Automating Your Purchase Order Process: A Step-by-Step Guide

Introduction

A purchase order (PO) is a commercial document that represents a formal request to a vendor or supplier to provide goods or services at a specified price and within a certain timeframe. It is a legal agreement between the buyer and the seller, outlining the details of the transaction and setting the terms of the purchase.

Purchase orders are typically used by businesses to ensure that they receive the correct goods or services at the agreed-upon price and quantity. They also help to establish a paper trail for tracking the progress of the purchase, including order status, delivery information, and payment details.

Purchase orders typically include information such as the name and address of the buyer and seller, a description of the goods or services being purchased, the quantity and price of the items, and any relevant delivery or payment terms. Once a purchase order is issued and accepted by the seller, it becomes a binding contract between the two parties.

Using purchase orders can help businesses to better manage their purchasing process, avoid misunderstandings or disputes with vendors, and ensure that they receive the goods or services they need to operate effectively.

The Purchase Order Workflow

This is what the complete purchase order workflow looks like -

1. Purchase Request: A purchase request is initiated by an individual or department in an organization when they require goods or services. This request is usually made through a standardized form or software system, and includes details such as the item name, quantity, required date, and cost center or project code. For example, an employee may need to purchase a new laptop for work, so they submit a purchase request to the IT department with the specifications of the desired laptop.
2. Purchase Order Creation: Once the purchase request is approved, a purchase order is created by the purchasing department. The purchase order contains the details of the requested goods or services, including the item name, quantity, unit price, total cost, and delivery date. The purchase order also includes the supplier's details, such as their name, address, and contact information. For example, the purchasing department creates a purchase order for the laptop requested by the employee, which includes the laptop specifications and the supplier's details.
3. Purchase Order Approval: The purchase order is then sent to the relevant department head or manager for approval. The approver verifies that the requested goods or services are necessary, the pricing is reasonable, and that there are sufficient funds available in the budget to cover the purchase. Once the purchase order is approved, it is sent to the supplier. For example, the IT manager approves the purchase order for the laptop and sends it to the supplier.
4. Purchase Order Dispatch: The supplier receives the purchase order, creates a sales order and dispatches the goods or services to the specified delivery address. The supplier may also provide an estimated delivery date and time to the purchaser. For example, the laptop supplier dispatches the laptop to the employee's work address.
5. Goods or Services Delivery: The goods or services are delivered to the specified delivery address. The recipient verifies that the goods or services received match the purchase order specifications. For example, the laptop is delivered to the employee's work address and the employee verifies that it is the correct model and specifications as requested.
6. Goods or Services Receipt and Inspection: The recipient inspects the goods or services received to ensure they are in good condition and meet the specified quality standards. Any issues or discrepancies are reported to the supplier for resolution. For example, the employee inspects the laptop for any damage or defects and reports any issues to the supplier.
7. Invoice Matching: Once the goods or services have been marked as received, the invoice which comes along with or after the delivery is matched to the original purchase order in a process called invoice matching. The match is usually made for the quantity billed and the invoice price. The following conditions need to be met :

• The invoice quantity is less than or equal to the amount ordered in the PO.
• The invoice price is less than or equal to the price quoted in the PO.

8. Payment Processing: Once invoice matching is successful without any flags, payment based on the terms set in the purchase order / invoice (whichever is less) is to be made to the vendor or supplier. This is done by the establishment which created the original purchase order and started this whole workflow, using payment method of convenience.

How to Start Automating the Purchase Order Workflow

The complete purchase order workflow listed in above section can be automated. Let us explore further -

Purchase Request

Purchase request is the first step in the purchase order workflow where a request is made for goods or services that need to be purchased. Purchase order automation can help in this step by allowing users to create and submit purchase requests electronically, thereby reducing manual effort and eliminating the need for paper-based requests.

Businesses that offer purchase request automation solutions include:

• Coupa Software - Coupa offers a cloud-based spend management platform that automates purchasing, invoicing, and expense management. Its purchase requisition automation feature allows users to create and submit requisitions electronically, and track their progress through the approval process. Website link: https://www.coupa.com/
• Procurify - Procurify is a cloud-based procurement software that helps organizations streamline their purchasing process. Its purchase requisition automation feature allows users to submit requisitions online, and track their progress through the approval process. Website link: https://www.procurify.com/

Purchase Order Creation

Once the purchase request is approved, the next step is to create a purchase order. Purchase order automation can help in this step by automatically generating purchase orders based on approved purchase requests and pre-configured vendor information.

Businesses that offer purchase order creation automation solutions include:

• Precoro - Precoro is a cloud-based procurement software that offers purchase order automation as part of its platform. Its purchase order creation feature allows users to create and approve purchase orders electronically, and track their progress through the procurement process. Website link: https://precoro.com/
• Procurics - Procurics is a cloud-based procurement software that provides purchase order automation as part of its platform. Its purchase order creation feature allows users to create purchase orders electronically, and track their progress through the approval process. Website link: https://www.procurics.com/
• Basware - Basware is a cloud-based procurement software that offers purchase order automation as part of its platform. Its purchase order creation feature allows users to create and approve purchase orders electronically, and track their progress through the procurement process. Website link: https://www.basware.com/
  

Purchase Order Approval

In this step, the purchase order is reviewed and approved by the appropriate authority. Purchase order automation can help in this step by enabling electronic approval workflows that allow approvers to review and approve purchase orders quickly and easily.
Businesses that offer purchase order approval automation solutions include:

• Nanonets - Nanonets is an AI-powered platform that automates purchase order approval and other procurement processes. Their solution uses machine learning algorithms to automatically extract data from purchase orders, match them against contracts and budget, and approve or reject orders based on pre-defined rules. Nanonets also provides analytics and reporting tools that enable procurement teams to optimize their purchasing processes and improve vendor relationships. Website: https://nanonets.com/

Nanonets' purchase order automation solution is designed to simplify and streamline the procurement automation process for businesses of all sizes. Their platform uses advanced machine learning algorithms to automate the entire purchase order approval process, from data extraction to order routing and approval. Nanonets' solution is highly configurable, so businesses can set up rules and workflows that align with their specific procurement policies and procedures. The platform also includes built-in reporting and analytics tools that provide insights into purchasing trends and vendor performance, enabling businesses to make data-driven decisions that improve their bottom line.

Looking to set up the ideal Purchase Order automation process? Book a 30-min live demo to see how Nanonets can help your team implement end-to-end PO and invoice processing.

• Coupa - Coupa is a cloud-based procurement platform that automates the entire purchasing process, including purchase order approval. Their solution integrates with ERP systems and other business applications to provide a centralized platform for managing procurement activities, from requisition to payment. Coupa's purchase order approval workflows are highly configurable and can be customized to meet the needs of any business. Website: https://www.coupa.com/
• SAP Ariba - SAP Ariba is an enterprise procurement platform that provides end-to-end procurement solutions, including purchase order approval automation. Their solution integrates with ERP systems and other business applications to provide a centralized platform for managing procurement activities, from sourcing to payment. SAP Ariba's purchase order approval workflows are highly configurable and can be customized to meet the needs of any business. Website: https://www.ariba.com/
  

Purchase Order Dispatch

Once the purchase order is approved, it needs to be sent to the vendor. Purchase order automation can help in this step by automatically sending purchase orders to vendors through email or electronic data interchange (EDI) systems.

Businesses that offer purchase order dispatch automation solutions include:

• AvidXchange - AvidXchange is a cloud-based accounts payable automation solution that offers purchase order dispatch automation as part of their platform. Their solution automates the entire purchase order process, from creation to payment, and streamlines invoice processing. AvidXchange's platform also provides real-time data and analytics to help businesses make better financial decisions. Website: https://www.avidxchange.com/
• Tipalti - Tipalti is a global payables automation platform that offers automated Purchase Order Dispatch as part of their solution. Their platform automates the entire accounts payable process, including invoice processing and payment reconciliation. Tipalti's solution also includes tax compliance and regulatory support for businesses operating globally. Website: https://tipalti.com/
• Procurify - Procurify is a cloud-based procurement and spend management solution that offers automated Purchase Order Dispatch as part of their platform. Their solution streamlines the entire procurement process, from requisition to payment, and includes real-time data and analytics to help businesses make better purchasing decisions. Procurify's platform also provides supplier management and inventory tracking capabilities. Website: https://www.procurify.com/

Note: These businesses may offer additional features and services beyond Purchase Order Dispatch automation. It's recommended to review their websites or speak with a sales representative to learn more about their offerings.

Goods or Services Delivery

Once the purchase order is dispatched, the vendor delivers the goods or services to the buyer. While purchase order automation cannot directly help in this step, it can provide visibility into the delivery status through integration with shipment tracking systems.

Goods or Services Receipt and Inspection:

In this step, the buyer receives the goods or services and inspects them to ensure that they meet the agreed-upon specifications. Purchase order automation can help in this step by providing an electronic record of the goods or services received and enabling buyers to easily compare them against the purchase order.
Businesses that offer goods or services receipt and inspection automation solutions include:

• Nanonets - Nanonets is an AI-powered document automation platform that offers automated Goods or Services Receipt and Inspection as part of their solution. Their platform uses computer vision and natural language processing to extract data from documents, and automates manual data entry tasks. Nanonets' solution can be customized for specific use cases, including purchase order automation. Website: https://nanonets.com/

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• BirchStreet - BirchStreet is a cloud-based procurement and spend management solution that offers automated Goods or Services Receipt and Inspection as part of their platform. Their solution streamlines the entire procurement process, from requisition to payment, and includes real-time data and analytics to help businesses make better purchasing decisions. BirchStreet's platform also provides supplier management and inventory tracking capabilities. Website: https://www.birchstreet.net/
• Coupa - Coupa is a business spend management platform that provides automated Goods or Services Receipt and Inspection workflows. Their platform streamlines procurement, invoicing, and expense management, and helps businesses control their spending. Coupa's solution includes AI-powered insights that can help businesses optimize their procurement processes. Website: https://www.coupa.com/

Note: These businesses may offer additional features and services beyond Goods or Services Receipt and Inspection automation. It's recommended to review their websites or speak with a sales representative to learn more about their offerings.

Invoice Matching

Automating invoice matching is the most important part of purchase order automation.

In this step, the buyer matches the invoice received from the vendor against the purchase order and goods or services receipt. Purchase order automation can help in this step by automating the matching process, thereby reducing manual effort and eliminating errors.

Businesses that offer invoice matching automation solutions include:

Looking to set up the ideal Purchase Order automation process? Book a 30-min live demo to see how Nanonets can help your team implement end-to-end PO and invoice processing.

• Nanonets - Nanonets is an AI-powered document automation platform that automates Invoice Matching as part of their solution. Their platform uses computer vision and natural language processing to extract data from invoices and purchase orders, and automates the matching process to ensure accuracy and speed. For example, Nanonets' solution can automatically match an invoice with its corresponding purchase order and receipt, and flag any discrepancies for further review. This helps businesses streamline their accounts payable process, reduce errors and manual effort, and improve financial visibility. Website: https://nanonets.com/

• Tipalti - Tipalti is a global payables automation platform that offers automated Invoice Matching as part of their solution. Their platform automates the entire accounts payable process, including invoice processing and payment reconciliation. Tipalti's solution also includes tax compliance and regulatory support for businesses operating globally. Website: https://tipalti.com/
• Procurify - Procurify is a cloud-based procurement and spend management solution that offers automated Invoice Matching as part of their platform. Their solution streamlines the entire procurement process, from requisition to payment, and includes real-time data and analytics to help businesses make better purchasing decisions. Procurify's platform also provides supplier management and inventory tracking capabilities. Website: https://www.procurify.com/
  

Payment Processing

In the final step, the buyer processes the payment to the vendor. Purchase order automation can help in this step by automating the payment process, thereby reducing manual effort and eliminating errors. An auto payment workflow post invoice matching and approval is set up to automate the process.
Businesses that offer payment processing automation solutions include:

• Flow by Nanonets: Flow by Nanonets is a purchase order automation software that streamlines the entire procurement process from creating purchase orders to approving invoices for payment. Flow by Nanonets automates payment processing by integrating with payment gateways such as PayPal, Stripe, and Braintree, allowing for quick and easy payment processing. The software also offers an intuitive interface that enables users to track payment status and view payment history. Flow by Nanonets uses machine learning algorithms to capture data from invoices, reducing the need for manual data entry and reducing errors. Additionally, Flow by Nanonets offers customizable workflows that enable users to configure the system to fit their specific business needs. Website link: https://www.nanonets.com/flow/

• Coupa: Coupa is a cloud-based procurement software that automates the entire purchasing process, from requisition to payment. Coupa automates payment processing by integrating with payment gateways and ERP systems, allowing for seamless payment processing. The software also offers spend analysis and reporting tools that enable users to gain insight into their spending patterns and identify areas for cost savings. Additionally, Coupa offers supplier management tools that enable users to manage their suppliers and track supplier performance. Website link: https://www.coupa.com/
• Procurify: Procurify is a cloud-based procurement software that streamlines the entire procurement process, from creating purchase orders to approving invoices for payment. Procurify automates payment processing by integrating with payment gateways and ERP systems, allowing for quick and easy payment processing. The software also offers budget tracking and spend analysis tools that enable users to gain insight into their spending patterns and identify areas for cost savings. Additionally, Procurify offers supplier management tools that enable users to manage their suppliers and track supplier performance. Website link: https://www.procurify.com/

Nanonets for Purchase Order Automation

Nanonets OCR (Optical Character Recognition) can be used to automate many aspects of the purchase order workflow. Here are some specific areas where Nanonets OCR can help with purchase order automation:

• Data extraction: Nanonets can help extract data from purchase orders such as vendor information, invoice numbers, line items, shipping addresses, and more.

• Document classification: Nanonets can help classify purchase orders based on their type, such as standard purchase orders, rush orders, or blanket orders.

• Validation: Nanonets can help validate the accuracy of data extracted from purchase orders, such as verifying vendor information or invoice amounts.

• Approval routing: Nanonets can help automate the routing of purchase orders to the appropriate approver based on predefined business rules.

• Exception handling: Nanonets can help identify and flag exceptions such as missing information or unusual purchase orders for manual review.
• Purchase order matching: Nanonets can help match purchase orders to invoices or receiving documents, ensuring accuracy and reducing errors.

• Automated communication: Nanonets can help automate communication between different parties involved in the purchase order process, such as sending reminders to approvers or notifying vendors of order status updates.

• Payment Processing: Flow by Nanonets can automate payment processing after invoice matching. You can set up manual or automated conditional rules to approve files to initiate the payment by payment method of choice.

• Purchase order tracking: Nanonets can help track the status of purchase orders throughout the procurement process, providing real-time visibility into order progress.
• Contract compliance: Nanonets can help ensure that purchase orders are compliant with contractual obligations, such as pricing or delivery terms.
• Audit trails: Nanonets can help create an audit trail for each purchase order, recording all relevant information and changes made throughout the process.

These are just a few examples of the many ways in which Nanonets can help with purchase order automation. With its advanced machine learning capabilities, Nanonets can automate many different aspects of the purchase order workflow, saving time and reducing errors for businesses of all sizes.

Looking to set up the ideal Purchase Order automation process? Book a 30-min live demo to see how Nanonets can help your team implement end-to-end PO and invoice processing.

Benefits of Purchase Order Automation

Purchase order automation provides many benefits to organizations, including increased efficiency, accuracy, cost savings, and improved supplier relationships. Here are some examples of these benefits in the real world:

1. Improved accuracy: By automating the purchase order process, organizations can reduce errors caused by manual data entry or communication mistakes. For example, if a supplier receives an automated purchase order, there is less chance of misreading the order or missing important details.
2. Cost savings: Purchase order automation can help organizations save money by reducing the time and resources required to process orders. For example, automated systems can reduce the need for manual paperwork and phone calls, which can save time and money in terms of staffing and other costs.
3. Improved supplier relationships: Automated purchase order systems can help improve communication and collaboration between organizations and their suppliers. For example, suppliers can receive orders more quickly and easily, and organizations can track orders and deliveries more effectively, which can help build stronger relationships with suppliers.
4. Increased efficiency: Automated purchase order systems can streamline the entire procurement automation process, from ordering to invoicing and payment. For example, when an order is placed, the system can automatically generate an invoice, which can save time and reduce the risk of errors.
5. Better inventory management: Automated purchase order systems can help organizations better manage their inventory by tracking orders and deliveries in real-time. For example, if an order is delayed, the system can alert the organization to potential inventory shortages, allowing them to take action to avoid stockouts.

Overall, purchase order automation can help organizations save time and money, improve accuracy, and strengthen relationships with suppliers, all of which can have a positive impact on the bottom line.