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Ready to modernize your purchasing process and reduce your AP workload through automation? Let’s dive in.
Using the best add-on software for your ERP, purchase order automation saves staff time and reduces business costs and errors from manual processes, including data entry. Compared with manual accounting, PO process automation improves cash flow and profitability. It lets your business place orders sooner.
This guide defines and describes purchase order automation, including challenges of manual PO processes, benefits of PO automation, steps to automate purchase orders, and software for purchase order process automation that incorporates best practices.
What is Purchase Order Automation?
Purchase order automation is a method for digitizing and automating procurement processes to automatically create a purchase order from an approved purchase requisition and send the PO form to the supplier when placing an order.
Purchase order automation replaces paper-based, manual data entry processes and enhances an ERP through add-on software integration with document digitization and added functionality to perform automated purchase order processes.
Key Takeaways
- Purchase order automation uses add-on automation software to automatically create orders from approved purchase requisitions.
- Purchase order automation software may include functionality to handle the intake and approval of purchase orders.
- Purchase order automation digitizes procurement processes and replaces time-consuming, manual data entry and paper-based processes.
- Purchase order automation reduces delays in creating POs and reduces errors.
- PO automation results in better spend visibility for stakeholders and purchase requisition approvers.
- PO automation improves document management, onboarding and supplier relationships, and communication.
The Challenges of Manual PO Processes
Challenges of manual purchase order processes include:
- Purchase requisition approval routing with paper documents
- Inadequate stakeholder reviews of PRs and POs before approval
- Delays in manually creating and submitting purchase orders
- Human errors from manual data entry and missed processes
- Time required for investigating discrepancies
- Missing paper documents
- Time-consuming paper document filing and high storage costs
- Unwanted results from not following company procurement and purchasing policies
- Higher levels of maverick spend without POs
- Delayed spend visibility for analysis and decision-making
Determining the designated PR approvers and routing paperwork to the correct approver requires time and manual effort to get it right. While many stakeholders should review PRs and POs during the approval process, it may be impossible to route the paper documents to different stakeholder departments like finance, legal, and other interested parties before placing an order because the time required to do so would be too long.
When the procurement team manually creates purchase order forms (POs) from approved purchase requests (PRs), it manually keys in much of the same data from the PR, which takes extra time to submit approved POs to suppliers. Avoiding human errors in PO manual data entry or Excel spreadsheet templates when creating POs and manually onboarding suppliers is challenging.
Each supplier invoice references its PO number for document matching. More accounts payable staff time is required to investigate discrepancies between supplier purchase orders vs. invoices in the procure-to-pay process. In three-way matching, the AP team should also review goods receipts to avoid paying for items not received.
In a paper-based system, documents, including PRs, POs, and contracts, may be missing, as not received, misfiled, or otherwise lost. It takes time to file paper documents and costs money to store them in a warehouse.
Without automated purchase orders and digital purchase order management with real-time spend control visibility, some employees may skip the formal procurement process when they need the items faster to complete their work goals. As a result, uncontrolled maverick spending outside the procurement and purchasing departments’ control may be higher, even if items purchased exceed the stated company policy threshold.
With manual PO systems, spend analysis takes much longer than it should and may require analysts to prepare manual Excel or Google spreadsheets for in-depth expenditure categorization. Supplier performance management is harder to track without the functionality provided by some automated procurement systems.
Simplify your procurement processes with automated purchase orders
Tipalti Procurement software automatically creates purchase orders from approved purchase requisitions and handles PR intake and approvals.
The Business Benefits of Automating Purchase Orders
Benefits of purchase order automation for businesses include:
- Eliminating error-prone manual PO processes and paper through digitization with OCR
- Cost savings from streamlining and automating business processes with e-procurement
- Simplifying and streamlining the PO request (purchase request) employee intake and approval process
- Supply chain management accuracy through guided supplier onboarding processes and enabling other supplier performance management software integration with the ERP to track supplier evaluation metrics trends
- Automating routing and approval workflows, including approval process notifications in the purchase order approval process
- Compliance with contract terms is more likely, and digitized contracts are system-accessible
- Data syncing with ERP for procurement, including purchase order software and accounting software
- Quick automated three-way matching of supplier invoice with purchase order and goods received notice through AP automation software for the procure-to-pay automation process and discrepancies flagging for follow-up
- Real-time visibility of spend by vendor and category
- Availability of a real-time audit trail
- More security and financial controls
Creating automated purchase orders through add-on software to your ERP system will result in the achievement of numerous time-saving and cost-saving goals. It will improve supplier communications and supplier relationships. Procurement automation software for PO management provides real-time spend management visibility when your ERP has this capability.
How to Adopt PO Automation (Step-by-Step)
Your business needs to know how to automate purchase orders through a system that also provides digital transformation.
To adopt PO automation, follow these steps:
- Evaluate PO automation software choices.
- Select Procurement automation software for PO automation.
- Appoint a team and consider using experienced consultants.
- Streamline purchasing processes.
- Plan and integrate PO automation with tasks and deadlines.
- Map fields with your ERP system and configure the system.
- Set business rules and thresholds for designated approvers.
- Test the PO management system in a sandbox environment.
- Set user permissions.
- Go live to automate purchase order automation.
- Consider adding AP automation software to automate the entire procure-to-pay process.
In this linked article, you’ll find more advice on implementing the purchase order process.
Tips for Choosing the Best PO Automation Solution for Your Business
To choose the best PO automation solution for your business, review available software products online and request a demo of each healthy PO system that meets your company’s needs. Set up a decision grid to match each PO automation software product’s functionality with your team’s essential and nice-to-have features.
Request a custom pricing quote for software products that meet your business needs. Establish a budget for the software purchase. Select the product that best fits your software requirements and budget from a company with excellent customer support, customer reviews, case studies, or testimonials.
Choosing Tipalti as Your PO Automation Solution
Tipalti is a unified finance automation software provider that offers Procurement software for purchase requests and purchase order management and an AP automation product for invoice processing in the procure-to-pay process. Implementing Tipalti Procurement software solves many of the challenges and issues associated with using manual, paper-based PO processing systems instead.
Tipalti Procurement is an automated purchase order system with ERP integration. The automation process begins with purchase request form data intake from your employees, enabling various stakeholders (including the requester, the procurement team, finance, legal, and approvers) to view the PR in real-time. Your stakeholders and suppliers can view digital PR, PO, and contract documents.
Upon supplier selection, suppliers and vendors are onboarded through the Tipalti Procurement portal, leading to improved accuracy, supplier management, and communications.
Tipalti Procurement creates an automated PO from the data in each approved PR, adding details like onboarded supplier payment terms, saving staff time and reducing PO processing costs. Procurement syncs with your ERP for purchase orders and inventory management data. The delivery date will meet the needs indicated in the purchase requisition and a PO number is automatically assigned.
Because the AI-driven PO automation solution is efficient, businesses reduce and optimize cycle times for the PO process, orders can be timely submitted to suppliers for acceptance and fulfillment, and your business receives its goods or services when needed if the supplier performs within PO or contract expectations. A real-time dashboard lets your company view business spend by vendor and category and review metrics trends for informed decision-making.
Learn more about end-to-end PO management automation software with Tipalti Procurement.
