How To Set Up A Purchase Order System For Large Organizations
The larger an organization grows, the more important it becomes to keep track of purchasing. A poorly functioning purchase order (PO) system or, worse, no system at all will result in purchasing problems that cost your company money. And since purchasing is such an important part of keeping a company running, you’ll want to make certain that the purchasing process in your company works smoothly.
Companies of any size need to make purchases. In smaller companies, you might get away without using purchase orders for a while. Purchase orders still play an important role, though, and if you’re a small business you can click here to read more about how to implement a purchase order system that will work for you.
In larger companies, documenting purchases isn’t just a good policy. And you shouldn’t consider it optional either. It’s a vital step in managing company spend. You’re going to need a system that makes it easy to generate purchase orders and to track your purchasing information. And setting up a purchase order system that really works isn’t just going to improve purchasing. It’ll also help with receiving and accounts payable.
But how do you improve your current purchase order system or set one up if you don’t have a PO system already? The simplest way usually involves coming up with a strong plan to implement an online e-Procurement system. Keep reading for key information that will help you set up a purchase order system for a large organization.
What Is A Purchase Order System?
Purchase orders serve as legal documentation of the orders your company places. They’re a document you generate and send to your suppliers letting them know what you want to purchase, the quantity you’re buying, and at what price. When they accept your purchase order, it becomes a legally binding agreement.
Your purchase order system governs how your company generates purchase orders and tracks purchasing information. It’s also going to play a role in receiving and accounts payable since those departments will check the purchase order against an invoice and make sure all the items were received at the agreed upon price.
When and Why To Use POs
There are a whole host of reasons to use purchase orders in your business. We cover several in our article “10 Important Ways That Using Purchase Orders Benefits Your Company.” In short, purchase order systems:
- Save time
- Help with budgeting
- Enable planning
- Act as an early warning system for unanticipated expenses
- Eliminate goof-ups
- Provide legal protection
- Control spending and automatically enforce policy
- Track company spending
- Help you understand vendors
- Improve inventory management
There are a few situations where purchase orders are not required. For example, some companies use purchase orders for regular expenses like utilities and membership renewals, but not all. It’s your choice to decide which categories of purchases require POs. Just make sure your policies regarding whether or not a purchase order is required are clearly defined in each case.
Elements of A Good Purchase Order System
Good purchase order systems make it fast and easy to generate purchase orders. That means a paper-based system simply isn’t going to be enough in today’s business world. Using an automated system makes it easy to track all the associated paperwork for each order and match relevant documents together across the entire company. Automated purchase order systems also simplify record keeping and cut back on processing expenses as well as on the amount of paper used.
Another advantage to using automated procurement software as a large organization is that it helps unite purchasing across the company. If you prefer, you can give employees in several different departments purchasing permission and cut-out the extra step of having each department submit purchasing requests to a centralized purchasing department. All the requests will still be handled by the same system, making it easy to monitor purchases company-wide and avoid issues like duplicate orders or maverick spending.
3 Steps To Implementing Large-Scale PO Systems
When setting up a purchasing system for a large organization, planning is key to success. Huge amounts of information go through the purchasing department in large companies and there are often multiple employees involved. The better your plan is going in, the easier it will be to implement a successful purchasing system.
As you’re going through the planning process, remember to loop your purchasing team in on all the decisions that go into setting up a new purchase order system. They’ll have important insight into what works and what doesn’t about the current purchasing policy. They’ll also be the ones working with the new system, so it’s important to make sure you’re giving them the tools they’ll need.
1) Define Your Purchasing Policy
As you’re setting up a new purchase order system, it helps to go over your purchasing policy at the same time. A good PO system enforces your policy. But before it can do that you need to decide what the policy is going to be. When creating policy, you’ll need to define your company’s position on:
- The role of purchasing in your company
- How you determine which suppliers to do business with
- Buyer-seller relationships and contracts
- Which spend categories require purchase orders
- Which employees have purchasing permissions
- Guidelines for ethical behavior
- Resolving disputes with suppliers
2) Select A PO Automation System
You’re definitely going to want an automated, digital system rather than one that’s paper-based. The main question you need to answer is whether you’re going to setup a system that’s hosted and maintained in-house or go with an online procurement supplier. Unless the information going through your purchasing system is highly classified, an online e-Procurement system is usually the best choice.
There are pros and cons to using an online procurement system. But for most companies, the benefits like easier organization, tightened controls, lower costs, and fast implementation outweigh downsides such as having less direct involvement in the process. And when you pick a reliable automation supplier like NextProcess, you avoid things like hidden fees and shoddy security that can be an issue with other companies.
3) Work On System Implementation
There’s a pretty low rate of successful implementations in the IT/software industry as a whole. Only about 33% of implementations are successfully completed. To avoid becoming part of the 66% that fail, you need to have an implementation plan in place and choose a reliable software provider
You might consider rolling out the new PO system gradually by giving your most influential users access to the system before everyone else. They’ll help you make sure everything is working the way your company needs it to before the system is used company-wide. Your e-Procurement supplier should be with you every step of the way making sure the implementation goes smoothly.
It’s worth noting here that NextProcess has an implementation rate near 100%. We have a very responsive customer service team and we’ll plan on working with you throughout the entire implementation process. This typically lasts about 6 months, though you’ll be able to start using the program early on in that time frame. Our Project Managers will work closely with you to set up configuration options that enforce your policy and support your company’s goals and needs.
Setting up a reliable purchase order system will benefit any organization. But for large companies like yours it’s even more important. Because larger companies make more purchases, the problems or benefits associated with your purchasing system have more of an impact. And you’re going to want a purchasing process that delivers all the benefits e-Procurement can offer without the potential problems.
If you’re ready to talk about your options for e-Procurement software in your company, get in touch with NextProcess. We’ll schedule a free demo so you can see first-hand how our software will work for your company’s purchasing needs. This also gives you more information about our system before you commit to purchasing. And if you do go with us as your software supplier, we’ll be there with you through the entire implementation process and beyond to make sure your new purchase order system continues benefiting your company.
A quality, automated purchase order system unites procurement across your organization. It also gives you the tools you need to make the purchasing process an asset to the company. And with the tips contained in this article, you’ll be well on your way toward setting up a purchase order system that will meet the needs of your organization.