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December 2017

e-procurement is needed for office supplies, materials, equipment...

What is E-Procurement, How it Works and What are its Greatest Benefits?

By | Purchase Order Plus | No Comments

Every organization needs materials, supplies, equipment and such. The procurement of these is usually left to the procurement department, which did this through paper purchases. However, paper proved slow and unreliable and is now replaced in most organizations by Internet and computer technologies. In other words, e-procurement took over.

So what is e-procurement exactly?

Today, we identify e-procurement with Internet. But in fact, it has been in use for much longer than that. It is simply electronic data transfer used to make procurement faster and more secure than if done on paper.

Benefits of E-Procurement

However, what this short definition doesn’t showcase is all the benefits that e-procurement has for an organization using it.

These benefits include:

  1. Improved accountability via better transparency in the procurement process
  2. Lower cost of procurement process itself 
  3. Better relationships with vendors
  4. Decreased cost for production of goods and services
  5. Lower cost on selecting suppliers

What are the Applications of E-Procurement?

E-Procurement has several applications that your business can use. The Internet itself has opened many doors, and it allows us to use several tools for XML-based data exchange or Electronic Data Interchange Systems (EDI), among other things.

E-sourcing, e-tendering, e-auctioning and e-ordering have all but pushed out the traditional procurement process done by organizations. This includes sourcing and identifying suppliers, their solicitation, evaluating the best ones, negotiating contracts and finally managing contracts with suppliers.

With these, an organization can, for example, identify a potential seller (e-sourcing), bring all suppliers under one roof for an auctioning process (e-auctioning), or allow all employees to procure office supplies and materials that they need in their work (e-ordering).

Conclusion

Organizations need new material, supplies and equipment almost every day. These are often are necessary to continue  their business. They don’t have the time to wait too long, or their work might stop completely. This is why businesses must to leave paper-based procurement behind and switch to e-procurement as soon as possible.

Do you have any thoughts or questions about e-procurement? Let us know in the comments below this post and don’t forget to sign up for early access to Purchase Order Plus, our add on software for Xero mobile, which allows you to create, approve and send purchase orders from your mobile device with ease.

purchase order tracking used to have lots of paper involved

What are the Benefits of Purchase Order Tracking?

By | Purchase Order Plus | No Comments

Purchase order tracking has certainly come a long way from paper to electronic format. It seems like it was only yesterday that we had paper POs and needed 10 copies of it just to track the order. Fortunately, things have changed for the better in the last couple of years and now it has become much, much easier for a business to keep an eye on its purchase orders.

What Purchase Order Tracking Looked Like Before?

Before we start talking about the benefits of purchase tracking today, let’s remind ourselves what it looked like about a decade or so before.

Let’s say you had a company in the 1990s. This was the time before the widespread use of computers in offices, so you would still have a typewriter (and of course needed a person skilled in typing on it).

It still beats pen and paper, but is not far away from it. For instance, what happens when a typewriter breaks down (and they did)? You’d need to order some new ones.

And that is where the problems begin. To do something as seemingly simple as order a couple of typewriters, you would first have to fill out a purchase order form (mind you, you need to do this neatly and you don’t have a typewriter to do it on). Then, you have to send the form to the purchasing department in your company, which submits the PO to the supplier your company is working with.

All of that on paper. Talk about a paper trail. That’s not to mention that the supplier needed at least two copies of the PO for themselves. One was to go with the payment and the other was attached to the invoice they would send to your company. Your customer also needed to have a purchase order of his own, just in case, and finally, your company needed several, for the paperwork.

If you didn’t include all this paper copies of the PO, you could end up mixing up order numbers, sending the invoice to the wrong supplier or making some other kind of financially costly mess.

Technology Saves the Day (and Our Mental Health)

Luckily, as it is prone to doing, technology once again swooped in to save the day.

Today, unless your company is really stuck in the old ways of doing things (don’t expect to last very long like that), you are probably done with paper purchase orders, invoices and such and are doing everything electronically.

What this means is that, not only is there no more need for so much paper, but the purchase order tracking itself has become much simpler and streamlined.

So how would this process look for a company similar to the one in the previous example?

Let’s say your company needs new computers (because who uses typewriters anymore?). Someone notifies the purchasing department via email, internal online form or by simply calling them on phone (see, already there’s no paper orders).

The purchasing department manager then creates a purchase order. If you use an online order form, the PO number us auto-generated. Following this, the purchase department manager sends to PO electronically to the vendor, who creates a sales order in their order management system based on your PO. The OMS is then integrated with the customer’s purchasing system.

Since everything here is done pretty much automatically, there’s almost no chance of mixing the PO number, so purchase order tracking is much easier.

Conclusion

Electronic purchase order tracking can be a real lifesaver and something any business should look into, if they haven’t already. Not only does it make the whole purchase order process easier and faster, but it also saves the time for the company and its employees to spend their time in more creative and productive ways.

Do you have any thoughts or questions about purchase order tracking? Let us know in the comments below the article and don’t forget to sign up for updates and early access to our Purchase Order Plus software.

cash flow

10 Steps Improve Your Cash Flow Control and Stop the Leak

By | Purchase Order Plus | No Comments

Let me ask you a question. What do you think is the number one reason businesses fail? If your answer is bad business ideas, lack of execution, too much competition, not enough interest for what they’re offering or something along those lines, you are wrong. It’s the lack of cash flow control.

As much as 82% of businesses fail as a result of experiencing cash flow problems. This means that their boats are leaking somewhere and their cash is going through those wholes. The question is, do you have those same holes and what are you doing to plug them?

In this post, I will present you 10 vital step that you will need to make in order to have a better cash flow control.

1. Make a Cash Flow Plan (and Stick to it)

When driving a car, do you watch the road by looking constantly in the rearview mirror or do you look straight ahead? Of course you are doing the latter. So why would you drive your business by constantly looking back? I’m not saying that you shouldn’t do things like analyze your balance sheets and profit/loss statements, but if that’s all you do, you’ll be blind to what’s ahead of you. That’s what a cash flow plan is – to give you a heads up on future revenues and plan for expenses.

2. Forget Profit, Focus on Cash Flow Control

“Hang on, what?” Most SMEs don’t have a cash flow plan. But that doesn’t stop them from predicting their profit margins for the next five or six years ahead. And that is why they fail within their first year. They are essentially looking to far ahead and forget that, in order to survive, they need to have a solid cash flow. Only once you have this, can you turn your attention to profit forecast.

3. Designate a Cash Flow Monitor

Your business probably has a lot of cash going in and out. Do you have any idea what’s going on there? Somebody needs to keep an eye on the door and track all that money. Designate and train an employee, for example an office manager, to be your cash flow monitor and to make sure you have sufficient cash in the bank.

4. Make Payment Terms Clear

When working with suppliers, it’s important to establish very clear terms beforehand. This includes payment terms as well. You want to know when you are going to get paid and when you need to pay. The last thing you want are overdue payments. They’re the bane of cash flow control.

5. Get Paid Fast, but Extend Your Payables as Long as Possible

On one hand, you want to get your money as fast as possible, but on the other, you want to extend your payables for as long as possible. You can do the first by keeping a strict policy on credit and minimizing net-30 and net-60 payment terms to a minimum. On the other hand, you want to extend your payables to net-30, net-60, or even net-90, if possible. Just mind those late fees.

6. Use Technology for Better Cash Flow Control

Technology can be an invaluable ally in cash flow control. For example, Purchase Order Plus, our add-on for Xero accounting software, can help you manage your cash flow better among other things. Also, cloud-based accounting technologies can help work more effectively and make it much easier to be up-to-date with your financial situation.

7. Don’t Make Payments Complicated

Customers will more often have a bigger problem if you make their payments complicated, then with large payments. This is why, for instance, you should switch to online payments and ditch cheques or anything else that can cause unneeded delays.

8. Work on Your Receivables

If only you could get the money the moment you make a sale! But it doesn’t work that way, unfortunately. However, that doesn’t mean you can’t do a few things to improve your receivables.

Here’s a few things you can do:

  • Don’t wait to send an invoice and follow up
  • Give discounts and other incentives to fast-paying customers
  • Ask for deposit payments when customers make an order
  • For non-cash customers, ask for a credit cheque
  • Demand cash on delivery (it’s still better than refusing to work with slow-paying customers)

All of these can help you make the stream a bit wider.

9. Get the Bank “in the Know” About Your Cash Flow

You need to be on very friendly terms with your banker from day one. Keep him or her informed about any unexpected and unforeseen changes in your cash flow. Banks like clients that are prudent with how they spend their money, so be sure you are as well. What you also shouldn’t be doing is keeping secrets from your bank. Trust me, they’ll find out eventually.

10. Don’t be Afraid to Make Tough Decisions

As a business owner, you are often required to make tough calls. Some of these decisions will not exactly make you popular, but you have to stop thinking this is a popularity contest and start doing what is best for your business.

If your cash flow gets critical, it’s time to make some of those tough calls. For example, you can cut employee benefits, let non-essential staff go or close down unprofitable departments in your company. Expect a lot of grumbling and unhappy employees, but it might help you save your business (but maybe not your soul).

Conclusion

Cash flow control isn’t the easiest thing to do and you might have to make some tough and unpopular decisions with your customers, suppliers and your employees. But unless you want to end up like so many businesses, these are the 10 steps that you will have to take to manage your cash flow.

Do you have any thoughts or questions? Let us know in the comments below and don’t forget to sign up to receive updates and early access to our Purchase Order Plus software.

Road Trip

By | Development, Uncategorized | No Comments

Roady

A few pictures from the recent road trip I took to Whanganui to work with the development team. We are proud to be working with Appmani, a division of NZ Computing Solutions to create POP. Beta testing is about to start to ensure we are ready for the public launch early next year. Watch this space!

 

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Purchase orders and purchase requisitions

What is the Difference between Purchase Orders and Purchase Requisitions?

By | Purchase Order Plus | No Comments

Procurement of supplies often works differently from business to business. In some small businesses, instead of buying supplies directly from the outside vendor, by sending a purchase order (and later receiving an invoice for the goods), the department in need of the supplies first needs to send another document to the financial section of their company. This document is called the procurement requisition. In this post, I will explain what is a procurement requisition and what are the differences between purchase orders and purchase requisition.

Hopefully, this will clear out some confusion you might have about purchase orders and purchase requisition.

What is a Purchase Requisition?

A purchase requisition is a document that the department of the company sends to the financial department of that same company. Basically it’s the equivalent of asking for permission to purchase specific goods. So in effect, it is not an order.

For example, the IT department of a company could be in need for more or new computers. So they send the purchase requisition to the financial department. Now, the financial department could grant approval and then the procurement process can continue further by creating a purchase order and sending it to the selected vendor, or it can decline (possible due to lack of funds).

The two documents, purchase orders and purchase requisitions are relatively similar, yet there are some distinctions. A purchase requisition usually contains the following information:

  1. Location or department of the buyer
  2. Vendor name and information
  3. Description and quantity of the supplies
  4. Price

What is a Purchase Order?

Once the financial department approves the purchase, a purchase order or PO is sent to the vendor. This is a legally-binding (for both sides) document that includes the following information:

  1. PO number
  2.  Buyer information
  3. Vendor information
  4. Delivery address
  5. Description and quantity of goods
  6. Price
  7. Invoice information
  8. Other terms of payment

Main Difference between Purchase Orders and Purchase Requisitions

The main difference between purchase orders and purchase requisitions is in their nature. A purchase requisition is a document with which one department asks for permission from another for something (to buy certain goods) and the purchase order is a document they use to actually buy these goods from the vendor.

You can think about purchase requisitions as interdepartmental documents that allow larger organizations handle their finances and accounting better.

Of course, both of these documents play an important role in any company’s spend management and protect both the buyer and the seller.

Are you using both purchase orders and purchase requisitions or just one? Let us know in the comments below and feel free to sign up your email to get early access to Purchase Order Plus.

Procurement process 7 steps

7 Important Steps You Need to Take with Your Procurement Process

By | Purchase Order Plus | No Comments

Obtaining products or services is hard enough for an individual, but perhaps even harder for companies. An individual could potentially buy something that he or his family doesn’t like, but for a business, the purchasing decision is a lot more invested and has much more risk. This is why it’s important for a company, no matter how big or small, to have a clear and effective procurement process.

We believe that any procurement process should include the next seven steps:

1. Identify the Need

When you open your fridge to get some milk and you find out that there is none, you know have the need to get milk. The same is more or less true for companies. Before you purchase a product or material, you must know if there is a need for it in the first place.

It is not enough to just recognize the need. It is also crucial to specify it. What do you need? In what quantity, size, color? This becomes more or less an automatic decision if it’s something that the company has ordered many times before and just needs to reorder again, but if it’s a new order it gets a bit more difficult.

2. Who to Get the Product from?

Once the company has identified and specified the need, the next they need to do is find where they will obtain it from. Usually, companies have a list of approved vendors and have the contacts for each of them. Also, the company has probably worked already with these vendors, or at least some of them, so it has built a rapport with them.

However, if the company does not have a list of approved vendors and is looking for one for the first time, there are several ways to research suppliers, such as checking the Internet sources, magazines related to their industry or sales representatives.

3. Negotiations

Once the company selects at least three possible vendors, it needs to sit at a table with each of them to negotiate the price and other terms. These will naturally depend on many factors and the more specific the requirements the company has, the higher the price will probably be.

4. Creating, Approving and Sending the Purchase Order

A purchase order (PO) is created by the buyer (company) and delivered to the seller (vendor). It includes the product, service or material that the buyer is ordering, any specifications such as quantity, price and other terms agreed previously with the seller.

The PO is a legally-binding document that both sides must honor. It contains:

  1. Buyer’s information
  2. Seller’s information
  3. Date of issuance
  4. Details of goods
  5. Price
  6. PO number
  7. Terms and conditions
  8. Signature of the person authorizing the purchase order

5. Accepting and Inspecting the Goods

Once the product is delivered, whether by mail, fedex or somehow else to the buyer’s specified address, the buyer is obligated to inspect if everything is alright. This is normally done by the procurement officer who created the purchase order in the first place.

In case the goods did come as specified in the PO, the buyer accepts them. Once he does, he becomes obligated to pay the vendor for them. However, if he doesn’t, he needs to inform the seller why this is the case and return the goods.

6. Invoice and Payment

After the buyer accepts the items, the seller can send the invoice and request payment for the delivery. The invoice needs to match the purchase order and can be paid in cash, credit, electronic transfers or any way the two parties have previously agreed.

7. Keeping Track of Everything

Some companies will use purchase orders to try and do some shady deals.  Perhaps avoid paying tax or something do something else illegal. This is why there has to be a proper record of each PO and invoice that the company can show to auditors.

Conclusion

It is important that a company has a clear procurement process. This will allow it to more easily obtain what it needs, when it needs it. These 7 steps  make the procurement cycle much more effective.

Did you like the article? Let us know what you think in the comments below. Are there any more steps that a procurement process should have? Also, don’t forget to sign up for our newsletter and get updates about Purchase Order Plus, our software for creating, approving and sending POs easy on any device.