Purchase order system
Making purchases is inherent to nearly every business. Documentation is the key to secure and reliable purchases — businesses need to know that they will receive what they ordered, and sellers want to ensure they will be paid for what they sent.
Regardless of the size of the company, there will always be a time when a business will need to purchase goods from a supplier.
Any business aims to do things right the first time, so that errors and mistakes cannot affect the bottom line. But in the realm of purchasing supplies, several things can go wrong. Finding the best way to prevent purchasing errors can save businesses money and the hassle of fixing a misconstrued order.
To avoid purchasing errors, organizations that purchase supplies need an effective purchase order system in place. A purchase order system is a platform that allows businesses to create purchase requisitions, which can then be approved and turned into purchase orders. The system sends the purchase order to the vendor, and the supplier sends the goods.
Once the company receives the goods they ordered (and the invoice from the vendor), the purchase order system matches the invoice with the purchase order and the receipt for the goods. If all three line up, the invoice is sent to the Accounts Payable (AP) department, so the vendor can receive payment.
Purchase order generator and tracker systems make it easy for businesses to verify the status and quality of the purchase order, from creation to payment. Additionally, a purchase order tracker system allows the company to keep an accurate record of purchases, to keep an eye on vendor relationships, and to ensure they only pay for what they receive.
Rossum is an intelligent document processing platform that can capture data from purchase orders automatically — so that verification, inventory tracking, bookkeeping, and other purchase order tasks can be performed accurately and easily.
Types of purchase orders
Before a business implements a purchase order system, it is necessary to understand the details of purchase orders. Once the details are straightened out, the purchase order is sent by the buyer requesting specific goods from the vendor. If the purchase order is accepted by the vendor, it acts as a legally binding contract between the buyer and seller.
To get a better idea of how purchase orders work, let’s take a look at the following example:
In a hypothetical purchase order, assume Company A, a T-shirt manufacturer, wishes to purchase 100 yards of cotton fabric. To do this, they:
- Send a purchase order requesting this fabric from the vendor.
- The purchase order contains the company information, a description of the goods, the quantity requested, price per unit, and the total order amount.
- The vendor receives this document, understands the request, and accepts it.
- The purchase order is now a contract, and the vendor sends the goods as requested.
- After a few more steps, Company A pays the vendor according to the amount on the purchase order.
The most comprehensive purchase order system will be able to generate and track all types of purchase order documents. POs exist in four primary categories: standard purchase orders, planned purchase orders, blanket purchase orders, and contract purchase orders. Here’s the difference between the types of purchase orders:
- A standard purchase order is created for a one-time purchase, and contains detailed information regarding goods, cost, and timeframe.
- A planned purchase order is similar to a standard purchase order, but it serves as a longer agreement to purchase goods from a vendor over a specific timeframe. Dates can be tentative.
- A blanket purchase order is a slightly less specific PO than the previous two, generally used as an agreement to purchase goods within a period of time without the details of delivery dates or specific quantities.
- A contract purchase order acts as a contract between the buyer and seller without actually purchasing any goods. These purchase orders are useful for ongoing buyer-vendor relationships.
Every type of purchase order includes data that must be recorded and verified in a purchase order system. That’s where AI-powered software like Rossum comes in.
Rossum allows you to capture all the data from purchase orders, and to automatically match purchase orders to invoices and receipts. An automated purchase order system allows vendors to be paid promptly, and it allows your business to accurately make and receive orders.
Purchase order management process
The purchase order management process follows certain steps that are essential to the purchasing process and business efficiency.
First, the purchaser should start by creating a purchase requisition. This document is for internal purposes only, and it is usually sent by the department that needs the supplies to the finance department for approval. A purchase requisition includes a description of the required supplies, quantity, vendor information, and price.
The purchase requisition is then approved by the finance department, which issues a purchase order based on the purchase requisition data. Purchase orders serve to officially place the order. This can be compared to the “cart” and “checkout” sections in online ordering.
The purchase order is then sent to the vendor for approval. If the vendor approves and accepts the purchase order, they will begin to fulfill the order.
On the other hand, if the vendor rejects the purchase order, the order must be discussed further. If the vendor does accept the purchase order, the buyer will eventually receive the goods — and create a receipt.
The receipt will outline the exact items and quantities so that the data can be checked against the purchase order. Once all goods are received, the purchase order, receipt of goods, and invoice are compared.
If everything matches, the invoice is approved and sent to the finance department for payment. For any business that needs to create a purchase order, a digital purchase order template can be found online.
One of the most essential parts of the purchase order management process is the storing of data and the keeping records. Because the invoices cannot be paid without checking them against the purchase order (and the receipt for supplies), there must be records of these documents in a database.
Rossum is an intelligent document processing (IDP) platform that can automatically capture data from diverse documents, and store captured data in the recordkeeping system used by your company.
With Rossum, the data from all the documents related to purchase orders can become easily accessible and verifiable, so that your business never pays for goods it did not receive.
Purchase order management system
A straightforward purchase order management system makes it easy for any department in the company to create purchase requisitions and send them to the finance department. Whether it is an online purchase order system or software, these platforms automate various aspects of the purchasing process.
Additionally, a PO system should include a tracker so that the purchase order can be fulfilled accurately and on time.
The most effective purchase order management systems will include the data from the purchase order, receipt of goods, and invoice stored in a database — and automatically perform the 3-way match to approve the invoice.
For retail businesses, a retail-specific purchase order management system is ideal. The best retail PO system will have the capability to store inventory data, so that management can quickly see if they need to create a purchase order for any retail supplies that are running low.
Whether for retail businesses or any other organization, a purchase order management system is a helpful tool for generating and keeping track of purchases. These systems make it easy to keep all of the digital documents in one place so that making use of the data is simple.
In addition, today’s most effective purchase order management systems are cloud-based, like Rossum — so that PO data can be accessed and updated from almost anywhere.
Purchase order management software
Most purchase order management systems will be in the form of software. Purchase order management software shouldn’t be difficult for employees to use — PO software should be an aid to the organization, not a burden. Software should be cost-effective, quick and easy to implement, and reliable.
Even the simplest purchase order software should be comprehensive enough to handle all of your purchase-related documents and data. It should be able to create purchase orders, relay them to the right department, match the invoice to the purchase order and receipt, and verify all of the data.
The most user-friendly purchase order software is based in the cloud — so that it can be consistently accessed and updated. Cloud-based software can make it easier for the separate departments that are involved in purchasing decisions to see the data as it is coming in.
The best purchase order software will also have intelligent optical character recognition capabilities, so that any unstructured and semi-structured data can be easily detected and exported into the proper database.
That’s where Rossum shines — Rossum can automatically capture data from various document types, whether from scanned PDFs or Excel spreadsheets, so that the data from purchase orders, invoices, receipts, and quality inspection sheets can be stored and accessed in one, centralized platform.