Many use the terms Procurement and Purchasing interchangeably. However, they are two different things.
TL;DR: Procurement refers to all the STRATEGIC activities that involve sourcing, negotiation, selection and compliance of vendors that provide all the resources needed by an organization. Purchasing, on the other hand, is the TACTICAL process of how goods and services get ordered.
What is Procurement?
Procurement is the strategic process of sourcing and obtaining the products and services needed by an organization to achieve its business goals.
The processes below are all part of a comprehensive Procurement function:
- Market Surveying
- Creating an approved vendor list
- Negotiating pricing and terms
- On-boarding and qualifying vendors
- Supplier Management
- Procure-to-pay process management (more on this later)
- Record keeping and ever-green documentation
What is Purchasing?
Purchasing is a series of tactical activities involved in the specific sub-process of “procure-to-pay”, which is part of the overarching Procurement function. Listed below the steps in the purchasing process:
- Requesting: Creating Purchasing Requests (aka Purchasing Requisition Forms)
- Approvals: Reviewing and approving purchasing requests (including Quotes’ review)
- Order Placement: Creating POs (purchase orders), PO numbers and sending them to vendors. Click here to learn more about POs or create one here, for free!
- Receiving: Checking the quality and quantity of what was bought
- Cross collaboration with Accounts Payable for post-purchasing tasks: Invoice processing, 3-way match, Payments and proper record keeping in the Accounting system.
If possible, you should focus your attention on the strategic value-adding processes involved in Procurement, and automate all of the tactical tasks involved in Purchasing. ControlHub helps organizations streamline all the tactical processes and tasks involved in your Procure-to-Pay process.
In the realm of procurement, it's essential to distinguish between purchase requisitions vs purchase orders as they serve different roles:
Purchase Requisition:
Purpose: It's an initial request made by a department or employee to signal a need for goods or services.
Content: Contains item details, specifications, and requires approval before procurement proceeds.
Purchase Order:
Purpose: A legally binding document issued to a vendor, formalizing the purchase after approvals and negotiations.
Content: Includes specifics like item descriptions, quantities, prices, delivery dates, and payment terms.
Understanding these differences is crucial for efficient procurement management.
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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.
Automate your procurement process: Say no to paper.
While the manual PO process is tedious, embracing technology in your hardware startup can be helpful in several ways. However, this will be a challenging transition. Adopting a purchase order template requires updating technology, aligning internal processes, and often initiating a cultural shift. In return, your startup gains productivity, prevents duplicate orders, and realizes a more efficient procurement cycle. Plus, the environmental benefits of reducing paper usage are undeniable.
A flexible purchasing process
Automating your PO process allows customized automated workflows tailored to each purchase request. These workflows can be aligned with internal rules and legal requirements, providing flexibility for varying scenarios such as high-demand periods or large one-time purchases. The crux of this automation lies in the ease with which a purchase orders template can be utilized, bringing about uniformity and speed.
Enhanced value in procurement
The transparency and accountability an automated purchase order system offers are unparalleled. Integrations with other departments or vendors ensure favorable ROI and controlled spending. The system's efficiency also redirects resources from manual data entry to more core engineering tasks.
Streamline your procurement process
Creating workflows through purchase order templates simplifies and accelerates the process. These templates reduce repetitive tasks and, when coupled with cloud-based systems, offer global accessibility, further diminishing approval delays.
Be more productive with the ControlHub System.
Balancing procurement tasks with engineering duties can be a challenge. Yet, automating the procurement process, setting up vendors, creating and accepting purchase orders, and approving spending become seamless. Partnering with ControlHub amplifies these benefits, ensuring your startup fully capitalizes on what automated procurement offers. Leap and engage with us today for an insightful consultation.
