Nonprofits Purchasing Guide: A Step-by-Step Approach

Tori Katz
April 7, 2022

What is the purpose of a purchase order?

Buying Stuff Smartly

Purchase orders (POs) are like shopping lists for businesses. They're the paperwork that says, "Hey, we want this stuff from you." But they're not just about jotting down what's needed. POs help keep things organized and official when companies buy stuff from suppliers. Without them, it's like grocery shopping without a list - chaos.

Setting Clear Expectations

POs lay out the nitty-gritty details of a purchase. They list what's being bought, how much, and at what price. This clarity helps avoid confusion and disagreements later on. It's like making sure everyone's on the same page before the deal goes down.

Keeping Tabs on Spending

With POs, businesses can track their spending. They know where the money's going and how much is left in the budget. It's like balancing a checkbook, but for buying stuff for the company.

Staying on Top of Orders

POs help businesses stay organized. They know what's been ordered, when it's coming, and when it's paid for. This keeps things running smoothly and avoids last-minute scrambles. It's like having a schedule for all the deliveries coming in.

How a Perfect Purchase Process Improves Your Nonprofit’s Goals

Nonprofits have a different goal than small businesses. Whereas businesses usually strive to make a profit, nonprofits have a mission to make an impact. This is why it is important for nonprofits to be mindful of their spending and purchases.

Reallocating funds to further the mission of the organization can make a huge difference in the outcomes of the nonprofit. To accomplish this, nonprofits should strive to perfect their purchasing process, understanding the distinctions between purchase requisitions vs purchase orders.

This can include creating and following a budget, setting up a system to track expenses and revenue, and researching and comparing prices of products and services before making a purchase.

It can also include investing in technology that can help streamline the purchasing process. For example, purchasing software can help automate the ordering process, track purchase history, and manage vendor relationships.

Nonprofits should also consider seeking out grants and sponsorships to help fund specific projects. This can help reduce the need for buying other products and services and help to achieve their mission.

Finally, nonprofits should be transparent and accountable to their stakeholders, donors, and beneficiaries in order to build trust and attract more support, especially in the context of indirect procurement. By proactively managing their resources, nonprofits can ensure their money is spent in the most effective and efficient way possible to help them reach their goals. That’s why expense report automation tools are extremely useful for them.

Improve Your Purchasing Process in 7 Easy and Practical Steps 

You’ve heard the terms thrown around, and you understand them enough to get by.

However, your team should fully understand the purchasing process and how to use purchase orders properly to make your nonprofit more efficient and cost-effective at the same time.

  1. Assign purchasing roles to the right team members.

    Your nonprofit might not have a dedicated purchasing department. As such, find someone in your organization who has the tech savvy and financial knowledge to handle basic financial relationships between you, the purchaser, and your suppliers. 

    Spread the task around to different team members so everyone on your team can learn the purchasing process as part of their roles.
  2. Determine what roles at your nonprofit can approve purchases.

    Part of the purchase order process involves people making purchases followed by someone higher up the ladder approving the purchase orders.

    What roles you assign this task to depends on the size and scope of your organization. You might have one person approving the purchases or one person per team if you have dozens of people under your umbrella. 

    Regular and large purchases may require multiple sets of eyes on purchase order requests.

    Ask yourself:
  • Is the purchase necessary?
  • Do we have the budget for it?
  • How does our clientele benefit from the purchase?
  1. Develop a relevant spend policy that everyone understands.

    This is largely determined by the size of your organization and the size of the purchases. Remember that your organization faces a high level of scrutiny through the IRS and the quarterly reports you file that are public knowledge.

    Micro-purchases and simple, one-off buys may be no big deal, like purchasing a water bottle at an outdoor event when it’s hot, and your organization can reimburse the person later.

    There are several methods of purchasing that nonprofits may employ that aren’t necessarily as streamlined as they are for for-profit businesses.

    Bidding or proposals may be involved for high-cost items, such as:
  • Sealed bidding for real estate or vehicles
  • Competitive proposals to outline goods or services delivered
  • Non-competitive proposals where your chosen supplier invites their vendors to bid on proposals.
  1. Develop standards for your suppliers
    Create a strict set of criteria for your suppliers based on your standards.

    Consider the following:
  • Prices per unit
  • Timeliness of delivery
  • Robust customer service
  • Flexible with payment terms
  • Accepts and fulfills purchase orders
  • Has testimonials from other purchasers to show you 

    Once you set these standards, make sure the people who request the purchase orders follow the criteria. The goal of the criteria is to prevent going over budget while buying quality products or services.
  1. Plan before making a purchase.

    Like an ordinary consumer or small business deciding on how and what to buy, your nonprofit should review all large purchases before making them.

    See if you already have the resources on hand to obviate purchasing them again so soon. Understand the exact cost, the overall benefits, and the timeliness of when the purchase will arrive. 
  1. Document every transaction. Documentation is crucial for many reasons.
  • You’re accountable to your board of directors.
  • You file quarterly, publicly available forms with the IRS that potential donors can examine ahead of making a donation.
  • You’ll need the documents when filing taxes every spring.

    One way to document your purchases thoroughly is through a robust purchase order system.
  1. Manage your purchase orders responsibly in every way.
    Your purchase order process must be scalable, actionable, and easy to tap into. You’ll also need to train your volunteers and staff on best practices for your purchase orders.

    Technological tools go a long way to helping staff understand the purchase order process.

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 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.

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 not only provides a standardized format but also 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. Such templates, when embedded within an automated purchase order system, become the bedrock for speed, accuracy, and scalability. In essence, while automation is the engine driving the procurement car, the purchase orders template is the blueprint ensuring the car is built to perfection.

Automate your procurement process

Say no to paper.While the manual po process is quite tedious, embracing technology in your hardware startup can come in handy in several ways. However, this won't be a simple 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 for 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 the use of purchase orders templates simplifies and accelerates the process. These templates reduce the 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, by 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 has to offer. Take the leap and engage with us today for an insightful consultation.

The Crucial Role of a Purchase Order Template in Business Efficiency

In the fast-paced world of business, precision and efficiency are paramount. This is where a Purchase Order Template in word processing software plays a vital role for companies. This seemingly simple document is the linchpin of successful procurement, ensuring that orders are clear, organized, and compliant with company policies.

Through the use of a Purchase Order Template, companies can streamline their purchasing processes, reducing the risk of errors and misunderstandings. It serves as a standardized blueprint, guiding employees through the procurement process and facilitating communication between departments.

Furthermore, this template helps businesses maintain a comprehensive record of their purchases, promoting transparency and accountability. It becomes invaluable during audits, budget planning, and vendor negotiations.

The Power of Purchase Order Tracking in Strealine Procurement

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 PO 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.

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.

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 (like purchase order software or purchasing software), and data-driven insights are increasingly utilized to streamline and optimize this process.

Take Control of Your Procurement with Zero Cost!

Revolutionize your purchasing strategies with our Free Purchase Order Template. Designed to integrate seamlessly into your business operations, our template ensures you manage your orders more effectively — all without a penny spent

Click here to download your free template now and take the lead in procurement efficiency!

Did you know ?

What is a purchase order?

A purchase order allows your nonprofit to request products or services from suppliers. It creates a paper trail that, once a supplier agrees to fulfill the purchase order, becomes legally binding for both parties.

What is a purchase requisition?

A purchase requisition is a formal request made by an employee or department within an organization to the purchasing or procurement department to acquire goods or services. It typically includes details such as the item or service requested, quantity, specifications, delivery requirements, and any other relevant information.

What is the value of purchase orders for nonprofits?

Purchase orders allow you to create a paper trail, or electronic trail in modern terms. They allow for more accurate reporting, more accurate tracking, and a way for stakeholder, staff, and volunteers to assess your organization’s financial health.

A purchase order process is only as good as the use of the right technology to keep track of your spending. 

How do I create a purchase order? 

Purchase orders all have specific information on them, such as:

  • Header, with your organization’s basic information.
  • PO number for easy tracking for all parties.
  • Supplier info such as name, address, phone, and email.
  • Your billing and shipping address.
  • Order details, including quantity and what items you want.
  • Pricing details, such as total of each quantity, subtotal, and total.
  • Payment terms, including when payments will be made and under what conditions.

Robust software and technology allow your organization to easily generate these forms for your purchase order process. 

A purchase order generator helps immensely, particularly when you can standardize supplier information that auto-fills very easily.

How do I generate a purchase order?

Your nonprofit can utilize our free purchase order generator that helps you automate your purchasing and lets you make unlimited purchase orders.

Simply input the information you require, including a PO number for tracking, and the form auto-generates as many fields as you need into an easy-to-read and easy-to-analyze format.

Purchasing has never been simpler.

And when you’re a nonprofit where every dollar counts, free stuff is good stuff.

Help your team, volunteers, and clientele by adding purchase order automation to your office process to save your team time and effort.

Frequently Asked Questions

Why is perfecting the purchasing process important for my nonprofit?

Perfecting the purchasing process is crucial for your nonprofit because it helps you be efficient, accountable, and make every dollar count. It ensures transparency, financial health, and effective resource allocation, allowing your nonprofit to have a greater impact and reach new heights.

How can I assign purchasing roles in my nonprofit?

Assigning purchasing roles in your nonprofit is all about teamwork. Find team members who are tech-savvy and financially savvy to handle purchasing relationships. Spread the task around your team, so everyone gets to be a part of the purchasing process. Remember, teamwork makes the dream work!

Who should approve purchases in my nonprofit?

Designate someone or a few individuals who will be responsible for approving purchases in your nonprofit. They will be the ones double-checking everything and ensuring that purchases align with your organization's goals and budget. Accountability is key in keeping your finances on track.

How can I create a relevant spend policy for my nonprofit?

Creating a relevant spend policy is essential for maintaining transparency and financial accountability. Set clear guidelines for purchases based on your organization's size and the purchases you make. Consider factors such as budget limits, approval processes, and IRS reporting requirements. A well-defined spend policy keeps you on the right path and avoids potential issues.

What standards should I develop for suppliers in my nonprofit?

Develop standards for your suppliers that align with your nonprofit's values and needs. Consider criteria such as price, delivery speed, excellent customer service, flexible payment terms, and their acceptance of purchase orders. Stick to your standards to ensure you are working with reliable suppliers who meet your requirements.

How can I make informed purchasing decisions in my nonprofit?

To make informed purchasing decisions, take a step back and evaluate whether the purchase is necessary. Assess if you already have similar resources, consider the costs and benefits, and determine when the purchase will arrive. It's important to weigh the pros and cons before making a decision, ensuring you make the best use of your resources.

How can a purchase order system help streamline documentation in my nonprofit?

A purchase order system is your secret weapon for streamlined documentation. It allows you to keep track of every transaction, ensuring accountability to your board and providing transparency for potential donors. By embracing technology and utilizing a purchase order system, you can automate the documentation process and save time and effort.

How can I manage purchase orders responsibly in my nonprofit?

Managing purchase orders responsibly requires scalability, actionability, and ease. Train your volunteers and staff on best practices, and embrace technology that simplifies the process. Utilizing a robust purchase order system, such as our free purchase order generator, can automate and generate unlimited purchase orders effortlessly. It's a valuable resource that saves time and effort while ensuring accuracy.

Purchase Order vs Invoice: Are they the same?

A purchase order is a commercialprocurement document that is created by a business’ purchasing department whenplacing an order with its vendors and/or suppliers. The document specifies thedetails on the desired items (type of goods, quantity, and price). An invoiceis a time-stamped commercial document that details and records a transactionbetween a buyer and a seller. If goods or services were purchased on credit,the invoice usually details the terms of the agreement and provides informationon 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 purchase agreements between your online store and manufacturers, distributors, or suppliers. This system simplifies how you order stock for your store, giving you simple concrete options for creating a purchase order to send to your supplier.

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.

What’s the purpose of a Purchase Order?

Apurchase order is a commercial procurement document that is created by abusiness purchasing department when placing an order with its vendors and/orsuppliers. The document specifies the details on the desired items (type ofgoods, quantity, and price).

Tori Katz
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Content specialist
Tori has a deep expertise in procurement and digital transformation technologies within the hardware industry. Author of extensive guides on strategic procurement practices and technology implementations. Focuses on improving operational efficiency and strategic growth through content.

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