Construction industry Purchase Order System transforming your company's buying processes

A properly structured, approved digital purchase order, will ensure that your supplier will have clear instructions. From what has been ordered, including quantity and cost, to delivery dates and instructions as to the delivery location (that may be different to where the order originated), as well as your own terms and conditions. Clearly stating these dynamics minimises the potential for confusion and misinterpretation, and even duplication. You want the right goods delivered, at the agreed price, in the right time frame, especially if operating a ‘just in time’ manufacturing process of any kind- and your supplier will want to be paid in a timely fashion! A digital purchase order sent by email as a PDF to the supplier handles all these areas in a structured format – you can even send supporting documents such as technical briefings or drawings as attachments.

The obvious items such as listing the correct items (including part numbers where applicable) to be ordered, together with prices, delivery information, dates and any special instructions, will all need to be included. Additional information such as who in the company has ordered the items will help in the case of supplier queries. Your terms and conditions for the supplier are also key, as the PO forms the basis of a legal contract to supply.

A purchase order system is designed to put on screen the procurement process of raising and getting approval for items ordered by the company, that previously were paper or spreadsheet based. By doing so, not only will the process be fully auditable, but the approval process can be set based on value or company rules (e.g., departmental structure) to suit the business. Being digital, searching and reporting facilities will again be customised, and finance departments would have full visibility of all purchasing, both past, present and future, to make cash flow forecasting easier and more accurate.

This will depend on the size and complexity of the organisation. For small companies where the requirement and the approval process is straight forward, launching such a system to all relevant employees at the same time is sensible. Where the organisation has multiple locations, and more complex structures, then a roll out approach based of, say, a department / location at a time can have benefits, as the success on a smaller scale will assist in deployment to the rest of the organisation. Training is also key, and the modern approach is to use videos based on the final software version, available at all times to staff, as part of the system. In this way the problems of getting everyone together, without interruption – the classic issue- are avoided.

Purchase to Pay or PTP, is where you import and match approved Purchase Orders with supplier invoices in a digital purchase order system . With the ability to import delivery notes that can also be matched to Purchase orders and Invoices, the whole procurement process is managed in one software system. Add in the ability to extract data – such as approved supplier invoices- as a CSV file that can then be imported to an accounts system, that can then be paid, the purchasing cycle is complete.

An online purchase order system should have the function to import delivery notes that can then be matched to the original purchase order. In this way short deliveries or other discrepancies can be identified and actioned. A useful function is for the system to present only PO line items that have not been fully receipted to those which are looking to reconcile deliveries.

Data such as Purchase Order information -and Supplier invoices in a PTP version- should be available for export and importation to a target accounts system. To avoid the need for API development, a properly structured CSV file, with headings and columns set to match the requirements of the target accounts system, will provide an ideal format. Data can then be easily extracted and imported as and when required, also allowing a checking stage to be carried out by the finance team. This information can also be set to run as a report on a regular basis, ensuring the same information is not exported more than once.

Purchase Order Management is the process by which a company dictates the way all items purchased go through all the correct checks and balances. A digital purchase order system will put this process on screen, following the relevant approval rules required. Purchase Order raisers can send purchases for approval, with supporting documents and justification notes on a workflow based structure. Approvers should have the ability to challenge the PO raiser on any item such as price or justification, via the workflow, and the raiser to amend and re submit the purchase order, until all those in the approval chain are satisfied to proceed with the order.

The workflow process should match the internal rules the company wishes to adopt. For example, orders for items below a certain value may not require formal approval – noting that full visibility to orders placed is always available. Or all orders should have an approval process, that maybe based on the organization’s structure, or value, with finance perhaps being last in the approval chain internally. Once set, these rules should be changeable as part of the admin control available in the system. For ease once an approval task is initiated, the system immediately emails the next person in the approval chain to alert them to action required.

There are many advantages. Firstly, a digital purchase order system that is located in the ‘cloud’ can be accessed securely, at any time, day or night from anywhere in the world via the internet. Secondly there is no software or hardware for a company’s internal IT team to have to install and support – the system is run as SAS (Software as a Service) and all updates / security are part of the package. If the system is transactional based (meaning instantaneous updating of the data base structure) then all users are working on the most up to date information.

Most certainly. Size is not the important factor, it’s the requirement to keep a firm control on expenditure that is a key driver for businesses, small, medium or large. For many, especially in manufacturing, a large proportion of turnover maybe spent on purchases of raw materials and associated items. For a small business, having controls such as budgeting by department, company or project will ensure overspending will never be an issue and using workflow approvals for proposed orders will mean full auditability and visibility. A purchase order software solution will put all your key procurement processes on screen, with custom reporting and data export.