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This guide describes how purchase order management systems work and the benefits of integrated procurement automation systems with digitization that eliminate manual processes.
The Problem With Today’s Purchasing Processes
There’s a whole host of inefficiency regarding purchasing, vendor management, and other complicated, often paper-driven, manual processes. Even worse, all of that inefficiency can snowball; the faster an organization grows, the higher the number of stakeholders involved.
After all, the bigger the organization, the more data to draw from, the paper to push, and the parties involved. Take all of that together, and you’ve got an enterprise-level headache quickly escalating to a non-stop migraine.
If that sounds troubling, there’s even more of a headache: the associated expenses of manual, inefficient purchasing processes as part of procurement. Unless these processes are handled by a cloud-based, integrated, digitized, and centralized purchase order management system, all of that paper will make things far more complicated and sluggish, not to mention expensive. Work out the resource costs and multiply them by the minute-rate cost per resource. Your business could incur between tens to hundreds of dollars per purchase order. That’s a staggering, wasteful amount – and it doesn’t need to be that way.
Amazingly, there are super-effective (by cost and time) automation-powered purchasing processes that could save your company all the headaches and wasted costs, energy, and time: a solid, cloud-based purchase order management system.
PO Management Systems, Explained
What is PO management? Businesses need an effective way to streamline and control the many purchases they make as part of the procurement process. Automating their purchase order process can improve efficiency and support secure and smooth operations.
Purchase order management systems are software for handling and approving purchase requisitions and creating and approving purchase orders submitted to suppliers. The best purchase order management systems automate PO-related workflows and provide electronic document storage.
PO management systems are an integral part of any mid-sized and enterprise-level organization. Considering documents, purchasing and approval workflows, people involved, and other factors, a cloud-based purchase order management system can save you valuable budget, boost productivity, and even prevent legal issues from raising their head…or falling between the cracks.
A working purchase order management software system will centralize and automate the tasks that have been slowing teams down, on the little things that add up over time (for example – illegible handwriting, ruined or misplaced documents, absent team members, or other types of human errors across emails, spreadsheets, Slack, generic ticketing programs and more).
It allows you to easily monitor all expenses and revenue throughout the supply chain and quickly narrow down any unnecessary expenditures or areas for further revenue potential.
The Moving Parts of a Purchasing System
The most effective PO management systems will keep things simple and effective:
- Request – Initiate a purchase
- Approve – Get approval from relevant stakeholders
- Monitor – Send data to relevant systems
Request: Initiate a Purchase
Employees need to create purchase requests. With automated purchase order management systems, most of the fields within the purchase order form will be automatically populated, with the remaining few being intuitive and customizable according to the organization’s needs and existing policies.
Most of these details will be automatically applied when an approved purchase request leads to purchase order creation. Other data – such as names and payment information – can be entered in just a few seconds or selected from a dropdown menu – meaning fewer issues, fewer mistakes, and quicker PO creation.
Approval from Relevant Stakeholders
By far, one of the most frustrating bottlenecks in the purchase order flow is waiting to receive approval from a variety of stakeholders. Expediting your standard operating procedures (often with automation) throughout the entire purchasing life cycle – from issuing purchase requests and purchase orders to ensuring vendor and supplier payment, will alleviate those bottlenecks and silos for all users.
The best purchase order management systems allow you to define the approvers required easily, and they’ll receive an automated notification with timely reminders if they’re taking their time. Stakeholders can send their approval in just one click, and approvals become faster.
Purchase order management systems will allow even the most complex approval processes to become much more streamlined, with custom flows, the ability to add comments, assign specific issues and items to certain stakeholders, and more.
Monitor: Share Data and Keep Everyone Informed Effortlessly
Save your business time, emails, and more: you can easily use Tipalti Procurement to update every single PO across other workflows, all from one intuitive dashboard.
Requests can easily be tracked, commented on, and managed, and they are complete with the ability to drag and drop documents. That means no more bottlenecks, lost documents, and happy stakeholders.
Does your purchase order management system use automation?
Use Tipalti Procurement to automate purchase orders, enhance process efficiency, gain real-time spend visibility, and accelerate PO approvals.
How Does a PO System Work?
A purchase order system can be very simple. The purchase order is an official document the buyer sends to the supplier outlining what the purchase entails and what/how much needs to be fulfilled. Upon the supplier’s acceptance of the PO, the purchase order becomes a legally binding contract.
The steps before and after this PO document is created in the procure-to-pay process, beginning with the purchase request, make up the PO system and can be as straightforward or involved as the organization wishes. Through these step definitions, you’ll understand the difference between purchase requisitions and purchase orders. Typically, a standard PO system will look like this:
Purchase request
- A purchase request (PR) or a request for a certain purchase of goods or services is placed and waits for the right approver. Purchase requests can also be referred to as purchase requisitions or PO requests.
Purchase order
- A PO is then created in the PO software upon approval and sent to the selected supplier
Order fulfilled
- After PO acceptance, the supplier uses the PO to fulfill the order and sends goods (or services) to the buyer
Goods received
- The buyer receives the ordered goods
Invoice sent
- The supplier invoices the order, including the PO number
3-way match
- The accounts payable team will perform invoice matching by checking the PO against the invoice and the received order to ensure everything aligns or flag discrepancies for follow-up
Payment
- Payment can then be issued after invoice verification, supplier validation, and getting approvals
Closure
- The order is closed
The above steps can be carried out manually in smaller businesses or automated through add-on automation software integration, working with different types of ERP systems. As companies scale and purchases become more complex, the PO system may be adapted to accommodate more involved purchasing processes. This is where automated purchase order software makes all the difference in visibility, organization, and speed.
Benefits of an Automated Purchase Order System
Migrating to an automated process is not as difficult or time-consuming as one might imagine. With some foresight and planning, implementing the best purchase order software can be smooth and provide many benefits from automated functionality compared to a manual process. Key features and benefits of automated purchase order management systems include:
Greater Visibility
An automated PO or purchasing system provides the full, real-time visibility needed to understand the status of each purchase order at every stage in the process. This type of system can help you see where things get stuck or bottlenecks occur. It also allows you to easily identify and nudge the appropriate stakeholder to keep the ball moving.
Having complete visibility will help teams avoid duplicate purchases, control spend, understand the need for inventory management, and always ensure the right approver oversees the approval process.
Simplified Internal Approval
An automated PO system makes it much easier to get approvals fast. When users don’t have to manually input data or worry about following up and checking in with approvers via email, the approval flow becomes simpler, faster, and more manageable.
More Control Over Company Spending
Automated PO processing helps to reduce human error significantly. Because procurement and purchasing teams get an accurate picture of business spend, they can make informed decisions to control company spending, easily manage spending, and save money.
Moving Parts Become Streamlined
There are so many moving pieces to a procurement process. A proper, implemented online purchase order system creates order, lets every stakeholder know where they fit in, and helps teams eliminate unnecessary steps or practices within manual purchase order processing that may clog the pipes.
Greater Flexibility
With automated procurement software’s added visibility and control, key stakeholders can easily get involved at any stage in the purchase order process without interrupting the approval flow or causing bottlenecks. Finance teams can get a clearer view earlier, improving decision-making and reducing their accounts payable workload with integrated AP automation systems.
When implementing an automated PO system, remember that the best purchase order systems rely on cloud-based purchasing software. Consider the current status of your PO process to strengthen it, and take the steps needed to establish and carry out a PO system that truly contributes to your organization’s health.
Cost Savings
An automated purchase order management system saves your business time and money from added staff efficiency that reduces hiring needs. Better real-time spend visibility lets you analyze spending sooner to reduce costs. When all stakeholders have visibility earlier in the procurement process, your business can negotiate with suppliers for better pricing and payment terms.
What You Need to Consider When Looking for a New Purchase Order Solution
If all of this sounds good, then it is – but there are some pretty important features you need to consider when it comes it choosing your own cloud-based purchase order management system:
UI/UX
As with anything cloud-based, it’ll only be as useful to you as its user interface (UI) allows it to be. Tipalti Procurement purchase order software improves the user experience (UX). It lets your business unify every PO and associated document from one intuitive dashboard, making searches across POs, vendors, and documents just a click or two away. A more intuitive interface drives the adoption of better practices without any backslides to “how things used to be done.”
Customization
No two enterprise-level companies are the same, meaning you need a customizable purchase order system for your company’s needs. Your PO management system ranges from creating PRs and POs with custom approval flows to syncing with your existing systems while achieving simplicity.
Automation
Digital services would not be complete without automation, which allows you to automate your repetitive, manual processes intuitively and effectively.
From vendor onboarding to vendor approval and contract management, you can easily delegate to suppliers, allowing them to submit quotes and invoices, update their business information, and more. This improves supplier management and leads to better supplier relationships.
Submitted documents can be automated to fall into the right hands, and approval flows, routing, and notifications can be set up to push the approval process for anyone taking their time to respond. The integrated purchase order management system will track purchase orders, provide order details and order status, and provide an audit trail.
Integration
The most important aspect of any purchase order system has to be its ability to seamlessly integrate with the company’s existing financial systems and processes. From budgeting, financial planning, bookkeeping, and accounting software to your company’s ERP, you should be able to securely sync financial systems to work with your purchase order management system.
Examples of Tipalti ERP integrations are NetSuite ERP and QuickBooks small business accounting software, as well as most other brands businesses use as their primary system.
When inventory is purchased through a PO, syncing with your integrated ERP will also result in a purchase order inventory management system that correctly reflects purchased inventory items without also requiring manual data entry into a siloed system.
Purchase order management systems, such as Tipalti Procurement, include Amazon Punchout functionality, meaning that employees can order from Amazon to automatically create purchase requests within Tipalti.
FAQs
What is a PO management system?
A PO management system is a set of processes put in place within the larger procurement team that can be automated and used to create and manage purchase orders from approved purchase requesitions, creating visibility into the purchasing and approval processes and spend management.
How does a PO system work?
An automated PO system, or PO management software, will centralize and streamline all the components of the purchasing process that slow teams down. Documents, ticketing and messaging, insight into the budget, and approval flows will be organized and visible so nothing gets lost or causes a bottleneck.
Stop Wasting Time and Money Without a Cloud-Based PO System
Time is money. From eliminating human error and bottlenecks and increasing stakeholder visibility–you can’t afford not to have a purchase order management system for your midsized or enterprise-level company. Learn more about best practices for technology-empowered procurement systems in our latest webinar.