Why Businesses Should Be Using Purchase Orders

By August 21, 2017Purchase Order Plus

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.

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