In today’s competitive business landscape, procurement is one of the most vital elements. Though it is very crucial, businesses tend to focus on it less. Think about a simple purchase order.
Quite often, businesses start focusing on managing purchase orders once they cross a certain number of POs such as more than a hundred a month. As a small business, purchase order management doesn’t get the attention it deserves. This can also give rise to an ineffective procurement team.
In this article, we will share how you can get your purchase orders right and make it a strong competitive advantage for your business.
Why Purchase Order Management is Vital For Business
Purchase orders are a simple tool that businesses started using to cut inefficiencies in their purchase process. When a company wants to reduce overspending on their purchases, it starts enforcing purchase deals as a legally binding agreement.
In procurement, businesses start to enforce purchase deals between the vendor and the buyer. After this, purchase orders help you manage the entire procurement process and related expenses. Companies seek to enhance process efficiencies by using a purchase order-based system to help eliminate duplicate orders.
Here are 5 actionable tips that you can use to make your purchase order management more efficient:
Setup Clear & Defined Procurement Guidelines
Making a clear and written procurement strategy and guidebook is one of the most simple and effective steps for your business.
You can get a procurement handbook printed or as a downloadable ebook for your team members. Having a clear procurement strategy helps you streamline the procurement process and makes the deliverables clear for your team members!
In this procurement guidebook, you can mention the PO approval sequence for general and special orders. Special orders above a certain dollar value can be defined separately and may require the separate approval process.
Having a clear set of purchase order management guidelines will help your procurement team to be consistent and work as per the standard procedures. For example, if 2 members of the procurement team are doing the same activity, such as vendor selection, they will both follow the defined guidelines written in the purchase order management guidebook.
Define Your Vendor Database
Having a clear record of all your suppliers can be a huge help in your business. When you want to organize your procurement management, you can easily choose a vendor from your list of suppliers. The presence of such a simple list of suppliers is a huge time saver and also makes your purchase order process more efficient.
So, if you wanted to hunt down a particular vendor, it would take hours if you don’t have a proper vendor list. With clear and accessible vendor records, your procurement team can create POs quickly. Make sure that your vendor listing is complete and contains vendor’s contact details along with their payment and delivery terms.
Design Budget-based Cost Structures
Making budget-driven expense structures is key to having an effective purchase order management process. Start with classifying your services and products that are essential and then segregate them into different requirements sections such as training or office supplies.
Once you are done classifying the goods and services, you can now set up budget specific structures and restrictions. Make sure you do this for every good and service in each purchase order. Set up expense categories and assign a higher limit to them. For example, you can set up the amount to be capped at a particular dollar level for training POs. Here, you can set up your purchase order system to decline purchase orders that are above $2000.
Setup a Defined Purchase Approval Process
Setting up a transparent purchase approval process can help boost your procurement efficiency. Once set up, you should be able to avoid duplicated approvals. Another benefit is that you can increase the rate of process executions by eliminating process delays and lost approvals. You can also consider using dedicated purchase order management solutions such as Tradogram. It can help you to route routine process approvals smoothly without the need for separate email reminders.
Tradogram also sends the payload from one approver to another automatically as per the in-built PO approval process. It would also archive all previous POs and have it stored in its central database for easy access later. Your team members can easily find archived approval request along with the dates when that PO was approved.
How to Choose a Cloud-Based Purchase Order Management System
If you have a messy purchase order system that needs to be set right, move it to the cloud. Installing a cloud-based digital purchase order management system is easy and can be an asset to your business, instead of being a liability.
Looking for reasons to have an electronic purchase order management system?
Let’s look at the top 6 reasons you should choose a digital purchase order system:
- Boost PO management efficiency and minimize delay or loss of POs
- Increase PO processing rate
- Eliminate any procurement frauds
- Organize order and stock management
- Make purchase order approvals smoother
- Enhance the buyer-vendor relationship
Having a robust procurement management system is vital for your small or medium business. Start today to give your business a strong competitive edge in the market against competitors.
Wondering how to make your purchase order management process more efficient?
We are here to help you streamline your procurement process and boost your business efficiency. We partner with Tradogram, our Purchase Order Management specialist partner, who has been supporting businesses in over 70 countries for more than 6 years.
Organize your procurement process with the Tradogram’s cost-effective procurement management solution. Manage all your purchase orders, contracts, approvals, budgets, supplier management, requisitions, and RFPs/RFQ in a secure online platform. Tradogram is a secure, cloud-based, and affordable procurement management solutions for small and medium businesses. It can help your business save money, control costs, and manage suppliers effectively.
Book a free consultation call with us to see how we can support your procurement management needs. Just drop us an email at email@example.com.