Cloud computing and automation are now inseparable from our society and the way we do business. With the rapid advances in automation and cloud-based computing technology, companies can accomplish more - faster than ever. Best of all, they can provide better results with fewer resources and expenses.
Strangely, though, procurement managers haven’t embraced automation technology in the same way that other leaders have. Most companies rely on the most basic of procurement tools - paper requisition forms, purchase order, and tracking. Even those that have “gone digital” still rely on manual practices to complete and take delivery of purchases.
Fewer than 10% of companies are taking advantage of key technologies - including blockchain, consumer data, and the Internet of Things (IoT). Most (60%) don’t use any digital procurement tools, except for basic spreadsheets.
Unfortunately, manual processes come with several risks that growing companies can’t afford to ignore:
- Human error: It’s easy for an overworked purchasing manager to transpose an item number or enter an incorrect price on a purchase order, which can significantly delay order fulfillment and payment, and can even jeopardize relationships with essential vendors.
A simple keying error could also lead to incorrect item quantities - if a delivery truck shows up with 100 office desks and you only needed 10, that’s a lot of extra hassle for both you and the vendor. - Budget allocation issues: When companies don’t provide a simple way for employees to make needed purchases (such as an automated procurement platform like ControlHub), “rogue spending” can become a problem.
Employees will either borrow a corporate credit card from a manager or executive, or use their own funds for purchases and then submit reimbursement forms. Both make it nearly impossible to adequately track spending and anticipate future budgeting needs. - Security risks: When employees are making online or in-person purchases with credit cards, they’re unknowingly exposing your company to financial loss in terms of fraudulent purchases. This risk compounds when your corporate cardholders share these cards with employees.
While some companies try to curb this risk by only issuing cards to executives and managers, the simple truth is that most of these people don’t have time to properly evaluate purchase requests. Instead, they simply hand their corporate cards over and ask for an online receipt.
The more “untraceable” hands touch a corporate credit card, the higher the risk of fraud, excessive spending, and other costly problems.
Is a purchasing platform a better solution?
If you’ve been relying on paper requisition forms, manual purchase orders, and spreadsheet based expense tracking, you’re not only operating under substantial risk, but you’re also making things much more difficult for yourself, your employees, your purchasing manager, and your accounting and finance team.
Procurement software helps substantially reduce security, fraudulent spending, and overspending risks associated with corporate spending. It provides a way for companies to receive, process, and take delivery of items needed to conduct business.
At the same time, it relieves employees of the cumbersome process of submitting a paper requisition form, waiting for the purchasing manager to approve the requisition and create a purchase order, and hoping that the information on the purchase order is correct and current so that there won’t be a fulfillment delay.
What is procurement software?
Procurement software, also known as purchasing software, is a platform that streamlines and automates some or all of the procurement process.
For example, some procurement software tools allow authorized employees to submit requisitions through the platform instead of filling out and submitting a paper requisition that could be lost, destroyed, or ignored.
Some of the best purchasing software platforms allow owners to assign “no approval needed” spending thresholds to reduce the number of requisitions a purchasing manager must approve.
As an example, suppose that Trey is a trusted employee with a solid track record. You could set a $500 per-purchase “no approval needed” threshold for Trey, which would grant him automatica approval on purchases under $500. You might also set a per-month limit to avoid being surprised by a slew of $499 purchases - just in case.
Procurement software tools can also eliminate transpositional errors that can lead to delays, unneeded expenses, and delivery of incorrect products. ControlHub automatically pulls data from your standardized digital requisition form, which saves your purchasing manager time while ensuring data continuity along the procurement process.
The Significance of Purchase Orders Template in 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.
Purchase Requisition vs Purchase Order: Significance in Modern Procurement
The differentiation between purchase requisition and purchase order forms the backbone of the procurement process. At its most basic, a purchase requisition is an internal document or request seeking approval for a proposed purchase. It initiates the procurement journey, signifying an organization's need or desire for specific goods or services. Once this requisition gains approval, it leads to the creation of a purchase order. This order, in contrast, is a formal, external document detailing the terms of the intended purchase and is sent directly to the vendor. Grasping the unique roles and sequential relationship of these two pivotal documents is paramount to ensuring clarity, efficiency, and accuracy throughout the procurement process.
What is procurement software?Procurement software, also known as purchasing software, is a platform that streamlines and automates some or all of the procurement process. For example, some procurement software tools allow authorized employees to submit requisitions through the platform instead of filling out and submitting a paper requisition that could be lost, destroyed, or ignored. Some of the best purchasing software platforms allow owners to assign “no approval needed” spending thresholds to reduce the number of requisitions a purchasing manager must approve.
What should you look for when buying a purchasing platform?
There are nearly countless procurement software companies offering a wide range of solutions to help companies improve their procurement processes, save money, and empower their employees to do their best work.
Choosing among their purchasing tool options, though, can be overwhelming. Here are some things to look for to ensure that your purchasing tool meets your needs:
Flexibility and scalability
If you’re in “start up” phase, or you feel like your company needs to mature a bit before “going big,” you might be focusing on procurement software for small business.
In fact, that’s why many small business owners only use spreadsheets, or don’t use any digital procurement tools at all. It’s easy to think, “My company is too small for a complete procurement solution.”
Find an entrepreneur whose business expanded “overnight” after years of hard work, though, and you’ll discover just how quickly procurement can get out of hand. A rapid burst of success means new employees, opportunities, and initiatives - all of which require more spending. If your current system can’t handle the increased demands, you’re likely to end up hemorrhaging money.
That’s why it’s important to choose a purchasing tool that can grow with your company. Migration to a more robust solution can be costly and resource-heavy - exactly what you don’t need when you’re in the middle of a growth phase. Take a look at the Purchasing Handbook for fast moving companies; on it, we outline the top 6 mistakes this type of companies make.
ControlHub’s procurement platform offers scalable solutions to fit a wide range of business owners’ needs, from small businesses to global corporations. From simple requisition software to fully customizable solutions that eliminate the work and risk of manual procurement, your company can rely on ControlHub to provide reliable, cost-saving purchasing solutions at every phase of your business.
Robust automation
When a business enters a growth phase, it’s often the repeatable tasks that get ignored - like submitting a requisition form instead of using a corporate card, or evaluating stacks of requests and creating purchase orders for the requests you approve.
That’s where automation can provide enormous benefits.
Your employees don’t have to worry about whether they’ve filled out a digital requisition form correctly, or whether they’ve sent it to the correct purchasing manager or approver. Every step of the process involves automated “checks” to ensure that the data the employee submits correctly reflects their purchase intent.
You can set up your platform to automatically route above-threshold purchase requests to the correct approver or purchasing manager. You can also include “special” approvers on requisitions for unusual purchases, such as those that require specific knowledge and expertise.
Automation also eliminates errors when creating purchase orders (PO) and routing them, including the associated PO number, to vendors for fulfillment. Because all of the information is stored and retrieved digitally, you and your employees can rest easy knowing that each vendor will receive the right data to fulfill, deliver, and invoice your order.
Budgeting and management tools
Spending can easily get out of control during periods of rapid growth - managers and executives, encouraged by news of the company’s increased revenues, can get rather loose when it comes to passing around their corporate cards. After all, “you have to spend money to make money.”
All too often, though, this leads to consternation at the beginning of the next month. No one has been keeping a close eye on who is spending the company’s money or what they’re spending it on. Suddenly, you realize that your expenses are much higher than expected - enough to erase your profit gains.
A procurement platform can help you establish and implement budget parameters automatically, so that you aren’t exposed to the risk of overspending. Individualized controls prevent employees from spending excessively, and can alert decision-makers to unusual spending patterns.
You don’t have to worry about returning purchases or getting credits or refunds when an employee overspends - the automated controls prevent employees from completing transactions in excess of their tailored spending authorization.
Simple approval tracking
From an employee’s standpoint, it’s easy to understand why the traditional requisition process is frustrating enough to bypass. Filling out a requisition form for an urgently needed item, and then finding out the procurement manager is on vacation, can dent an employee’s morale. How can the employee do their job when they don’t have timely access to the resources they need?
With a robust procurement platform, employees can access their personal dashboards at any time to check on the status of their requests. They can see if the approval manager has received and reviewed the requisition, and whether they have approved or denied the request.
If the request has been approved, the employee can track the status of the order - whether a purchase order has been generated and sent to the vendor, whether the vendor has accepted the purchase order, and whether the vendor has fulfilled the order.
This information helps employees effectively plan their job tasks by letting them know when they will receive items essential to perform these tasks.
Essential integrations
While it’s important to choose a procurement platform that can grow with your organization and provide the tools you need to budget effectively, your software should also integrate with your existing accounting software to optimize budgetary control.
Platforms like ControlHub seamlessly integrate with Quickbooks and other common accounting software titles such as Netsuite, enabling your team to automatically import, sort, and analyze purchasing data to make better decisions, provide accurate financial reporting, and ensure profitability while empowering employees to help your company succeed.
Collaboration
In a fantasy world, every purchasing request would be simple and straightforward - the employee would identify the products they need, submit the requisition form, and receive the items they need within a few days.
Unfortunately, Amazon Prime simplicity isn’t alway the case when it comes to company procurement. While small, everyday purchases might be simple to streamline, larger purchases often require input from multiple stakeholders and experts.
For example, suppose that an employee proposes to purchase equipment that allows a manufacturing company to double its output without hiring additional employees. While this could represent a dramatic cost savings to the company, the purchase and maintenance costs of the equipment could be too large to take lightly.
In this case, approving the purchase could involve input from a wide range of team members, including managers and cross-department liaisons. In some cases, business owners bring in outside consultants to provide additional guidance to help evaluate a potential purchase.
Your procurement platform should provide tools and resources for real-time collaboration to help your teams make the best purchasing decisions possible. By providing a collaborative environment, you can help ensure that your company is investing in purchases that will produce a predictable, measurable return.
Ready to end your purchasing frustrations today?
Whether your business is currently in a “growth phase,” or you’re looking for an opportunity to level up your sales and revenues, a reliable, scalable procurement platform is one of your most powerful tools. Get in touch with the experts at ControlHub to find out how easy it is to automate purchasing, tracking, and invoicing tasks. Our intuitive platform takes the guesswork out of managing your company’s spending budget.
Frequently Asked Questions
Why should I use purchase orders for my business?
Purchase orders provide numerous benefits for your business. They streamline the purchasing process, ensure better control over procurement, minimize the chance of leaks or missing items, protect against fraud, and help track spending. Using purchase orders is like having a superhero sidekick for your procurement efforts!
How do I write a purchase order?
Writing a purchase order is simpler than you think. First, your employee writes a purchase requisition, stating what the team needs. Then, it goes through an approval process, and you have yourself a purchase order form ready to be sent to the supplier. The process ensures better organization and accountability.
How do I find the right supplier for my purchase order?
Finding the right supplier depends on your specific needs. Sometimes, a quick call will suffice, while other times, a full request for proposal (RFP) process is needed. You compare bids and select the supplier that best suits your requirements, ensuring quality and value for your purchases.
What is the difference between a standard purchase order and a blanket purchase order?
A standard purchase order is ideal for one-time or irregular-interval purchases, such as equipment or office furniture. On the other hand, a blanket purchase order is used for consistent supplies needed on an ongoing basis. It ensures you never run out of essential items and simplifies the procurement process by placing a standing order with your supplier.
What information should be included in a purchase order?
A purchase order is a legal document that includes important information such as buyer and seller details, delivery locations, item descriptions, quantities, prices, and payment terms. Including these details ensures a mutual understanding between both parties and facilitates a smooth procurement process.
How can procurement software like ControlHub help with purchase orders?
Procurement software, like ControlHub, automates and streamlines the entire purchase order process. It eliminates manual errors, links various stages of procurement together, and provides a seamless system for managing purchase orders. With procurement software, you can save time, improve accuracy, and have better control over your procurement efforts.
Is mastering the purchase order process important for all businesses?
Absolutely! Whether you're a small startup or an established company, mastering the purchase order process is crucial for efficient procurement. Purchase orders give you control, protect against fraud, keep your budget in check, and provide a clear record of your purchases. It's a key aspect of successful business operations.
How can I embrace the purchase order process and improve my business?
Embracing the purchase order process starts with understanding its importance and benefits. Educate yourself and your team on the process, use procurement software like ControlHub to automate and streamline your efforts, and maintain a positive mindset. With organized and efficient procurement, your business will thrive and achieve its goals.
