A messy, inefficient, and error-prone purchase order management process slows your business down.

Without a structured purchase order management system, you risk wasted time, rising costs, and limited visibility into spending. Poor PO management can also strain supplier relationships, leading to delays and missed opportunities.

The solution is a streamlined purchase order management strategy backed by the right purchase order software to improve efficiency and control.

In this blog, we’re going to talk about:

1. What is purchase order management and why is it important?
2. How does purchase order management software work?
3. The benefits of optimizing purchase order management.
4. How to choose the best purchase order management software for your needs.

If you’re ready to improve your procurement processes, check out how our tool, ProcureDesk, can be the solution you need. Our team of experts is here to guide you through its features. Click here to see it in action

Let’s dive in!

What Is Purchase Order Management?

Purchase order management is the process of creating, tracking, and completing purchase orders. It makes sure businesses get the right products and services at the right time while keeping costs under control.

It covers everything from start to finish of the purchase order management process. From creating purchase orders (POs) for needed items to sending them to suppliers, tracking deliveries and invoices, and finally making payments. Without a structured process, businesses risk delays, overspending, and supplier disputes.

Here’s how purchase order management works.

Creating And Sending Purchase Orders

Purchase order management involves being specific with the items ordered. Your procurement team creates purchase orders with key details like item descriptions, quantities, prices, delivery dates, and payment terms. Most businesses use purchase order management software to automate this process. Before sending a PO to a supplier, it typically goes through an approval workflow to ensure accuracy.

Tracking Purchase Orders And Deliveries

When a PO is sent out, your purchase order management system tracks the status. This includes updates such as if it’s already been accepted by the vendor, when it’s expected to arrive, and other potential delays that may come along the way. Using PO tracking software reduces manual follow-ups and improves visibility.

Matching Invoices And Payments

When an order arrives, businesses check the purchase order, invoice, and delivery receipt to confirm that all details match.  This step is known as three-way matching. Invoices are processed and verified before payment is made. This is to ensure accuracy and prevent overspending.

Reporting And Analysis

A good purchase order management system provides insights into spending habits, supplier management, and cost-saving opportunities.

Data like these will help your procurement team identify cost-saving opportunities, make better negotiations with vendors, and help you manage your inventory levels better.

What Is Purchase Order Management Software?

Purchase order management software is a tool that automates and manages the complete PO management life cycle.

This can automate the manual time-consuming tasks of creating and approving purchase orders.

How does it do it?

It automates the purchase order process by providing an easy way for employees to make purchase order requests, route the request for approval, and dispatch the purchase order to the vendor.

A purchase order management system makes automating your company’s procurement activities easier!

Click here to see it in action

ProcureDesk is purchase order management software built for growing businesses that need better procurement management without adding complexity. We built it for CFOs, Controllers, Accounting Managers, and Operations Managers who manage 50+ purchase orders or 100+ invoices per month.

With automated approval workflows, real-time budget tracking, and seamless integrations with QuickBooks, Xero, and other accounting tools, ProcureDesk eliminates human error and discrepancies and improves compliance. Companies in biotech, education, construction, professional services, manufacturing, climate tech, and non-profits use ProcureDesk to streamline purchase order management.

Key Features Of Purchase Order Management Software

Let’s look at some of the main features of purchase order management software to better understand the PO process.

Purchase Requests

A purchase order management system should allow employees to create and submit purchase requisitions with ease. Purchase requisitions allow an employee to request a product or service.

Employees create a request from catalogs or type in what they are looking for and then submit the request for approval.

The typical flow is that a requisition gets routed for approval, and a purchase order gets issued to the vendor once approved.

Using purchase order automation software helps reduce cycle times by eliminating the extra step of converting requisitions into purchase orders.

In our experience, a purchase requisition only makes sense in the following scenarios:

• A procurement team needs to review the requisition and decide whether to get additional quotes before purchase.
• The finance team must review the purchase for accounting and other budget details.

If you don’t have a procurement team, you are probably better off implementing the purchase order process. You can still set up different workflow conditions to meet your compliance requirements.

The main benefit of directly using purchase orders is significantly reducing the cycle time. You don’t have the additional step of converting a requisition into a purchase order.

Related: Purchase Order Vs. Invoice: Understanding The Key Differences

Catalogs For Repeat Purchase Orders

If you review your purchase transactions, you will notice that 40-50% of items are repeat purchases. So, instead of having the users do data entry repeatedly, why not create a catalog of these items so that it is easier to create requisitions or purchase orders for repeat purchases?

Catalogs are not only helpful for reducing the time spent on creating requisitions, but they also have some additional benefits.

1. Since the items are in the catalog, it is easy for the users to find the product they want to purchase. So, if you have a preferred vendor for specific categories, catalogs help you route more spending through preferred vendors.
2. It provides a user-friendly interface, an experience similar to online shopping.
3. Since the items are purchased from preferred vendors and at the preferred price, you could automate the workflow for certain small items. For example, all office supplies orders under $100 don’t need approval.

Punchout Catalogs

Catalogs are helpful, but one of the biggest drawbacks is that you still need to maintain vendor catalogs.

Now, if you have many items being purchased, this could be full-time work for buyers. Let’s say you want to build a catalog for Amazon.com purchases – first, the number of items is huge, and then the price keeps changing.

That is where punchout catalogs make more sense.

A punchout is a catalog that the supplier manages. So, instead of maintaining the catalog yourself, the purchasing system links to the catalog and pulls the items and pricing as needed.

Let’s continue with the Amazon.com example. ProcureDesk supports integration with Amazon.com so you don’t have to maintain the catalog.

The added advantage is that all purchases are routed for internal approvals before placing the order with the supplier.

So you get the best of both worlds: an awesome purchasing experience and added purchase compliance.

Purchase Order Workflow And Approvals

A PO management system should include customizable approval workflows for better cost control. If your main objective of purchasing automation is cost control, then purchase order approval is a key feature.

With purchase approval, you can easily route the requisitions for approval to be authorized before you place the order with the supplier.

Setting up cost controls is easier than you think. Schedule a demo and find out in 30 minutes or less.

For cost control, you want to design a purchase approval process so that you can control the majority of spend but are not becoming a bottleneck. You should be able to set up different approval limits for different user groups.

Common examples of the purchase approval process include:

1. Purchase authorization based on the dollar amount.
2. Purchase authorization based on the purchase category. 
3. Purchase authorization based on the department and business units.
4. Purchase authorization by the owner of the budget if the items exceed a certain threshold.

Don’t worry about handling every scenario. Focus on 80% of the spend, which should be covered by not more than 20% of the transactions.

Avoid setting up complex purchasing workflows for approvals. The system should support custom rules or approval workflows but keep it simple. It should be easy to explain and easy to follow.

There are two types when it comes to purchase orders:

1. Standard purchase orders
2. Blanket purchase orders

Blanket orders are recommended for service or bulk purchases where the quantity for each order is not known in advance.

To make the approval process easier we recommend creating blanket orders for repeat purchases.

Purchase Order Creation And Dispatch

Once the requisition is approved, a purchase order must be sent to the supplier. So, this functionality focuses on converting a requisition into a purchase order.

If you are using requisitions, the purchase order doesn’t need additional approvals.

You could have a fully automated process where the purchase requisition is automatically converted into a purchase order template without further review or approval.

The purchase order management software should be flexible to support different PO templates. With custom PO templates, you can customize the look and feel of the purchase order.

Alternatively, you could have a review process where each requisition is reviewed and then manually converted into a purchase order.

Your purchasing system should support multiple PO transmission methods to achieve maximum efficiency.

Each supplier might have a different PO process requirement based on the sophistication of their sales order process. Some of the common ways to send the PO to the supplier are:

1. EDI – Electronic Data Interchange
2. cXML – Common Extensible Markup Language
3. Emails

As we mentioned earlier, if you are a small team, then you might as well use purchase order functionality directly without creating requisitions.

Related: Purchase Requisition Vs Purchase Orders

Tracking Purchase Orders

A purchase order tracking system should provide real-time order updates so employees can check delivery status without contacting buyers. The most common question of employees to buyers is when their order will be delivered.

So it is essential to have order-tracking capabilities within the PO tool so that the requesters can track their orders without calling people.

From an order-tracking standpoint, the following functionality is important to have in purchase order software:

1. Ability to see purchase order acknowledgment from the vendors.
2. The vendors should be able to self-acknowledge the purchase order without calling the requester.
3. When the order ships, the user should be able to get a notification of the order along with tracking information.

Receipt Tracking For Purchase Orders

AP teams spend considerable time chasing people to know whether the material has been received so that they can post the invoice. No one likes chasing invoice approvals.

The solution is easy, you can request a receipt to be created in the system to know when the product has been received and invoiced is ready to pay.

The challenge is that most end users hate to create receipts. They receive the product, which is the end of the transaction for them. 

So, to make sure that users are creating the receipts, the system should:

1. Generate a request for a receipt when the order is delivered. For example, if you have an order tracking number and the status of the order changed to “Delivered” then that could be a trigger to generate the receipt.
2. Make it easy so that the receipts can be created by answering a simple confirmation email.
3. Send reminder emails if the receipt is not created in the first request.

ProcureDesk streamlines receipt tracking. We notify users to upload photos of receipts upon order delivery. Our system detects delivery status through tracking numbers and sends timely reminders. This helps with prompt receipt documentation, reducing delays in invoice processing.

Purchase Order Reporting

A purchase order management tool should provide detailed reports on procurement activities, supplier performance, and budget tracking. Reporting is important for two reasons:

1. It gives you visibility into the current process.
2. It provides you with spending information for better decision-making.

Your purchase order management system should be able to provide standard reports. Some of the common reports are discussed below.

1. Supplier, category, department, etc, breakdowns of total spending.
2. Ability to review line-level data and do a unit cost analysis.
3. Reports for tracking orders that are not approved so that you can accrue the expenses correctly.
4. Orders that are placed and have not been received so that you can follow up with the vendor.

ProcureDesk provides real-time dashboards and reports. You can track spending across all departments in one place. This visibility makes it easier to manage budgets and spot cost-saving opportunities.

Inventory Management With PO Software

A purchase management solution should also support inventory tracking. With inventory management, you can keep an accurate stock of what you have in your warehouse.

Effective warehouse management allows you to track stock at multiple locations and release stocked items to employees.

Typical functionality includes maintaining min-max levels to maintain adequate stock levels. You should also be able to track on-hand inventory levels across different locations.

ProcureDesk helps businesses track inventory across multiple locations. Users can set up minimum and maximum stock levels and reorder points to prevent shortages. The system updates inventory automatically when new items arrive or when stock is used.

Businesses can track inventory in three ways:

1. Manual Releases – Employees record when and why they take stock, keeping track of usage.
2. Purchase Requisitions – Employees can check available inventory before ordering. If stock is available, the system creates an inventory order for approval.
3. Physical Inventory Counts – Teams can upload stock reports after regular counts to keep records accurate.

ProcureDesk also provides an inventory valuation report, showing stock levels, total inventory value, and pricing based on LIFO or FIFO methods. This helps businesses reduce waste and maintain proper stock levels.

Purchase Order Management Software vs Procure To Pay Automation

Purchase order management software can fall into two categories. Purchase order management software or procure-to-pay (a.k.a P2P) automation.

Note: We will interchangeably use purchase order software, purchase order management software, and purchasing software.

Let’s look at a high-level difference between the two categories.

Purchase Order Management Software

Purchase order management tools focus on automating the purchasing process.

The basic assumption in this scenario is that the invoicing and matching process lives in the ERP/ accounting system.

So, for example, if you are using QuickBooks for accounting, employees would create purchase orders in the purchasing system, but the Accounts Payable team would still key the invoices in the AP system.

Pros

1. This approach is simple to implement, takes less time, and costs less money.
2. You need to work with fewer stakeholders to get buy-in because the scope is limited to purchasing.
3. The training is more straightforward because you train fewer people for the new purchase order management process.

Cons

1. Invoices need to be manually entered in the ERP or accounting system.
2. You must still match the invoices manually with the purchase order management system.
3. The invoice approval workflow needs to be managed manually or you need to implement a different process for managing invoice exceptions and approvals.

Procure To Pay Software

Procure-to-pay software allows you to automate the purchasing process AND helps you streamline the supplier invoice process.

With procure-to-pay software, you get an integrated purchase order and invoicing process in one system, increasing the efficiency of the end-to-end purchasing cycle.

The procure-to-pay system would then send the invoice to the accounting system for booking the cost and paying the vendors.

Pros

1. You gain better efficiencies because the entire purchase-to-payment process is automated.
2. There is less compliance risk because an automated purchase order management process leaves an audit trail.
3. You can process invoices faster and capture more early payment discounts.

Cons

1. Takes more time to implement since you need to automate the whole process.
2. The decision time might increase if the involvement of stakeholders increases.
3. It could cost more because of the added procure-to-pay features.

The good news? You can use ProcureDesk in either way. Just for purchasing or as a full procure-to-pay solution.

What Are the Benefits of a Purchase Order Management System?

Let’s look at the key objectives and benefits of purchase order automation. It’s important to identify the objectives to justify the investment in purchase order automation.

ProcureDesk has worked with hundreds of companies, and the objectives for purchase order automation generally fall into 3 areas.

Cost Control

As companies start growing, a common concern among CFOs and owners is that they lack a cost control framework. They are often concerned about going over budget and cash flow.

A common mechanism deployed to prevent going over budget is having senior management approve all purchase requisitions. That is not feasible because it takes a lot of senior management time.

Nobody likes to spend a considerable amount of their daily hours approving requisitions!

Another common scenario is that 80%+ of your purchases are on credit cards. There is no pre-authorization of spend, and that leads to budget surprises.

So, if you are struggling with cost control, your objective should be to implement a cost control framework that frees up management time and drives accountability for mid-management.

Better Spend Visibility

Spend visibility means having granular insights into your spend across the supply chain. If you have better spending visibility, you will make better investment decisions.

For example, you did a quick general ledger analysis and noticed you are spending $1M monthly on marketing.

Is this $1M on ads, content creation, or agency fees?

Let’s say you knew that out of $1M, $200K is on online ads. Then, you can ask specific questions on how online ads contribute to lead generation goals.

Sometimes, it is not a decision-making question; you probably don’t want to wait for the invoice to show up for accruing the expenses.

So, if you have advance visibility into purchase requests, that data can be used for accruing expenses.

Purchasing Process Automation

This is probably the most common objective for the automation of the purchase order process. As companies grow, they realize the pain of disjointed purchase authorization and the invoice reconciliation process. It’s then that they look to optimize.

This results in a lot of back and forth in understanding who approved the purchase order and who should approve the invoice.

So, the objective should be automating the end-to-end purchase-to-pay process to have an integrated purchase and invoicing process.

Ongoing Changes and Support

One often overlooked benefit of effective purchase order management software is ongoing maintenance and support. Cloud-based procurement software is great because the vendor manages and supports it.

Think about the following when selecting:

1. How easy is the system for both end-users and administrators? Can users complete a standard requisition or purchase order without needing a help manual?
2. Can you make the configuration changes independently without raising a support ticket?
3. If you have to raise a support ticket, how responsive is the support team?
4. How long does it take for the support ticket to be resolved?
5. How the vendor gathers customer feedback and incorporates that into the product roadmap.
6. Is the vendor transparent about its product roadmap?
7. How often does the vendor release new features? Ask for the release schedule. Is the release monthly, weekly, or every quarter?

We recommend that you rate your shortlisted vendors based on the above parameters. A simple scale of 1-5 can be used where 1 is the lowest and 5 is the highest.

At ProcureDesk, we pride ourselves on offering excellent customer support. Our team is always available by phone or online to assist with any questions or issues you may encounter. 

Integration With QuickBooks and Other Systems

The great thing about purchase order management software like ProcureDesk is that it integrates with your accounting system.

Here are some important considerations when it comes to purchase order management software integrations:

1. Does the system allow you to integrate purchase orders and invoices with the accounting system? That lets you implement the purchase order automation or the entire purchase-to-pay process.
2. Is the integration process seamless, or is a manual setup or development process required? You don’t want to maintain custom integrations because that increases the workload for your team.
3. How well does the system integrate with other payment platforms? If it is easier to implement, then that gives you the flexibility to design your processes

At ProcureDesk, we understand the importance of integrations. Our platform offers native integrations with popular systems like QuickBooks, Sage Intacct, Xero, Bill.com, NetSuite, and more.

The Bottomline on Purchase Order Management

Finding the best purchase order system for small businesses and growing medium-sized companies doesn’t have to be complicated. Follow these steps to choose the best purchase order management software for your business:

1. Identify the objectives for purchase order automation. That drives scoping and features requirements.
2. Create a high-level scope for automation. For example, purchase order automation or purchase order and invoice automation.
3. Create a shortlist of purchase order management features you need based on the scope.
4. Shortlist 2-3 companies that sell software for purchase orders and use the feature map to evaluate those vendors.
5. Finally, review the vendor’s support and ongoing innovation to ensure that the vendor remains viable in the long term.

ProcureDesk is built for small and mid-sized businesses that need to streamline procurement without adding complexity. With automated approvals, real-time spend tracking, and deep accounting integrations, ProcureDesk helps CFOs, Controllers, and Accounting Managers eliminate manual processes and spreadsheets. It’s simple purchase order software that is easy to use yet powerful when customized. See how ProcureDesk can help your business scale—schedule a purchase order management software demo today.