amount, the team leader would digitally receive the request, and approve or decline it. If the request is above a set dollar amount, the platform can send it to another purchasing manager for final approval. 

ControlHub also saves purchasing managers time and headaches by automatically generating and submitting purchase orders for requests that have been automatically or manually approved. The software auto populates the purchase order for error-free procurement.

Once a purchase order has been submitted, the software tracks fulfillment, shipping, and delivery, and even enables automatic payment for purchases using pre-designated accounts. 

Rapid, consistent payment, of course, can quickly put your company on your vendors’ “favorites” list, earning you perks, discounts, promos, and other advantages not available to a vendor’s other buyers. 

Not all approval processes are created equal, though. Check the article linked next, you’ll discover the steps to an efficient approval matrix, which can help save your company money.

Will an automated purchasing platform integrate with my accounting or financial software? 

You might currently use third party software to manage financial aspects of your business operations - for example, you might have a Quickbooks approval workflow in which information from manual requisitions and purchase orders are entered manually later. Or, as part of your purchase order approval workflow, Netsuite might be the end destination for your manual purchasing data. 

Whether you have a purchase order system for Quickbooks or a Netsuite purchase order approval workflow, integrating an automated purchasing system such as ControlHub is no problem. The platform seamlessly integrates with both Quickbooks and Netsuite. 

ControlHub’s Quickbooks purchase order approval and Netsuite purchase order approval bundle give you full control over connecting your purchasing platform to both software titles. This allows you to add information from purchasing platform activity to your accounting and operational software to get accurate spending and budgeting information in real time. 

This eliminates the risk of human error when entering data into Netsuite or Quickbooks, keeping your financial information consistent. It also allows you to make decisions quickly to respond to trends in purchasing and spending, and to adjust protocols for better control over where your company’s money is going. 

Frequently Asked Questions

What are automated purchase order approvals?

Automated purchase order approvals refer to the use of technology to streamline and expedite the process of approving purchase orders. It eliminates manual paperwork and replaces it with digital workflows that automate approvals based on predefined rules and criteria.

How does automated purchase order approval benefit my work life?

Automated purchase order approvals bring numerous benefits to your work life. It saves time by eliminating manual paperwork and waiting for approvals. It reduces frustration by streamlining the entire purchasing process. It keeps vendors happy with rapid payment, leading to potential perks and discounts. Embracing automation allows you to focus on your core work and be more productive.

What is ControlHub, and how does it help with automated purchase order approvals?

ControlHub is an automated purchasing management platform that simplifies the purchase order approval process. It provides a streamlined digital workflow, reduces human errors, and ensures purchase orders are sent to vendors promptly. ControlHub allows you to set specific rules and approvals for teams and individuals, putting you in control. It also integrates with accounting software like QuickBooks and Netsuite, providing real-time spending and budgeting information.

How does ControlHub integrate with accounting software like QuickBooks or Netsuite?

ControlHub is a purchase order software that seamlessly connects with accounting software like QuickBooks and Netsuite. It eliminates manual data entry by syncing with your accounting software, providing real-time updates on spending, budgets, and financial information. This integration saves time, reduces errors, and improves the accuracy of your financial records.

Is automated purchasing management suitable for all types of businesses?

Absolutely! Automated purchasing management is beneficial for businesses of all sizes. Whether you're a solopreneur, a small team, or a large organization, automation can streamline your purchasing process, reduce manual errors, and improve efficiency. It allows you to scale your operations and focus on more strategic tasks.

How can I get started with automated purchase order approvals?

To get started with automated purchase order approvals, consider implementing a purchasing management platform like ControlHub. Explore its features, benefits, and integration options. Reach out to the ControlHub team to learn more and get guidance on how to set up automated purchase order approvals for your organization. Embrace the future of purchasing and unlock the true potential of your work life!

Purchase Order vs Invoice: Are they the same?

A purchase order is a commercial procurement document that is created by a business’ purchasing department when placing an order with its vendors and/or suppliers. The document specifies the details on the desired items (type of goods, quantity, and price). An invoice is a time-stamped commercial document that details and records a transaction between a buyer and a seller. If goods or services were purchased on credit, the invoice usually details the terms of the agreement and provides information on the available payment methods.

What is an electronic purchase order?

An electronicpurchase order is the same as a traditional purchase order, except that it isnot placed on paper. It is a digital document that outlines the line items inan order, the terms and conditions both the buyer and seller must adhere to,pricing, delivery, and other information you'd expect to find on a PO.

What’s order time?

Order time or purchasing lead time starts when the goods or services are ordered and ends when they arereceived. This lead time includes availability confirmation, ordering,order acknowledgement, shipping notice, receipt of goods or service, invoice recordingand payment.

What is a Purchase Order book?

Purchase Order Book shows a summaryof all purchase orders. You can view a list of all the purchase orders untilthe date of last order entered.

What’s a PO system?

A purchase order (PO) system is an automated digital tool that creates numerous purchaseagreements between your online store and manufacturers, distributors, orsuppliers. This system simplifies how you order stock for your store, giving you simple concrete options for creating a purchase order to send to yoursupplier.

 If you are looking to step up your procurement game consider signing the services of Control Hub, this software will cover many of your needs, including acting as a PO system for small businesses.

 

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