Bonus: Purchase Order System Checklist

Wondering how to automate purchase orders and put an end to manual processes that slow your team down? An automated purchase order process provides you with:

1. A centralized place to track all your purchases. No more spreadsheets to track your purchase orders.
2. An automated process to request and generate purchase orders without any manual process.
3. A robust cost control process that is supported by an approval workflow process and a detailed audit trail.
4. A comprehensive spend management process that helps you drive cost savings.

We will discuss automating the manual purchase order process using our tool ProcureDesk.

Streamline Purchasing With An Automated Purchase Order System

The following sections will cover the core steps needed to automate your purchasing process. We will show you how purchasing automation software eliminates the need for a time-consuming PO process and provides real-time visibility into your spend.

Here is a step-by-step process you can follow to automate the purchase order process. These are the most common steps in a purchasing workflow but feel free to optimize it as per your business process.

Step 1: Automate The Purchase Request Process

The first step toward purchase order automation is implementing an automated purchase requisition process.  Once a purchase request is approved, a PO is generated using the automated PO process.

The purchase request process has the following parts:

Purchase Request Form

The purchase request automation starts with providing your users with the ability to create electronic purchase requests.

For example, your employees create different purchase requests – Travel, purchase, petty cash, etc.

They are probably filing up a form. In this step, we get rid of the form. One of the benefits of purchase order automation is a paper-free digital procurement process.

Here is an example of an electronic purchase request:

Couple of things to note here:

You want the procurement system to populate the user department, address, etc. It avoids any redundant data entry and makes it easier to create purchase requests.

For example, In the screenshot below, you can see that user defaults are automatically populated.

Vendor Catalogs

Vendor catalogs make it faster to create purchase requests.

Without vendor catalogs, the users must type in a description of what they need to purchase, which leads to human error.

Some users might just paste the URL of the vendor’s website so that a buyer can review the items and place the order on the website.

It takes a lot of time, and the process is error-prone due to manual data entry.

For example, a user might type in the wrong description or the wrong unit price.

With vendor catalogs, you can avoid all these data entry errors and make the purchase request process easier for the employee.

There are two types of vendor catalogs:

Vendor Managed Catalog:

The vendor catalog greatly enhances the purchasing experience for employees.

With vendor-managed catalogs, you get an online purchase experience without spending time on creating and managing catalogs.  The PO automation solution automates this entire process so that there is manual copying of the data from the cart.

For example, if you purchase supplies from Amazon.com, then instead of people using different accounts and credit cards, you can centralize the purchasing experience.

ProcureDesk links with your business account, and anyone can select what they need to purchase.

Here is an example of a user selecting a battery purchase.

Once the user selects an item to purchase, they just need to submit it for approval.

After the user clicks on the “Submit this item for Approval button”, the data from the vendor catalog gets copied to the employee’s cart.

The employee can then submit the request for approval, and the system automatically routes the request for approval.

Once the request is approved,  ProcureDesk sends the purchase order to Amazon.

We use Amazon as an example. ProcureDesk supports integration with more than 150+ providers.

Buyer Managed Catalog:

Most small vendors don’t have websites or online catalogs.

If the vendor is offering a small list of items, it probably makes more sense to create an internal catalog or a buyer-managed catalog. Here Buyer refers to someone from the purchasing team responsible for the catalog management.

With a buyer-managed catalog, you maintain the pricing and other details. The vendor can provide these details in a spreadsheet that you can upload into the purchasing system.

Here is an example of an internal catalog:

An employee can easily create a purchase request by selecting the items they need to purchase. This also allows you to limit the purchase to preferred vendors.

The system populates the rest of the data in the employee’s shopping cart. The user can then send the purchase request for approval.

Step 2: Automate The Purchase Approval Process

Automating the approval process eliminates the email back and forth between requesters and approvers.

There are two main issues with the manual approval process.

1. Employees need to know who needs to approve their purchase. That considerably slows down the purchase order approval process.
2. Employees need to continuously follow up or provide additional details about the purchase, which takes time.

Process automation of the approval process solves both problems.

You first set up an approval workflow so that the employee doesn’t need to worry about the appropriate approver.

You can set the approvals based on the department, the amount of the purchase, or the purchase location.

An effective purchase approval process is easy and faster.

Here is an example of an approval process:

When the user creates the purchase request, the system automatically identifies the appropriate approvers and sends the request for approval.

The approver gets notified using email, Slack, or through the notifications on the phone.

Here is an example of an email approval request:

The system sends automated reminders so that the approvers don’t forget to approve the purchase order request.

ProcureDesk mobile app provides an easy way to approve purchase requests for employees who are always on the road.

They can see all pending requests and approve them quickly. Whether you are using the approvals for invoice process or purchase orders, the mobile functionality offers an easy way to manage approvals.

Here is an example of how easily a user can approve the purchase request using a mobile app:

Step 3: Automated Purchase Order Management

After the requisition is created and approved, you need to issue a purchase order to the vendor. Sometimes, a procurement team is responsible for dispatching the purchase order to the vendor.

Not every purchase requisition needs a purchase order.  For example, an employee can directly purchase an item from a vendor’s website.

But most large vendors will ask for a purchase order before sending the items to you.

Here is an example of a digital form of the purchase order form generated by the system:

You can pick and choose from different purchase order templates to fully customize the look of the purchase order document. You would need to print the following information on the purchase order document.

1. Order contact and their details.
2. Item details
3. Payment terms.
4. Delivery date
5. Any special contract terms, including delivery terms and.

You can add the authorized signatories signature on the document.

Or you can just say something like:

“This is an electronic purchase order and doesn’t need signatures.”

Once the purchase order is approved, there are multiple ways to issue the purchase order to the vendor.

The most common methods are email and electronic purchase orders. All large vendors like Amazon.com accept electronic purchase orders.

An electronic purchase order uses an industry standard like EDI or cXML to transmit the purchase order data to the supplier.

For small businesses, email is the best way to send the PO.

Here is an example of a system-generated purchase order email to the vendor:

You can also request the purchase order confirmation with the purchase order email.

Or you can use the email to provide standard instructions on how a vendor should process the purchase order.

Step 4: Track Purchase Orders Using Purchase Order Software

Tracking purchase orders requires a lot of effort and back and forth with the vendor.

It is important that along with automating the purchasing order creation and dispatch, you also automate the purchase order tracking . Order tracking provides complete visibility to all stakeholders.

Here are the three areas of order tracking that need to be automated.

Order Acknowledgment

An order acknowledgment is a process for the supplier to confirm that the vendor has received the purchase order.

Often, you are waiting for the product, and the vendor never received the purchase order.

Especially with uncertainty in the supply chain, it is important to keep track of your purchase orders.

With ProcureDesk, there are two ways vendors can acknowledge the order.

You can ask them to acknowledge using email, or they can use the ProcureDesk supplier portal to provide an order acknowledgment.

Here is an example of how a vendor can acknowledge the purchase order:

The supplier portal allows suppliers to provide feedback at the line level. So if a specific purchase order line is back-ordered, they can easily mark it and provide expected shipping dates.

Advance Ship Notice (ASN)

When a vendor ships the product, they provide the shipping information so that you can track the order.

It is called ASN (Advance Ship Notice)

With ASN, you can track the order while it is in transit.

An ASN contains the tracking information and a list of items the vendor is shipping.

Here is an example of ASN:

The ASN can be directly submitted by the vendor using the vendor portal, or they can email the information to the buyer.

The buyer can then enter the information in ProcureDesk.

The system then tracks the delivery and sends an email notification to the buyer when the product arrives.

Purchase Receipts

Purchase receipts allow buyers to confirm that the supplies delivered the product.

They can also mark what was received and what is still pending.

Here is an example of a purchase receipt that a buyer creates.

Purchase Order Receipt

With a purchase receipt feature, you can do the following:

1. Create a full or partial receipt.
2. Provide other information like packaging number and attach relevant documents like packaging slip.
3. Resolve any quantity errors. For example – you ordered a quantity of 10, and the vendor sent you 20.
4. Perform three-way matching, which enables AP automation.

Step 5: Get Granular Visibility Into The Company Spend

With purchase orders, all the spending gets pre-authorized. Since all purchasing data is in one place, you can get granular reporting about spending behavior and an overall Spend summary.

Here are a couple of ways in which ProcureDesk provides granular spend visibility.

Spend Dashboard

Spend dashboard provides an easy way for management to track overall spending.

Here is an example of overall Spend.

The Spend dashboard provides you with granular visibility and answers the following questions:

1. What are we purchasing?
2. Who are our top vendors?
3. Who is purchasing the most in the company?

You might be interested in understanding how your company burns cash month to month. The spend trend report answers that for you.

Here is an example of spend trend:

With the month-to-month trend, you can assess your monthly averages and identify any anomalies that deviate from the averages.

Spend Reporting

With spend reporting, you can see detailed spend data without collating multiple spreadsheets from different systems.

For example, if you want to see the details of all the items that you have purchased in the last 12 months, the purchase order report provides you with all those details in one snapshot.

Here is an example of a purchase order report:

If you are interested in understanding your cash flow requirements, the open purchase order reports provide you with an easy way to track them.

Here is an example of an open purchase order report:

The reports summarize total committed spending, invoiced, and pending invoice amounts.

If you are interested to know how many vendor invoices are not received by your employees, then the invoiced but not received report provides you with an easy way to track that.

Here is an example of an invoiced but not received report:

You can use this information to follow up with the stakeholders and determine why they have not received the purchase orders yet.

Step 6: Integration With The Accounting Software Or ERP

Automating the purchase order also requires that the purchase order is sent to the accounting software so that you can create an invoice against the purchase order.

Without integration with the accounting system, keeping the purchase order data in sync between the purchase order system and the accounting system is difficult.

There are two aspects of integration with the accounting software:

Master Data Integration

A lot of data is required in the purchasing system to create a purchase order. For example, you need the supplier information, chart of accounts information, and cost codes.

If you are using QuickBooks, you need additional information like Classes and Project codes.

You might need customer information assigned to the purchase order to tag the expenses to the correct customer.

With the master data integration, ProcureDesk keeps the master data in sync with the accounting software.

ProcureDesk automatically pulls the required master data from the accounting system with the automated data feeds.

You always have the latest chart of accounts, suppliers, and other cost codes that you need in the procurement system.

Purchase Order Integration

Master data integration allows you to keep the master data in sync. With purchase order integration, you can ensure that you don’t have to spend time manually creating the purchase orders in the accounting system.

With purchase order integration, ProcureDesk automatically syncs the purchase order information with your accounting system. ProcureDesk offers integration with the following accounting packages:

1. QuickBooks Online
2. QuickBooks Desktop
3. Xero
4. Sage Intacct
5. Netsuite
6. Microsoft Business Central

Now Your Turn!

This article covers the six-step process to automate the purchase order process.

Using ProcureDesk, our customers see the following benefits in the first 30 days of the implementation.

1. No more paper forms for creating purchase order requests.
2. Reduced purchase order cycle time by at least 40-50%.
3. Greater visibility into the Spend and better cash flow planning for the finance team.
4. No more surprise invoices that ruin your working capital needs.

You can now use these six steps and patch together a purchase order system or invest in a purchase order solution. ProcureDesk automates the purchase order process and provides you with better control over your Spending.