PURCHASING COPILOT

Purchase order software generates, manages, and matches purchase orders (POs). It should ideally be integrated as part of a broader Procure-to-Pay (P2P) software solution that extends from purchase requests through to the payment of invoices. This integration allows for tracking all procurement-related documents in one place, ensuring that everything is properly matched and accounted for, ensuring visibility and control over the entire procurement process.

Purchase order software and P2P automation systems like Kloo can automatically raise and generate purchase orders from approved purchase requests. Once generated, the purchase order is sent to the supplier, outlining the agreement for the goods or services to be delivered. This ensures clarity and formalises the transaction, providing both parties with a clear reference of what has been agreed upon, including quantities, prices, and delivery expectations

A purchase order can be created using an automated system, which generates the document automatically from a purchase request and sends it to the supplier. This method starts with purchase requests to ensure financial control, as it helps justify the expenditure, aligns it with budgets, and maintains visibility of all company expenditure. 

 

To set up purchase orders for small businesses, begin by implementing a system that can handle purchase requests, approvals, and generate purchase orders automatically from approved requests. This is crucial for scaling businesses, as it helps control spending while operations grow in scale. Establishing a process for requisitioning goods or services and converting these into formal purchase orders ensures that expenditures are pre-approved and aligned with company budgets. 

 

Both purchase orders and invoices are fundamental documents in the procurement process, serving as official records of transactions between a buyer and a supplier.

 

A purchase order is issued by the buyer to authorise a purchase and detail the types and quantities of goods or services requested, along with agreed prices. An invoice, on the other hand, is sent by the supplier once the goods or services have been delivered, requesting payment and confirming the terms initially set out in the purchase order. 

There are four different kinds of POs (Standard, Planned, Blanket, and Contract) which are used for different kinds of purchases.

 

1. Standard Purchase Order (PO):  Used for one-time transactions that are not expected to recur regularly. This typically an itemised list of goods, and delivery terms.

2. Planned Purchase Order (PPO): A planned purchase order does not specify delivery dates or locations, which are decided based on need. This flexibility is suitable for items that are used periodically, such as office supplies that need restocking at irregular intervals.

3. Blanket Purchase Order (BPO): Also known as a standing order, this type covers ongoing purchases where the exact quantities and delivery timings are not predefined. This arrangement is useful for items with unpredictable usage rates, allowing orders to be made as required up to a specified maximum quantity.

4. Contract Purchase Order (CPO): This PO represents a general agreement on the terms and conditions for future orders rather than specific details about the items, quantities, or delivery dates. It sets the framework for subsequent purchase orders that are issued as needed under established contract terms.

Considering that 51% of businesses report that spend is frequently committed before or without approval, the scope for ROI from an effective purchase requisition, approvals and PO system is significant. These systems deliver ROI in several ways:

 

Squashing maverick spend: This refers to unapproved expenditures that have not been requested or approved, or that fall outside of company procurement policies. By ensuring all spending is pre-approved, a purchase order system prevents financial leaks.

Increasing sourcing leverage: Fragmented spending that is not tracked centrally can weaken a company’s ability to negotiate better prices with suppliers. Central tracking through a PO system enhances negotiation power by consolidating spend data.

 

Admin cost savings: The automation of generating purchase orders removes the burden from finance teams who would otherwise have to manually create these documents, thus saving time and reducing administrative costs.

Purchase orders should be approved by appropriate pre-defined personnel within an organisation, using conditional approval workflows tailored to the specifics of each purchase request, such as department and purchase size.

By implementing granular conditional approval workflows, organisations can ensure that senior approvers are not overwhelmed by the volume of approvals, particularly for smaller transactions, thereby maintaining efficiency and oversight throughout the procurement process.

When choosing a purchase order system, it's important to prioritise user experience. The system should be intuitive and easy to use, requiring minimal clicks to encourage employee adoption. Look for integration capabilities with your existing accounting or ERP system to streamline the entire procure-to-pay process. The system should also offer conditional approval workflows based on factors like price or department to avoid bottlenecks. Features like email-integrated approvals can speed up the process, while reporting and analytics provide insights into spending patterns and approval delays. Finally, automatic PO generation ensures efficiency and accuracy, reducing manual errors and ensuring the timely creation of purchase orders.