Building an Efficient Purchase Order Workflow: A Step-by-Step Business Guide
Businesses with inefficient processes lose their edge over time. One such process is purchase order management. Every business has vendors, and the purchase order is one of the main documents while interacting with the vendor. Now, manual purchase order processes tend to be efficient and costly. The cost of manually processing a single purchase order can touch $500! Consider you send over 200 purchase orders; that cost will touch $100,000. That’s huge for businesses to waste.
Purchase order workflow automation helps businesses streamline their PO processes and reduce costs by around 80%. More and more businesses are automating PO processes, so if you haven’t, it’s time to get on board.
In this blog, we will learn everything you need to create efficient purchase order workflows.
Automate data extraction from purchase orders with Nanonets' pre-trained PO model. All you need to do is just upload your documents and the platform will extract all the data, perform data formatting, and automate approvals and payments. Try it for free!
What is the purchase order workflow?
Purchase order workflow is an automated and defined business process that can track goods or service purchase tasks for any team. A purchase order workflow defines the steps and actions the buyer requires to purchase anything for their team or business. Due to this, no matter what a buyer wants, they go through the same process. This helps in standardizing the process in large organizations.
What are the benefits of using a purchase order workflow?
An efficient and streamlined purchase order process can benefit organizations in multiple ways:
- Enhance standardization: With the purchase order workflow, everyone from the organization follows the same set of steps to purchasing anything. This reduces errors, improves monitoring of purchase activities & keeps track of spending vs. budget.
- Enhanced efficiency: With the standard purchase order process, every team member will have a proper view of steps to take while getting purchase approvals. This reduces effort in getting approvals manually by tagging everyone on a long email chain.
- Better Decision Making: Purchase order workflows can provide deeper insight into spending, budgets, and requirements of employees, thus helping companies make better decisions about their budgeting, financial forecasting, and inventory management.
- Provide valuable insights into a company's purchasing patterns, which can be used to make informed decisions regarding vendor selection, inventory management, and budget allocation.
- Cost Savings: This goes without saying; automating a manual purchase order process with a purchase order workflow reduces the cost per purchase significantly. Proper monitoring also helps organizations reduce their spending in the wrong places.
Automate data extraction from purchase orders with Nanonets' pre-trained PO model. All you need to do is just upload your documents and the platform will extract all the data, perform data formatting, and automate approvals and payments. Try it for free!
How does a purchase order workflow work?
Now that we’ve seen benefits let’s look at the steps of the purchase order workflow and the different stages.
In the purchase order process, these steps are involved:
Buyer identifies the need
A purchase order requisition is a document that states the buyer's buying requirement in detail, created by an employee. This purchase order requisition is then sent to the purchasing or procurement department.
Purchasing department checks the requisition document
The purchasing department tallies the requirements, checks the inventory to see if the requirement can be fulfilled internally, and validates all the purchase requisition details like item description, quantity, price, delivery date, and payment terms are according to the company policy.
Approval process
The requirement is sent to the buyer’s managers and department head from the purchasing department to validate the requirement, budget, and alignment with department goals.
Once the purchase order is approved, the purchasing department selects a vendor based on price, quality, and delivery time. Once selected, the vendor is sent the copy of the purchase order document to confirm and provide an estimated delivery time.
Goods or services delivery:
The vendor delivers the goods or services to the company, and the receiving department checks the order to ensure it matches the purchase order.
Once the goods are delivered, the vendor sends invoices to the company. The company must match the invoice with the purchase order and delivery note to ensure all the details are correct. Once 3-way matching is done, the invoice is sent to the accounting department for payment.
Payment of invoices
The company pays the vendor according to the payment terms outlined in the purchase order.
Now, in this entire process, how can the purchase order workflow fill the gaps, reduce manual intervention and streamline the process?
Purchase order workflow can:
- Automate inventory checks, validation of the correctness of purchase order requisition, and then route the document to the purchasing department for any further checks.
- Automate document approval processes by routing the document to the required person, showing the bottleneck for the approval process, and sending reminders to fast-track document approvals.
- Automate 3-way matching of the documents with efficient OCR software.
- Automate the payment once the accounting department approves the invoice.
- Improve visibility into the purchase order process by showing all stakeholders’ remaining tasks to everyone to identify bottlenecks, if any.
How to create a purchase order workflow from scratch?
Purchase order workflows are extremely easy to create. Document automation platforms like Nanonets make it easier. Nanonets is an AI-based intelligent document processing platform with in-built OCR, payment gateway integration, and workflow automation capabilities. You can create a purchase order workflow in minutes with Nanonets (for free). Let’s see how:
To do this, you need to log in to your Nanonets account. You can create a free account too.
Step 1:
Select the purchase order workflow from the home screen.
Step 2:
You’ll be prompted to the next screen, which asks you to upload your purchase order, but before we do that, let’s set up the workflow rules. So, select Workflow from the left-hand menu.
Step 3:
The workflow screen will show you all the options you need to create an efficient purchase order workflow.
Step 4 Select Import.
Now, you can set up how you would like to receive purchase orders here. You can automatically import purchase orders from the mail, drive, dropbox, API, Zapier, and more. Select the one that suits you.
Step 5 Data Enhancement
If you compare an invoice in the US date system to a purchase order from a UK vendor, the system will not match it unless you convert the date data properly. Enhance data feature allows you to format extracted data and validate and check data from multiple sources.
Here’s how you can use this to perform 3-way matching.
Step 6 Approvals
Now the approvals section allows you to set rules to send the document for manual review in case of any flags, errors or for management approval reasons. All you need to do is enter the approval details, set up rules (with no coding, of course!), and make it live!
Here’s a beginner’s step to step guide to approvals on Nanonets.
Step 7 Export
Now, once you’re done with everything, you will want to update the data in your systems. You can easily connect your CRMs with Nanonets with the click of a button.
Step 8 Payment
To pay the invoices, you can go to Nanonets Flow. You can process ACH payments, wire transfers, or more without paying any transaction fees.
If you need any assistance after signing up, feel free to contact our AI experts. They’ll help you set up workflows for you or you can try it for yourself.
Automate purchase orders with Nanonets
Nanonets is the best choice to automate purchase orders and other financial accounting processes. Nanonets is an AI-based financial automation platform with in-built OCR software, no-code workflow management, and global payments platforms. Nanonets can automate all financial processes in bookkeeping, accounting, accounts payable, accounts receivable, and more. Nanonets’ workflows automation can automate manual processes like
- Invoices, Receipts & Bills processing
- Data extraction from documents like contracts, invoices, etc
- Reimbursements & payroll accounting
- Vendor payment and vendor management
- Manual data entry into ERPs
Nanonets can reduce the document processing time by 90% and costs by 80%. Trusted by 500+ enterprises, it is the best no-code financial automation software with an OCR engine.
Here are some case studies that you might want to explore!
Best practices for creating an efficient purchase order workflow
How to get the best out of purchase order workflows? Follow these tips from finance veterans:
- Start with clear idea of the entire process. Be as meticulous as possible to define every step of the purchasing process.
- Use standardized templates for purchase orders that include all the necessary information, such as vendor information, item descriptions, quantities, prices, delivery dates, and payment terms. This ensures that all purchase orders are consistent and complete.
- Use an automated financial management system to implement the entire process, like Nanonets.
- Maintain a close eye on the spending. Don't let it surprise you at the end of the quarter.
- Train employees properly. This entire exercise won’t yield results if they don't use it.
- Regularly analyze data on purchase orders to identify trends and areas for improvement. This analysis can help identify opportunities to streamline purchasing, reduce costs, and improve vendor relationships.
Conclusion
We hope this blog helped you understand how to easily create purchase order workflows for you and your teams. Need to implement it? Head over to the signup button and get started!