Efficient management of purchase orders is crucial for any company's procurement process. Purchase orders provide essential details about the products or services being acquired, including pricing, discounts, payment options, and delivery deadlines. To effectively handle and approve purchase orders, businesses are increasingly turning to procurement software.

As per American Productivity and Quality Centre (APQC), purchase order, and approval expenses can be reduced by up to 75% and invoice processing costs can be reduced by up to 90% using procurement automation.

Your company must have a purchase order workflow to effectively manage and approve orders.

In this article, we will discuss the Purchase Order Workflow in details starting with the basics:

What is a Purchase Order workflow?

A purchase order (PO) is an official document that a customer sends to a vendor outlining the products or services they wish to purchase. The process used by an organization to develop, approve, and monitor purchase orders is known as the purchase order workflow. It guarantees that the products or services have been requested in a timely and effective manner, making it a crucial step in the procurement process.

What are the steps involved in a purchase order workflow process?

The purchase order workflow includes multiple steps, which may differ based on the framework and size of the business. However, the following are the typical processes in the purchase order processing.

1. Purchase Order Creation

The workflow for creating purchase orders begins with this phase. The buyer typically starts the process by drafting the purchase order document and sending it to the vendor. Important details including the details of the goods or services, the quantity being ordered, the date of delivery, and the payment terms should be included in the purchase order.

2. Approval and Evaluation

Following creation, the purchase order needs to be examined and approved by those responsible organization parties. Based on the organizational hierarchy, several degrees of permission may be required during the review and approval process. The approvers must be absolutely certain that the purchase order is accurate and that the requested products or services are really required.

3. Processing Purchase Orders

The business's purchasing division processes the purchase order after it has been approved. This entails confirming the vendor's information, ensuring that funds are available, and ensuring that the purchase order complies with the company's procurement policies and regulations.

4. Purchase Order Confirmation

Once the purchase order has been processed, the vendor attests that they can complete the transaction within the allotted time frame and that they accept the terms and conditions stated therein.

5. Delivery and Shipping

Immediately after confirmation of the purchase order, the vendor ships the products or provides the services to the purchaser's location. The mutually agreed-up terms and conditions of the purchase order shall be followed for the fulfilment date and time.

6. Receipt for Products

The purchaser shall confirm that the delivery complies with the requirements stated in the purchase order after receiving the product or services. Any differences should be stated right away to the vendor if they exist.

7. Payment Processing

The vendor sends an invoice to the customer when the product or service is delivered. The invoice should be in accordance with the purchase order and contain all relevant details, such as the terms of payment, the deadline for payment, and instructions for payment.

8. Payment

After receiving the invoice, the buyer must proceed with the payment in accordance with the terms and conditions outlined in the purchase order.

Organizations can make sure they have an efficient process for buying products and services by adhering to the standard purchase order workflow. This can assist them to control expenses, manage inventory levels, and enhance supplier relationships.

What makes the workflow of purchase order approval effective?

An efficient purchase order workflow process should fulfill the following criteria:

1. It is simple for auditors to examine the supporting documents and audit the controls.
2. It caters to a variety of business needs.
3. It connects with additional processes like generating purchase orders and three-way matching of invoices with ease.

How to accelerate your purchase order workflow?

A lot of businesses are also taking their time to adjust, taking into account the fact that spreadsheets and paper are still frequently utilized in purchase order workflow processes.

However, despite the fact that manual processing can appear to be a tried-and-true technique, it has been shown to be prone to mistakes and time-consuming, as well as costly when using outdated techniques.

Your finance team members eventually feel overwhelmed by the volume of purchase orders and invoices as your business expands and needs increasing quantities of goods and services.

When this happens, you should use purchase order automation to centralize your purchase order workflow and procurement processes and automate them.

Restoring your internal processes can seem difficult, but if you move with a simple and intuitive procurement software that completes the onboarding and installation process in a few weeks then you’re good to go.

You can gain the following advantages right away by making this move towards Purchase Order workflow automation:

1. Get rid of the paper trail
2. Track POs to the accountable parties promptly
3. Create purchase orders with a few clicks.
4. Exclude human error and manual data entering
5. Create a streamlined approval process.
6. Easily manage spending and implement allocation-driven expense constraints.
7. Simply click a button to automatically generate a PO from a requisition or from scratch.
8. Manage all of your vendors, inventory, contact details, and invoicing in a single platform.
9. Automatically do a 3-way match, synchronize documents with existing system.

What are the benefits to automating your Purchase Order approval workflow?

Procurement can be made simpler and several benefits are ensured with a quick and easy PO approval process.

1. Cost savings 

The Purchase order workflow helps save the business from incurring unnecessary costs. Obtaining purchase approvals requires verification to see if the item is currently in stock and whether it is actually essential. This aids in avoiding pointless charges and expenses and also clarifies how money is being utilized.

2. Greater operational effectiveness 

A thorough and controlled purchase approval process leads to faster PO approval timeframes and expedites the procurement process causing fewer obstacles and inefficiency.

3. Greater transparency 

The approval of POs provides access to the company's expenditure areas. When using credit cards and vendor invoicing, businesses are only made aware of spending when a bill or invoice arrives. On the other side, a PO approval guarantees that stakeholders are informed of agreed expenditures to better plan and allocate budgets.

4. Collaboration that works 

A PO is an official document that can exchange information as needed between internal departments and vendors. A comprehensive process is followed to make sure there are no disputes before a purchase order is accepted. It leads to increased accountability and effective communication among the company and the vendors because everyone has an understanding of the terms and conditions.

5. Simplifies audits 

Establishing streamlined Purchase Order workflow approval for purchase orders could prove helpful during audits. Every purchase must go through a purchase order workflow process, which makes it simple for the accounts payable staff to organize and match invoices to the appropriate purchase orders. This makes it simpler to maintain correct documentation and helps company audits.

6. Reliable forecasting and well-informed decision-making

When a purchase order approval process is set and in place, the process of forecasting and making decisions becomes relatively simple. The business can make well-informed decisions to increase business efficiency because they are fully aware of where the company must spend its money and which purchases necessitate regular budget allocation.

How TYASuite streamlines the purchase order workflow to enhance procurement value?

Modern technology and the emergence of digital solutions have made it simpler to automate critical corporate activities. The purchase order approval process is made simpler, quicker, and more profitable for businesses through a purchase order software.

1. PO Generation And Approvals

Procurement process is optimized with automatic PO development and fast approvals. You can raise, create and monitor multi-vendor PO and purchase documentation for tracking purposes.

2. Revise Purchase Orders

Whenever there needs to be a change in the terms in the purchase order, it becomes a time consuming process if sending out change notice is done manually. It can also lead to vendors not receiving them on time and other unwanted confusion. Modifying purchase order solves this issue by allowing easy submission of a change request for an existing PO.

3. Restrict Vendors to Items

There are various kinds of products, yet nobody seems to be able to come to terms on how to classify them. Additionally, some vendors have over a dozen different material master pairings. Limiting vendors to goods in purchase order software makes managing vendors simple and quick.

4. Numerous Approval Workflows & Location level controls

How many times does a procurement process gets blocked because an individual forgot to approve it? Business can set up the process for approval and make sure that your purchase orders will be processed without hiccups if you have the most effective purchase order software in place.

5. Efficiency in Purchasing Through Blanket Orders

Up to a specific amount or until company criteria have been satisfied, an organization can give a vendor permission to make ongoing purchases which are referred to as blanket orders.

TYASuite provides comprehensive and agile purchase order software with features to generate, track, and approve orders in real-time giving you complete control over the purchase order workflow.