Purchase orders (POs) are a key component of any streamlined accounts payable automation process, but a surprising percentage of AP departments don’t take advantage of the many benefits that POs offer. A PO is a document sent from a buyer to a supplier with a request for an order. That PO provides a clear statement to the supplier of what is being purchased, the agreed cost, and the payment terms. A PO requisition, which should be part of any robust PO system, is a document generated to notify the purchasing department of items it needs to order, their quantity, and the timeframe for completing the order. 

Many companies make the mistake of avoiding POs because they feel the additional paperwork is cumbersome and creates yet another obstacle in an already convoluted and time-consuming AP process, or because they have a strong relationship with their vendors and don’t deem POs to be necessary.

As we’ve discussed in the past, utilizing POs helps to:  

  • Control spending 
  • Manage inventory 
  • Strengthen vendor relationships 
  • Predict cash flow 
  • Empower more employees to spend smartly
  • Improve upfront financial controls

In addition, POs provide a concrete paper trail that can be used as a point of reference if there is any issue with the transaction.  

If you are already aware of these benefits and are looking to implement a PO system, if you are discouraged by failed attempts at implementing a PO process in the past, or if you currently have an outdated, messy PO system in place and desire a more efficient way to request, route, approve, audit, and process these documents, you should consider an automated purchase order and requisition (PO Req) solution.  

This type of solution can increase your use of POs and, if it is combined it with a bolt-on “vouching” solution that uses PO, invoice, and receiving data to perform a "pre-ERP" 2- or 3-way match and eliminate manual reviews, you can truly achieve touchless processing on the majority of your invoices.

An automated PO Req solution provides:  

  • Cost savings  — Your organization will save money by not having to route paper to the purchasing department for data entry. 
  • Better control  — Payment requestors will only be presented with their approved cost centers and accounts, giving your finance department greater control. 
  • Greater visibility  — Your AP team will have a better view of the entire approval process and enhanced spend controls. 
  • Compliance — The workflow can be configured to your business rules and be completely amenable to your purchase order and vendor policies. 

We hope we have proven to you that an automated PO Req process is in the best interest of your organization. However, we encourage you not to attempt a PO Req solution inside your ERP. Why? Part 2 of this series takes a deep dive into why ERP’s are not optimal for this process. 

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