An online purchase order is a business process in which an organization orders products or services from other organizations and pays for them by sending electronic payments. In this case, an online retailer might request that its suppliers send the items to a central warehouse before they can be shipped to customers.
The online purchase order (PO) is a digital document sent by a buyer to the seller with a formal offer to order products or services. The order software has an inbuilt Purchase Order management system that includes key constituents like purchase requisition, purchase order form, invoice templates, terms and conditions and tracks or approves orders in real-time. Just like in the paper-based method, when the buyer and seller mutually agree upon the payment terms, price, product quantity and quantity of the product and service and other terms and conditions, the digital document also becomes legally binding on both parties.
Here are some of the benefits of an online purchase order system-
1. Strong buyer and order supplier relationship
Faster processing of PO means faster approvals, lesser complaints, and faster payments to the supplier resulting in a healthier buyer-supplier relationship translating into good quality product or service.
2. Reduces errors
A purchase order system can process and track multiple PO. It is easy to track the orders with their unique purchase order number and get actionable insights.
3. Maximizes efficiency
With an online system, there is minimum back and forth, speedier approval, and an efficient overall supply chain. As per the industry data, order software can potentially reduce the processing time by more than 70%.
4. Improves visibility of the purchase order
More transparency in the order purchase trail, not only prevents overspending but also avoids any kind of internal fraud in the purchasing process. It helps the audit team to get the real picture of the PO journey and track the people accountable for the PO
5. Demand management
The ease with which businesses can track incoming orders with the order system and have instant access to shipping details, enables businesses to make demand forecasts, and manage inventory efficiently.
Paper Purchase Order is bulky and needs proper upkeep resulting in administrative costs. As per the industry data, even though the cost of saving in generating an online PO varies from industry to industry, on average online purchase order can potentially realize cost savings of up to around 75 to 80% per invoice.
Based on their business needs, large or small business owners can scale up or down an online PO system
8. Consistency in rules
With rules-based processing of orders, businesses can ensure that sellers as well their team members stick to the organizations' purchase policies, privacy regulations, and contracts.
9. Manages cashflow better
The accurate and real-time tracking of the organization's spending enables businesses to effectively plan and manage budgets and avoid the risk of poor cash flow management.
Features that should be part of your online purchase order software
Free purchase order systems are as efficient as paid ones. The free versions can typically come with limited time or with limited features, which can adequately fulfill the requirements of a small business owners.
An efficient order software has the following features-
Centralized cloud storage - Store current and archived POs, one can approve purchase orders seamlessly with centralized storage, and one can access the PO anytime and from anywhere.
Role-Based Access - The online purchase order system has a provision to keep the information related to the purchase secure and has user-specific and conditional access controls.
Paperless PO processing - Order systems avoid the wasteful expenditure of printing out purchase orders as well as the cost of storage.
Smart alerts and reminders - Automated reminders can keep the buyer as well as the seller updated with timely automated alerts and instant notifications.
Real-time tracking - With real-time visibility one can identify bottlenecks in the process from the sending of the purchase order to the final delivery date and seek remedial action wherever necessary. One can track and approve purchase orders from anywhere, anytime, on any device
Integrations - An order system, which is easy to use, offers the flexibility of use in a way that it integrates well with other business solutions like accounting software, or access data from external sources.
Three-way matching - Much to the relief of the buyer as well as the order supplier, an online software process results in the actual delivery data matching with the invoice as well as the Purchase Order, therefore, ensuring a successful procurement process.
The automated purchase order systems are easy-to-use software. Here's the simple step-by-step guide for creating your first online purchase order
1 Buyer chooses the right purchase order template from the options available in the software as per the business requirement, and creates a digital purchase order
2 The software will identify the matching supplier and the prospective order supplier details.
3. The online purchase software offers transparency and visibility to the purchase order. The purchase manager can access the PO form in real-time and grant quicker approval
4. The purchase order system has an inbuilt mechanism that sends the PO to the prospective order supplier
5. When buyer and seller mutually agree on the payment terms, quality, and other terms and conditions, they sign a legally binding agreement.
6. The seller completes the delivery process of the product or service.
7. The purchase order system matches the three key details i.e., the product or service delivery, invoice, and PO data for consistency and ensures the legitimacy of all the invoices
8. Finance team uses the order system to approve the invoices for the Purchase Order supplier's payment
9. The PO software schedules the payment. All the documents including invoices and purchase order are shared with the integrated accounting software.
The online purchase order system works in real-time, and keep updating all the stakeholders on the delivery of product or service. As the PO management system helps make the buyer's approval process seamless, it has a cascading effect on the order suppliers' efficiency too. The purchase order system also expedites the order supplier's payment by making the three-way matching of the invoice, order delivery, and PO a cakewalk.
A purchase order management system is beneficial for buyers as well as order suppliers as the whole process that the software runs through are meticulous, well-planned, and comes with pre-existing guidelines and policies. This significantly reduces the scope of friction between different stakeholders, and makes the approvals move fast resulting in timely delivery as per the business needs. It can pave way for a long-term healthy buyer-supplier relationship. The online Purchase Order system is the surest way to derive value from every dollar invested in inventory management and order fulfillment.
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