March 19th, 2019 • Procurement Process • purchase order
While most businesses recognize that procurement is crucial to being successful in today’s competitive industry, they often focus on it later than they should.
Take purchase orders. Businesses only really start thinking about POs once they move from small (less than a hundred employees, generally) to medium-sized and purchasing becomes a busy part of the business. Procurement is put together in a hurried manner, with insufficient attention paid to the minutiae. This often means an inefficient procurement wing.
Organizations started using purchase orders as a means of reducing overspending and inefficiencies in purchasing. Here’s what they do for procurement:
Considering how integral they are to procurement, it is crucial that you get purchase orders right. Here are 5 best practices to get the best out of procurement.
You can develop a printed handbook for procurement, or draft an ebook. Whatever the medium of delivery, it helps to have clearly stated rules and policies around your purchasing efforts.
This can include general instructions on topics like the basic sequence of PO approvals. You can specify instructions specific to your organization; maybe you want your Chief Finance Officer to weigh in on purchase orders valued $10,000 or higher.
Clearly presented guidelines help your organization deliver consistent results in purchase order management and execution. This ensures that all members of your procurement team consistently follow the same procedures, whether they’re sending out purchase orders or carrying out vendor selection.
Maintain records of all the suppliers your business has ever ordered from, so you can streamline procurement management by easily picking a vendor. Even within the scope of purchase orders, this is a significant time-saver.
Clear and accessible vendor behavior records help you create POs much faster than you would if you had to look up data archives and make phone calls, just to get vendor details. Make sure your records include vital data like each vendor’s contact details and payment terms.
You can do this by first classifying your products/services required, segregating each purchase into buckets like ‘office supplies’, or ‘training’, or ‘equipment’. Classifying the goods/services mentioned in each purchase order helps you enforce budget-specific limitations.
You can set caps by expense categories. For example, you can set POs for training to be capped at a certain level. Your system can decline purchase orders that someone has raised for over a threshold amount, like $1,200.
There are two benefits to using an approval system. One is that you won’t ever have to deal with duplicated approvals. The second is that, once you’ve hired a purchase manager, you won’t have to deal with lost approvals and delays that cut down the speed of process execution.
Another great thing is that you can use a solution like KiSSFLOW, which helps you with the routing of approvals. It takes the job of sending the payload from approver to approver, moving things along without the need for email requests. A system like this would also take care of archiving every approval request made, and when each PO was approved.
An electronic purchase order system means that you can throw away prone-to-failure systems like the old manual paperwork-based method. You won’t have to dive into dusty cabinets to find an archived PO’s reference number, nor will you have to use spreadsheets where one bad formula in one cell can defeat the purpose of the spreadsheet.
You can use KiSSFLOW to take care of purchase order approvals. It can automatically route your PO payloads along routes you have set. You can define stakeholders, responsibilities, and branching decisions.