Purchase Order Management: Automate Procurement and Control Spend

Gaining efficiency and productivity, while minimizing time-consuming bottlenecks, requires digital transformation through the integration of automated, AI-driven technology for purchase requisition (PR) intake, approvals, purchase orders (POs), and supplier management. 

According to CAPS Research, 31% of supply chain leaders say outdated procurement software blocks execution, while 37% cite data access issues as a top barrier. By replacing fragmented workflows with integrated purchase order management software, companies gain speed, reduce costs, and scale smarter.

AI-powered purchase order management streamlines approvals, boosts visibility, and enforces policies. This article explores how it works and how Tipalti helps finance teams control spend, reduce risk, and scale.

What Is Purchase Order Management?

Purchase order management is the process of efficiently creating, approving, and controlling POs and managing suppliers and contracts in accordance with company policies to optimize costs and internal controls. 

Effective purchase order management uses specialized software tools and communication channels. Many businesses have well-established purchase order management policies in place to guarantee that employees follow standard operating processes before completing procurement orders.

State of Purchase Order Management in 2025

In 2025, purchase order management is defined by AI-driven, integrated procurement automation. It provides easier purchase requisition intake from employees, more stakeholder visibility for approvals and spending, and automatic PO creation.      

According to Verified Market Research, the procurement analytics market is projected to grow from USD 4.85 billion in 2024 to USD 25.18 billion by 2031, at a CAGR of 25.5%. This growth reflects rising adoption of advanced analytics to optimize procurement, cut costs, and improve supplier management.  

To meet these challenges, organizations are turning to AI-powered purchase order management tools that streamline workflows, improve visibility, and enforce stronger controls. In 2025, automation isn’t just a nice-to-have—it’s essential for scaling procurement efficiently.

Procure-to-Pay Steps including PO Management

Purchase order management is included in the following procure-to-pay (P2P) steps. The procurement, receiving, accounts payable, finance, and accounting departments are responsible for performing these processes. 

Steps in the procure-to-pay process include:

1. Purchase requisition and approval
2. Request for Quote (RFQ)
3. Vendor selection and negotiation
4. PO creation and sending
5. Goods/services receipt
6. Invoice processing
7. Payment authorization
8. Record keeping

1. Purchase Requisition and Approval

Employees submit a purchase requisition, which must be approved or rejected before moving forward. Managers with budget authority, along with procurement, finance, and legal teams, review requests to ensure visibility, compliance, and reasonable costs. This step also helps set appropriate contract terms with suppliers.

2. Request for Quote (RFQ)

Procurement departments send a Request for Quote (RFQ) for standard goods to multiple competing suppliers, allowing them to obtain and compare pricing bids for a planned purchase. 

3. Vendor Selection and Negotiation

Procurement selects vendors based on price, quality, sustainability, financial strength, timely deliverability, and other factors. 

PO terms negotiation with suppliers includes volume discounts, early payment discounts, and prices. For certain purchases, more extensive, formal contract documents may be required in addition to accepted purchase orders. 

4. PO Creation and Sending

The business procurement team creates purchase orders from approved purchase requisitions and sends them to each selected supplier for acceptance and order fulfillment. 

5. Goods/Services Receipt

For strong internal control through segregation of duties, the receiving department visually inspects the goods for quality standards and records the product quantity for each line item received, indicating the date of receipt. In some cases, a more formal inspection for quality standards is required to accept the goods. 

6. Invoice Processing

At this stage in the procure-to-pay process, the accounts payable department assumes responsibility. 

The AP team should use integrated third-party AP automation software for invoice capture and invoice processing through payment and reconciliation. During invoice processing, 3-way or 2-way matching of invoices with purchase orders and receiving data occurs. 

Purchase order vs. invoice are different, but they’re used together in accounts payable workflow. PO matching with supplier invoices helps ensure that your company only pays for items ordered and received at the agreed-upon price. 

7. Payment Authorization

The Controller or CFO authorizes invoice batch payments. 

8. Record Keeping

Supplier invoices are coded to expenses, inventory, or fixed assets and recorded as accounts payable, using double-entry bookkeeping. When paid, accounts payable is reduced by the amount paid, and the cash expenditure and any early payment discount earned are recorded. 

AP automation software may provide AI-generated account coding. 

Outstanding supplier invoices are detailed and summarized by vendor in the accounts payable aging report. 

Managing these steps manually often leads to bottlenecks, errors, and compliance risks. Automation solves these challenges by streamlining requisitions, approvals, and POs from start to finish.

The Purchase Order Management Process

Whether you’re a small brand or a major corporation, your purchase order process is critical to your success. If you are unable to approve purchase requests on time, vendors may reach capacity serving other customers, resulting in procurement delays that can cost your company significantly more than you might think.

What Is Procurement?

Procurement is the process of acquiring goods or services from external sources or vendors. Consider numerous factors during this process, including quality, quantity, and timing.

The two types of procurement activities are direct and indirect. Direct procurement is procurement associated with the production of a final product, such as raw materials. Indirect procurement is non-production-related and includes items like standardized office supplies, software solutions, and heavy equipment maintenance.

What Is a Purchase Order?

Once accepted by a supplier, an approved purchase order is a legally binding document between the buyer and the seller for goods and services being purchased by a business. Purchase orders include details such as quantity, delivery instructions, pricing, terms, and delivery dates. 

What Is the Purchase Order Process?

The purchase order process encompasses all of the actions businesses take to produce, approve, validate, manage, and track purchase orders from the moment a necessity is identified through the point of delivery or sale.

The following are the steps in a standard purchase order lifecycle:

1. Identify the need for goods or services
2. Submit a purchase request (PR) or request for proposal (RFP)
3. Select and qualify vendors
4. Negotiate terms and issue the purchase order
5. Create and approve the purchase order
6. Receive the shipment and verify quality
7. Close the purchase order and match items received against the order

In the PO process, another name for the purchase request is purchase requisition. 

Companies may create a blanket purchase order for a specific contract time period to get volume discounts from a vendor. A blanket purchase order is approved for obtaining scheduled, recurring order deliveries. Using a blanket purchase order, your company gets product deliveries from a vendor when needed that reference the unique blanket PO number instead of issuing a single-delivery purchase order. 

How Purchase Order Management Works

A company can perform the purchase order management process in five high-level steps. 

1. Using purchase requisitions and purchase orders
Employees submit a purchase requisition detailing the goods or services needed. Once approved, procurement creates a purchase order—often automatically through a “PO flip”—and forwards it to the supplier for fulfillment.

2. Receiving and inspecting goods
The receiving department confirms deliveries match the PO and inspects for quality or discrepancies.

3. Processing and paying invoices
Accounts payable matches invoices to POs and receipts, codes expenses, and schedules payment based on agreed terms.

4. Tracking and managing inventory
The inventory team updates stock levels, locations, and reports to support resource allocation decisions.

5. Continuous improvement
Teams refine workflows to eliminate inefficiencies and improve overall procurement performance.

Together, these steps ensure companies maintain control over spending, improve supplier relationships, and keep procurement aligned with business growth.

Best Practices for Optimizing the Purchase Order Management Process

A company can achieve the benefits and optimization of the purchasing process by defining and implementing appropriate purchase order procedures, effectively reducing ineffective acts, and increasing productivity. Listed below are a few tips for improving purchase order management.

1. Simplify the system

While developing a workflow, remember that each person has a distinct function. Simplify to avoid unnecessary movements.

2. Implement an ordering procedure that is tailored to your company’s needs 

Workflows can vary depending on the size and type of company, as well as within departments. Find inefficiencies in the current process and discuss them with qualified decision-makers and stakeholders. This will enable you to create a solution that is tailored to the department’s specific requirements.

3. Analyze KPIs

Collect reliable supplier performance information using your procurement management software. Create unique indicators for each vendor, review statistics, and select the most suitable vendor for every purchase transaction.

4. Utilize digital, automated, and integrated solutions

Avoid additional hassles caused by inefficient manual processes and excessive documentation by abandoning paper-based procurement strategies.

Procurement software enables smooth and reliable scaling without the need for a significant increase in the procurement team. Select a software solution that allows your business to go digital, streamline workflows, gain real-time visibility, and significantly improve its purchasing process. It can provide notifications and dashboards. 

Human error is unavoidable when dealing with dozens of purchase orders in numerous spreadsheets or attempting to track progress via e-mails or phone conversations. Automation can help reduce errors by performing low-level tasks.

5. Develop a system for tracking and reporting on purchase order activity 

Designing precise instructions and describing each role is always a good strategy. It can be a physical, manual, or digital learning reference, as long as everyone in the supply chain has easy access.

Help ensure that everyone involved in the procurement process follows the same procedures to ensure smooth collaboration and avoid misunderstandings.

For example, specifying an inventory threshold that triggers a purchase request is required. It should be clear who has the right to request a purchase, who may issue a purchase order, and whether the team must validate the purchase.

The purchase order management process is a critical component of effective purchasing and inventory management. By implementing the best practices outlined above, businesses can optimize their purchasing processes, thereby enhancing overall productivity and profitability.

AI in Procurement Management

Two primary applications of AI in procurement are AI for productivity and AI for data management/manipulation, according to an October 15, 2024, Institute for Supply Management (ISM) article: 

“AI for productivity focuses on enhancing workflow efficiency and automating repetitive tasks, while AI for data management emphasizes handling, cleaning and even analyzing data to improve quality and derive actionable insights. Data categorization at a line-item level provides buyers with an accurate view of spend for a category, eliminating the need for manual calculations, saving valuable time during the purchasing process.”

These types of AI in procurement include robotic process automation (RPA) for automating repetitive tasks and methods to streamline procurement workflows. They are applied in purchase order management and supply chain management (SCM). 

Why Purchase Order Management Is Important

A purchase order management system is crucial because it allows a business to track and manage the purchasing process and inventory levels. It helps ensure that goods are ordered in a timely manner and are available when needed, while also helping prevent the company from over-purchasing or ordering too late.

Additionally, purchase order management can help to improve supplier relationships by streamlining the ordering process and making it easier for suppliers to understand what is needed and when it is required. A sound purchase order management system will also help improve cash flow by reducing the amount of inventory held at any given time.

How Your Company Can Benefit from Purchase Order Management

Purchase order management is an integral part of running a successful business – particularly for companies looking to expand. Every organization has limited resources at any given time, so it’s critical to make the most use of them, keep track of spending, and streamline procedures.

Traditional purchasing systems still lack organization and standardization in purchase order creation and submission. Stakeholders may not have access to up-to-date purchase information due to a combination of paper documents, databases, e-mails, and even phone conversations.

Businesses with purchasing inefficiencies, who need to improve their internal procurement processes and effectively manage physical goods and supply chains, face challenges in serving their customers and achieving business goals.

Purchase order management automation helps solve these problems. It aids in preventing errors and fraud and reducing excessive administrative levels. Managing purchase orders entails gaining a better grasp on spending and making better-informed purchases.

Put it into Practice

Companies put purchase order management into practice by setting clear procedures that keep every purchase relevant, timely, and cost-effective. The key is giving teams simple rules to follow and the right technology to handle approvals, suppliers, and spending without extra manual work.

Thanks to automation software linked with your ERP, digital purchase orders can be processed more efficiently. Procurement automation software for PO management gives managers and procurement process stakeholders a real-time status update and visibility into spend management, reduces errors, speeds up the process, and helps ensure that every purchase is justified.

Tipalti Procurement is cloud-based purchase order management software. The Tipalti Procurement solution will let your company efficiently achieve these purchase order management goals and other benefits, like cost savings, through automation with an audit trail. Learn more about Tipalti Procurement automation.