When financial managers were asked about their organization’s purchase order system in a recent survey, a full 43% admitted to major inadequacies in the company’s purchase order (PO) practices.
Even in companies that had a formal purchase order system in place, many reported major inconsistencies, with, for instance, receipts or goods and services not being tallied with the PO until the invoice arrived.
For organizations of all sizes, the management of POs is very often disorganized.
Small firms may simply lack the skilled finance staff to manage a purchase order system; more established businesses may have to deal with a chaotic mix of legacy paper and antiquated monolithic order processing systems and multinational companies need to deal with complexities like import tariffs or even language barriers.
As a result, the purchase order system can very easily break down, leading to a loss of trust in the relationship with suppliers and internal inefficiencies.
Inefficient PO processing costs companies a significant amount of cash in terms of wasted time and manpower. Clearly, this inefficiency is a problem.
So how can we overcome these challenges?
The Causes of Breakdown in Your Purchase Order System
There are myriad reasons why a purchase order system might break down or hit delays. Some of these can be boiled down to human error, while others can be blamed on the process itself.
- Lack of authorization
Typically, a named person must ‘sign off’ on a purchase order. If this person does not receive the purchase order to sign off, or forgets to do so, the accounts department will refuse to agree to the PO.
- Incorrect supplier names and codes
If the person who completed the purchase order does not know the correct full name of the supplier or their business code, this can lead to break downs. They could write ‘Acme’ in the Supplier Name column, when in fact it should be ‘ACME Ltd.’ – a simple error, but one that could cost hours.
- Failure to complete all essential columns and boxes
This is especially a problem with paper POs where the user can’t be reminded by the system that they must fill in certain kinds of information—whether that’s an account code, full names and costs of the goods or services or something as simple as where the delivery must be made.
- Illegible handwriting
Again, this is a common problem with paper forms, and requires endless ‘back and forth’.
- Failure to use the preferred suppliers list
Many organizations have a preferred supplier list, meaning that if an employee tries to buy from outside this list, the finance team will object to this decision. There may be a perfectly good reason, but this usually needs to be explained and an escalated approval obtained.
- Seasonal issues
In some organizations, there are seasonal surges in the number of POs coming through the purchase order system. These can compound other problems and lead to further delays.
Automation is the Solution
Despite the number of potential setbacks, there is a solution: automating the process.
Nintex Workflow can be used to automate your organization’s purchase order process and dramatically reduce these common problems in your PO system. It allows you to fully digitize the completion of purchase orders, and design a workflow which efficiently completes all the necessary steps to ensure the purchase order is always finalized on time.
Let’s see why this is so much better than the ‘traditional’ approach:
|Traditional purchase order system||Automated purchase order system|
By fully automating your purchase order system, you can save yourself countless hours, rapidly speed up the process and save endless ‘back and forth’. This cuts frustration, saves time and minimizes those inconsistencies that so often hold companies back.