Creating A Purchase Order System For Your Small Business
Purchase orders might seem like an unnecessary step that just adds to your paperwork load. Many small businesses don’t even use purchase orders, preferring to rely on invoices from the seller to document orders. After all, why go to the trouble of generating a record of your purchase request when the seller’s going to send you something with similar information?
Every company needs to make purchases. As your company grows, good documentation of those purchases becomes more and more important. You’ll need a way to track purchases and protect your business legally in the event of a problem with the seller. But if you start using purchase orders without a reliable system, they can become quite a hassle. That’s why it’s so important to start out with a purchase order system that works for you.
What’s A Purchase Order System?
Purchase orders are a document buyers send to sellers containing a request for an order. Once a seller accepts the purchase order, it serves as a legal agreement between the buyer and seller. Typically, the purchase order includes a detailed list of the type, quantity, and price of items being ordered.
“Purchase order system” simply refers to your business’ process for managing purchase orders. Some businesses start with a manual paper-based system because it seems easier. But in the long run, keeping up with all the associated paperwork becomes difficult. A single purchase can involve records of quotes, order acknowledgments, miscellaneous notes, packing slips and invoices in addition to the purchase order. On top of that, the more paper-based records you accumulate the harder they are to keep track of.
The best purchase order systems make generating purchase orders quick and simple. They’ll also track all the associated paperwork for each order and match relevant documents together. And the advantages of an automated purchase order system don’t stop there. They simplify record keeping and protect records from loss, damage, or being accidentally destroyed. You’ll also cut back on processing expenses and on the amount of paper used.
Do Small Businesses Use Purchase Orders?
Very small businesses can usually get away with not using purchase orders, but as your business grows POs become more important. The main difference between a purchase order system in a large company and a small business is how many people are involved. Larger companies work on a larger scale. There’s a much wider range of employees involved in purchasing, which means there are more opportunities for something to go wrong.
Large companies need a purchase order system that can track purchasing across the company. It helps them prevent fraud, control employee purchasing, and avoid duplicate purchases. Depending on the number of employees in your small business, you might not need all those features. But you’ll still reap the benefits of using purchase orders no matter how small your company is.
Why Should I Use Purchase Orders?
Before you go to the effort of implementing a purchase order system, you probably want to know more about how they can help your business.
In a business of any size, it’s easy for communication to break down enough for two people to place orders for the same thing. A purchase order system helps you avoid duplicate orders since it’s easy to pull up records for recent purchases.
Since purchase orders are a legal agreement between buyers and sellers, they can protect you from price increases and any legal disputes that arise regarding the order. And if the price changes between the time you submitted your purchase order and the time of delivery, you’ll have a record of the agreed-upon price.
Tracking incoming orders by matching them to the POs in your record-keeping system helps simplify inventory management. Also, good purchasing records are an asset in dealing with audits. Some types of audits also require proof that a manager approved procurement decisions, and purchase orders are the best documentation for that.
Purchase orders make it easier to look up repeat orders of similar or identical items, so you can track what your business purchased when, and for how much. Accurate, easy-to-access records about how much your company spends are also valuable for budgeting.
How Do I Use POs In My Business?
The best purchase order systems for a small business will scale to your exact needs. You don’t need to pay for a huge, complicated system designed to work on a large scale. But you also don’t want to get stuck with a system that can’t keep up as you grow. Cloud-based systems, like NextProcess’ Purchase Order Module, are designed to scale to your needs and pricing is based on your company’s use.
Once you have an automated purchase order system, creating and using POs will be simple. Automation makes creating purchase orders and saving templates for use on your next orders quick and easy. You can even submit orders to your vendors directly through the software. PO software also stores information that’s searchable and updates in real-time. You can check your purchase records anywhere, anytime on your computer, tablet, or smartphone. It also keeps your information secure and only authorized users can access the records.
If you’re implementing a new purchase order system, start out right with easy-to-use automation software tailored to your business. Contact us and we’ll give you a free demonstration of NextProcess’ purchase order system so you can see first-hand how it will work in your business.