What is a Purchase Order?

A Purchase Order (PO) can be defined as a financial transactional document issued by a company to a supplier. It confirms that the organisation issuing the PO wishes to purchase goods or services, from the supplier, usually with quantities, and agreed prices and delivery details. It's a legally binding document detailing the items the buyer agrees to purchase at a certain price point.

Traditionally organisations relied on a paper PO format that passed manually through a company for sign off, that was then despatched to the supplier, by post, fax or other. This method was replaced in many companies with spreadsheet designs, which still suffered for the delays and inaccuracies of these manual style processes. Some still use the phone to place orders, that can lead to misinterpretation, resulting in the wrong goods being delivered, and accompanying delays, that may be critical.

With the advent and proliferation of computers, from desktops, to laptops, tablets and smart phones, the purchasing or procurement process can now be moved to on screen based format, providing a wealth of advantages.

What should a Purchase Order process consist of?

All organisations have the need to purchase goods or services form external suppliers in order to carry out their day-to-day business. These items may be regular on-going items or one off purchases, and may be time critical, for example in ‘just in time’ manufacturing structures.

In order to ensure the right items are ordered, at the right price and delivered in a timely fashion, a formal process is required. Purchases should be able to be made by any person with relevant authority in their role in the organisation, but then process the purchase request to others in the company, who are required to approve it. This may be based on a hierarchy e.g., department manager, or supervisor, then by value to others, perhaps including a ‘top level’ where Directors are required to authorise spends over a certain level especially if these may be capital purchase items.

At each stage of the approval process, authorisers should have the ability to see documents that support the purchase request e.g. quotations, or other supporting material, as associated documents, in order to justify the purchase request, and the action they decide. A function to allow an approver to return the request to the originator with comments, which the originator can act on e.g. amend the purchase requisition, will ensure that everyone in the process has the chance to have an input, prior to the Purchase Order being sent to the supplier.
Once all the approval processes have been completed, the final Purchase Order can be submitted to the supplier for action and delivery.

An electronic purchase order system will allow the customisation of this whole process, with all stages audited and reportable. And being electronic it will be available and workable on a whole range of devices from desk tops to tablets and even smart phones.

Here’s a typical overview graphic of the Purchase Order process:

Purchase Order Software - Purchase Oder Process
Cloud B2B - Purchase Order Software - Purchase Oder Process

Can Purchase Order Software be designed to match our specific business needs?

There are a range of standard packaged products on the market, that contain standard features and functions, but won’t be tailorable to each specific business. They are scaled and designed to be ‘out the box’ to keep the price down, which may or may not be suitable.

Some main stream accounts systems have a basic Purchase function, but these usually lack some key aspects and flexibility that a properly designed PO system provides.

In reality every business operates in a slightly different way, depending on their industry sector, so getting a ‘business fit’ is important in relation to a system providing the benefits – including ease of use- that a company requires.

In our experience over the last 10 years of providing purchasing solutions, every system we have provided has been tailored, in some cases to a high degree, to ensure the organisation gets the system matching their business needs. This doesn’t mean paying a lot more, as even in it’s base format the system has customised workflows, reports, goods receipting and a comprehensive administration module that allows full user roles and permissions functions..

The system is also scalable, in that you can start with just the Purchasing function version, and then add modules such as Supplier Invoice matching at a later date. And as business evolves, and processes change, the system should be able to  cater for changes required.

Is it difficult to implement a Purchase Order system?

As long as you follow a structured process in terms of designing the system features and functions you require, and involve key users in that process, then the answer is no.
Key in the process will be agreeing and signing off a System Specification that details all the agreed functionality and any special customisations that are need to make the system workable.
All such meetings (held via Teams) should also be recorded and shared, thereby avoiding issues of misunderstanding.

You should also have access to a system in a Test format once it has been built, so that the functionality can be checked against the agreed Specification, to ensure the system ‘does what it says on the tin’ before it goes live!

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