5 Purchase Order Best Practices Every Company Must Adopt

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.

Getting Purchase Orders Right is Crucial

Organizations started using purchase orders as a means of reducing overspending and inefficiencies in purchasing. Here’s what they do for procurement:

• The primary purpose is that they enforce the deal between buyer and vendor, as they are a legally binding agreement
• They help you monitor and manage all the expenses within procurement
• Using a purchase order-based system for purchasing helps you locate and eliminate all instances of duplicate orders
• They boost the overall efficiency of the organization by doing the above

Considering how integral they are to procurement, it is crucial that you get purchase orders right. Here are 5 purchase order best practices to get the best out of procurement.

1. Develop written guidelines for 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.

2. Create and use vendor databases

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.

3. Create budget-driven expense restrictions

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.

4. Use purchase approvals

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.

5. Use a digital, cloud-based procurement system

A cloud-based digital procurement software like Kissflow Procurement Cloud is easy to install, and can untangle a messy purchase order process within a few hours. Here are six reasons why every organization needs an electronic purchase order system.

Digital purchase order systems can:

• Enhance efficiency in PO management, with no lost or delayed POs
• Improve PO processing speed
• Accelerate purchase order approvals
• Streamline order and stock management
• Improve the vendor-buyer relationship
• Prevent procurement fraud

Kissflow gives enhanced purchase order processing

Kissflow is a comprehensive procurement system that covers the entire procure-to-pay cycle. It extracts purchase order details easily from approved purchase requisitions and sends it to the approval loop without any human intervention. You can integrate this procurement software effortlessly with any other finance or ERP tools you may be using.

As your purchase orders are stored over the cloud, you need not lose sleep worrying about security.
Your procurement team can improve value, boost profits, and eventually deliver more ROI. Still unsure if you need Kissflow?

Take a look at Kissflow Procurement Cloud, and you can see for yourself how your purchase order process gets transformed, along with the rest of procurement.