3 Hard-Hitting, Hard-to-Digest Truths About Paper Purchase Orders
Procurement often feels more like a play-by-feel art than an easily defined science. It’s easy to feel like e-payments, customers, spend policies and other such elements are all intangible factors that aren’t as real as a crisp currency note in your hand. Many procurement executives want tangible, physically present purchase orders that aren’t “somewhere in cyberspace”.
That’s why they sometimes stick with paper-based purchase orders.
Once the only way of doing things, paper-based POs are worryingly still around. 1 in every 5 businesses uses paper-based POs. If you find your organization moving back to paper POs, or if you never embraced digital POs in the first place, consider these issues.
Paper purchase orders can cause angry customers and vendors
Considering that purchase orders are meant to make a procurement process go smoothly and without disruptions like misplaced orders and angry customers, a paper system is an archaic, ineffective system.
Trademarks of a system based on physical, paper-based purchase order include:
- Frantic last-minute searches for PO documents while a frustrated vendor waits for clarification on an older order
- Occasional calls from irritated vendors who didn’t receive a purchase order approval when they expected it
- Your procurement team gets used to hearing the occasional irate customer rant on an angry phone call because their product didn’t get delivered as promised
- Purchase orders get approved even when they shouldn’t, such as when the price mentioned on the purchase order wasn’t adhered to during the payment step
- Various tasks around purchase orders–such as goods receipt, fulfilment of customer product delivery–often fail to meet the scheduled deadline
- There is a culture of complacency throughout procurement, encouraged and initiated by an “it’s okay” attitude to mistakes made around POs
All these issues can lead to an ineffective, flailing procurement department that fails to achieve the company’s financial goals. In addition to this, your customers can get frustrated and move on to other businesses. Brand value takes a hit.
All this streams from refusing to embrace a system that can take digital control of purchase orders, streamlining the process, routing approvals to the right person at the right time with relevant notifications. It can be easily avoided.
You will have to deal with that whole ‘human error’ factor
Human error is another trademark of a paper-based system for purchase orders, getting in the way of consistent results and error-free purchase order processing.
There’s a reason the world of accounting moved all of it’s calculation-based tasks to digital tools, completely eliminating the mental math system of the past. Human beings tend to make the occasional mistake, while digital calculation is unwaveringly accurate.
Within procurement, the negative impact of paper-based POs cannot be understated.
Especially with people who have been purchasing for years, there’s a tendency to mistrust ‘newfangled’ equipment to do a job that a long-term accountant has been doing really well for a long time. However, human processing of POs is affected by a number of factors–work stress, personal issues, lapses in concentration or focus, bureaucracy, and even poor vision.
Paper-based purchase orders are prone to issues like:
- Grossly inaccurate figures because someone missed a digit or used the wrong formula
- Three-way matching being executed poorly because the procurement team was working under the pressure of a looming deadline
Software solutions like Kissflow Procurement Cloud offer automation, which takes care of those mundane everyday tasks that we tend to make most mistakes in.
You may be vulnerable to insider fraud
It’s convenient to sit back and trust that all your employees are fully invested in the wellbeing of the organization. However, history, common sense, and experience all dictate that such an assumption can leave you open to fraud from within the company.
A purchase order system based on traditional paper-based methods is often slow in execution, with multiple delays as POS get, organized, sorted and balanced. This gap can be used to exploit the business. With an automated digital solution, you protect yourself using features like instant verification and cross-referencing.
How much do you spend on a purchase order?
A 2016 study by the APQC showed businesses the true costs of purchase orders using a traditional manual approach. From this twelve-year-old study, costs are estimated at anywhere from $35.88 to $506.52 per purchase order.
This can reach up to a massive $741 in the petroleum industry.
It’s high time procurement teams embraced a system that helps them manage POs efficiently.
Automation–the right solution
Manual error, inefficiency, and the chance of fraud are all convincing reasons to dump a system that relies on super-human efforts to run efficiently. Paper-based systems are known to be inefficient, time-consuming, and expensive.
Software solutions like Kissflow Procurement Cloud help you bring automation into the picture. Use a good PO management tool to take care of approvals, bring in consistency and accountability, and general speed up purchase order management. They are generally a cost-effective option as well, contradictory to popular opinion.
Want to see how well Kissflow Procurement Cloud can fit into your PO management style/system? Sign up for a free trial today. Move away from tried-and-terminated paper purchase orders, and embrace chaos-free and consistent purchase order management today.