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August 2017

A construction site may need to use a non purchase order

What is a Non Purchase Order and Why it Might Not be a Good Idea?

By | Purchase Order Plus | No Comments

Is using a non purchase order a good idea or not for your business? While non-POs do have some advantages over regular POs, you should still be careful when using them and this article explains why.

In business, some things have to be done quickly. For example, let’s say that your construction company urgently needs some material or the building project you are working on right now stops. Normally, what would happen is something like this: The team manager sees they are out of material and  informs his superior about it. His immediate boss then forwards John’s request to his manager, who in turn sends the request to the Finance department. All the while, every person in that chain has to approve the purchase before sending it to the next. This is the basis of a purchase order and the whole process can take a few days, even a week (maybe even longer if your company is using outdated paper orders).

But what happens when you don’t have the time to wait for everyone’s approval? Like in our example with a construction company, waiting for the purchase of urgently needed material (for instance cement) can slow down the entire project and cause your company to lose money. In this case, some companies use something called a “non purchase order” or non-PO.

How Does a Non Purchase Order Work?

A non purchase order is initiated by the employee who needs the material in the first place, rather than the procurement officer. Because of this, it is also often referred to as a “self purchase order and it basically serves to speed up the purchase process since the employee who is making the order only needs an approval from his immediate superior. Once he has it, he can look for a vendor himself and buy what he needs.

Many companies see non purchase orders as a faster way of getting the material they need. For example, construction companies use non-POs.

Why Non Purchase Orders are Not a Good Idea?

On the surface, non-POs look like a very good idea as they can make the order process go much quicker. However, while this may be the case, a non purchase order carriers a lot more disadvantages than advantages.

Here are just a few you should keep in mind when considering self purchase orders:

  1. No one is truly accountable for them

One of the main points of purchase orders is that the person in charge of them (a procurement officer or a purchase manager) can make sure that he gets the best possible deal from the vendor for his company. That’s not the case with non-POs. When an employee sends a non purchase order, on the other hand, he often does not think about buying at the best price (rather he is concerned with the delivery speed). This can lead to overspending.

  1. Non purchase orders often lead to fraud

Unfortunately, some employees may use non purchase orders for fraud. For example an employee can make a self purchase order to buy something for himself and not the company. Or, he can make a deal with the vendor to order from him in exchange for some personal benefits.

  1. It’s harder to check vendors

Without a purchase order, it is nearly impossible for a company to check on the status of its order. Yes, a self purchase order can make the purchase faster, but what about shipment delays or some other problems? SInce there is no purchase manager, there is no way to check the vendor’s performance.

Non-POs are not good for your business. If you want to speed up your company’s purchase process, you should instead use solutions like Purchase Order Plus, which allows you to easily create and control purchase orders with Xero via mobile application.

Purchase order

What is a Purchase Order (PO) and how can your Business Use it?

By | Purchase Order Plus | No Comments

The success of your business hinges on many different things. One of these is your ability to manage requests from buyers to suppliers. A document that can help you do this more easily, protect both the buyer and the seller legally and provide a number of other benefits for both sides is a purchase order. Read this article to learn more about what purchase orders are and how you can effectively use them to help your business be more successful.

What is a Purchase Order (PO)?

So what exactly is a purchase order or a PO? Basically, this is a document (it could be a normal paper document or an electronic document) that a buyer sends to the supplier or a vendor, along with an order request.

This document serves as a risk-protection for the vendor when the buyer orders supplies on account and he needs to deliver those items before payment is made. A purchase order then allows the supplier to track payments as they are made for different orders. In addition, a PO also lets the vendor compare the inventory they have on hand with the one they shipped to the buyer.

Once the seller accepts the purchase order, it becomes legally binding for both parties. This means that, in the case the buyer refuses to pay for order for any reason, the PO will protect the seller.

How Does a Purchase Order Look?

A purchase order usually looks like any standard document and it can be in non-electronic, paper form or in electronic form. It typically contains the following items:

  • Company information
  • Vendor information
  • Shipping details (where to send the items)
  • Order information (type of product, its quantity, price, etc.)
  • Billing address (what address to bill the purchase order to)
  • PO number (this number is used to more easily match the purchase with the shipment).

Each of these items is necessary for a successful purchase order. Today most PO software comes with fields for every one of these. All the buyer needs to do then is to fill in the fields prior to sending the order to the supplier.

How Can You Use Purchase Orders in Your Business?

A business that has no standardized way to manage purchase requests can hardly control how and where its employees spend its hard-earned money. This can lead to a potentially serious problem in the future, but with purchase orders you can always be ahead of it.

When an employee in your organization needs new supplies or material for his work, he will typically send a requisition to the manager, who can then make the necessary purchase. For this purpose it is best to use standardized requisition documents that all your employees can use and as a result save time.

This will also allow the manager (or another person tasked with approving requisitions) to submit orders in bulk. What this will do is allow the approver to get bulk discounts (if the vendor offers them) and it will also save processing time.

Based on these requisitions, the approver can contact the seller and tell them that they will be sending a purchase order before they make payments. This is called a “purchase order process”. The PO is then sent and after the vendor reviews and approves it, he can send the ordered material or supplies to the shipping address indicated by the buyer.

As you can see a purchase order is a very important and useful document that you can use to more easily handle your employee’s requisitions and order items from vendors. Still, a PO can be lacking, so be sure to check out Purchase Order Plus. This will allow you to customize your POs sent through Xero.

Why Businesses Should Be Using Purchase Orders

By | Purchase Order Plus | No Comments

An efficient and streamlined purchasing process can help your business in many ways. When your company places a purchase order with a supplier, the document that you issue must be absolutely clear and unambiguous.

Among the points that a purchase order must address are the specifications of the item that you are ordering, the quantity that you require, and the payment terms. The document should also state the date by which the items are to be; supplied and the location to which the goods are to be delivered.

An error in the purchase order or even some information that is open to misinterpretation can have serious consequences. You should not forget that the document being issued by your company has legal sanctity. A mistake or an inaccuracy could have financial implications.

It is possible to automate your purchasing process and make it virtually error-free. Purchase order software can provide your organisation with a range of benefits.

Maintain adequate stock levels

If you run short of certain items, your business may suffer a setback. It is absolutely essential that you track your inventory levels and place an order at the correct time.

When you issue a purchase order, you should keep the time period that the vendor requires to fulfill it in mind. Placing an order too early will result in blocked capital and excess stock. A delay in order placement may result in lost production or sales.

While it is perfectly possible to achieve the targeted results with a manual system, an automated process could do the job with a far greater degree of efficiency.

If you use purchase order software you could access customised reports that provide you with details about outstanding orders and expected delivery times. The flexibility that an automated process provides could give your business great benefits.

Control your costs

Every business owner tries to ensure that purchases are made at the least possible cost. But orders are often placed on suppliers who charge more than others for the same product. This could be done to meet quality requirements. Some vendors may charge more as they are capable of delivering large quantities at short notice.

Monitoring the orders that you have placed and keeping a track of deliveries, actual expenditure against budget, and stock levels can be a complicated exercise. A robust purchase order system that allows you to review open orders and deliveries and which ties up with your accounting records can be invaluable.

For example, deliveries against a single purchase order could be made in parts. Your purchase order software must be capable of tracking multiple invoices against a single order.

An automated system can offer several other advantages as well. When a request is put up for placing an order, the software could automatically generate data that reveal whether it is within the approved budget. This would give the approving authority the required details to make an informed decision.

Gain a competitive advantage for your business

A purchase order system that functions seamlessly with your accounting software can help you meet your business objectives. One significant benefit that you will gain is that you will never be faced with an unexpected expenditure resulting from a purchase order that has been placed but not recorded.

Your purchase order software will track deliveries that remain to be made. You will also have a clear idea about the amounts falling due for payment in the coming weeks and months. The different departments within your organisation would use the same set of data. Identifying problem areas related to inventories would be much easier.

Identify inefficient vendors

If your company uses well-designed purchase order software, it will be possible to generate a variety of reports that can aid management in decision-making.

Many medium-sized and large firms use multiple vendors for the same item. At times, this is a deliberate strategy used by a company to widen its supplier base and have an alternate to its primary vendor. But there are situations where a particular supplier may charge exorbitant rates or repeatedly fail to meet delivery commitments and yet remain on a company’s approved list.

A purchase order system that provides various types of reports can help in identifying such instances.

A must-have for your business

If you are able to improve your purchase process even marginally, it could have a significant impact on your business results. Purchase order software that works as an add-on to your accounting software produces the best results.

If you implement and use the system in the correct manner, you will be in a position to keep a detailed track of all your purchases in an easily accessible manner. Additionally, you will be in a position to curtail unnecessary expenditure and monitor the amount that you have spent or committed to spend on various items.