Why Switch to Digital Purchase Orders?

Types of Purchase Orders

There are different types of purchase orders and you should choose the type that suits you well. Purchase orders have different structures with different purposes. Following are some of the common types:

Standard purchase orders

These are the most common types of POs and are used for one-time purchases. These purchase orders include specific details of transactions such as product description, quantities, pricing, delivery dates, and terms. Standard purchase orders come in handy for immediate procurement needs as they are straightforward, making them ideal for routine purchasing. 

Planned purchase orders

Planned purchase orders are something that you create in advance anticipating future procurement needs. Unlike the standard ones, planned POs are used for one-off transactions where they outline the intention to purchase goods within a specified timeframe. This proactive approach helps businesses manage inventory, schedule production, and budget and offers more visibility over future procurement requirements. 

Blanket purchase orders

Blanket purchase orders act as long-term agreements with the suppliers. These are used for recurring purchases made over time. Instead of sending multiple POs for each purchase, the blanket POs will set terms and define the overall relationship that includes delivery schedules and expected quantities for a fixed price for a specific time frame. Blanket purchase orders simplify the transaction by consolidating under one contract taking the burden off of the administrative team. 

Contact purchase orders

Contract purchase orders are formal agreements useful for establishing long-term commitment. These are often used for strategic suppliers forming partnerships for large-volume purchases. These POs clearly define the pricing terms, delivery schedules, and other important details necessary for a smooth relationship. Contract POs often come in handy for long-term commitments, minimize risks, and ensure they are compliant with the terms.

Challenges with Traditional Purchase Orders

Paper-based purchase orders face a lot of challenges due to the complexity of managing them, especially in the digital era. 

Traditional purchase orders can be complex and challenging to manage especially in the digital era. These are some of the common challenges that you might encounter with manual purchase orders:

• Human errors are inevitable. The paper-based purchase orders rely on manual data entry which can be inefficient due to errors in the details of products, quantities, and prices. This can affect vendor relationships and result in inaccurate financial records.  
• Traditional purchase orders can take time to create, approve, and process as it involves the procurement team manually filling out the form and sending it for approval. This can delay getting a response due to manual follow-ups. 
• Traditional purchase orders can be difficult to track especially when your company handles volumes of purchase orders. The procurement team has to go through a stream of email threads and phone calls to locate the physical records which can be tedious and challenging.  
• Like human errors, delays in the manual processing of paper-based purchasing orders are inevitable due to the multiple rounds of review or unavailability of the approvers. 
• Paper-based purchase orders are costly and offer low visibility over procurement activities. This makes it difficult for businesses to track spending patterns and analyze vendor performance. 
• Traditional purchase orders lack robust control to prevent the risk of fraud and unauthorized purchases leading to non-compliance issues and penalties. 

The Solution: Automating Digital POs For Seamless Procurement

The solution to those above challenges is automating the purchase orders. 

Digital purchase orders eliminate manual inefficiencies and drastically improve the procurement process. It offers real-time visibility, better control, and accurate record keeping which helps businesses to be compliant and sustainable as it grows. 

Step-by-step Guide to Creating Digital Purchase Orders

Here is a step-by-step guide for you to easily set up and manage a digital purchase order system. These systems enable you to create digital purchase orders effortlessly. 

Establish sourcing guidelines

The first step is to establish strong purchasing guidelines which have to be clear and well-defined and align with the business needs. So, when developing the purchasing policy you need to consider certain key elements:

• Identify the scope of the purchase by categorizing purchase types and clearly establish guidelines to suit special cases that may require different handling. 
• Delegate roles and responsibilities to relevant people such as approvers, buyers, and suppliers for accountability. 
• Design a detailed procurement workflow ensuring each step is properly mapped as it simplifies tracking orders. 
• Create an approval system and implement it to review purchase orders correctly and ensure that all necessary information is captured efficiently.
• Communication is key for any process and strong communication between the various departments actively promotes problem-solving. 
• Regularly assess the policy’s effectiveness and improve it based on feedback and address issues to align your business needs with the market conditions. 

Configuring the approval workflow

This next step involves setting up the approval workflow for processing the purchase requests. You can use Cflow to set up an automated approval process easily with a few simple steps:

For instance let’s say your purchase approval system requires initial approval from a procurement manager, followed by department head review and final CFO approval for purchases over $6000, for which you can establish the following workflow:

1. First set up the reporting manager approval. Cflow allows users to assign a reporting manager to handle the purchase requests. When a request is submitted the system automatically routes it to the assigned reporting manager for first-level approval. 
2. Next set the department head review. After the reporting manager approves the request it gets routed to the department head. Cflow enables users to assign predefined department heads based on the purchase category. The system will automatically assign the correct approver according to the details of the purchase order request.
3.  For the CFO’s approval, Cflow enables users with conditional workflow. For purchases exceeding $6,000, users can set a conditional workflow to escalate the request to the CFO for final approval. Cflow’s conditional routing ensures that large purchases receive the necessary financial review, protecting the company from overspending or unauthorized purchases.

Choosing the right PO template

Cflow offers hundreds of predefined templates and completely customizable templates that can be created from scratch. You need to select the right one as it is crucial for generating accurate and efficient digital purchase orders.  

The PO templates in Cflow are a structured format that clearly defines all necessary information such as product description, quantities, price, delivery schedules, and payment terms. 

Purchase order templates can be very basic or more sophisticated, and you must choose the one that fits all your procurement needs. A well-chosen template can capture all information accurately, resulting in smoother vendor transactions. 

Initiating service request

Now that you have configured the approval workflow with the right template it is time to initiate the service request. You create a PO to initiate a service or product request from the chosen vendor. 

The request should detail the type of service needed, product quantities, delivery dates, and any special instructions or preferences. Providing this information upfront facilitates a smooth and efficient procurement process.  

Supplier evaluation and proposal submission

Once the vendor receives the PO they carefully review to see if they can meet the buyer’s expectations. They evaluate the availability of the requested resources, and the ability to deliver within the specified schedule and it aligns with the expertise of the suppliers. 

Once the supplier completes the evaluation, they draft a service proposal detailing their approach to fulfilling the request. 

The proposal comprises information related to the scope of the services and products, estimated pricing, delivery timeframes, and terms and conditions. The document acts as a foundation for further discussion allowing both parties to negotiate and finalize the purchase. 

Customer approval and issuing a purchase order

In this step, the proposal is reviewed and the customer confirms and approves if everything aligns with their product demands, budget, and delivery schedule. 

When the supplier’s proposal is reviewed, the customer determines if it aligns with their needs, budget, and timelines. 

Once approved, the customer formally issues a purchase order to the supplier which can be a digitally signed document or a printed version and mailed depending on the supplier’s preference. 

These purchase orders act as legally binding documents once the supplier accepts and confirms their acceptance of fulfilling the order. At this point, both parties are legally obligated to proceed with the terms and conditions. 

Delivering the service

Once the purchase order is confirmed and accepted the supplier initiates the delivery of goods based on the terms and conditions outlined in the PO. 

The process includes allocating necessary resources, planning, and scheduling tasks, and collaborating with the customer to ensure services are provided efficiently and on time, meeting all specified requirements.

Verification and Processing Invoice

Once the products are received, the customer verifies the quantity delivered by performing quality checks, and confirming that all agreed-upon requirements have been met.

Once everything is checked and the service completion is accepted, the supplier releases the invoice based on the PO. The invoice contains information on the goods and services provided, and their corresponding costs as per the terms. 

Once the invoice is received, the customer processes the payment which officially closes the transaction and fulfills their financial obligations. 

Benefits of Digital Purchase Orders

Faster processing and scalable

Digital purchase orders are significantly faster to process and send to suppliers than paper-based ones. 

RPA bots are equipped with data extraction, OCR, and NLP to automate tasks efficiently without human intervention. This results in:

• Auto-generated purchase orders using pre-defined templates
• Evaluating terms and conditions against the rules engine.
• Sending purchase orders directly to vendors with automated processes. 

This enables businesses to handle large volumes of purchase orders easily in less time. 

Moreover, Digital purchase order systems are more flexible compared to traditional paper-based ones. Changes can be made easily without needing to reprint documents. They are scalable, increase agility, and improve procurement management. 

Efficiency and Productivity

Digital purchase orders reduce manual data entry, eliminate paperwork, and reduce delays caused by physical approvals. The digital system unlocks productivity by allowing employees to focus on more strategic tasks like planning and execution. This boosts organizational productivity as the staff can shift their focus away from administrative tasks.

Data-Driven Insights

Digital systems can integrate purchase order software with ERP systems, BOM software, and other third-party apps. This creates a centralized data hub that provides visibility across the entire purchase order workflow. 

Companies can have better insights into supplier performance (e.g., response time to invoices)  and order tracking metrics such as lead times and cost evaluations. These insights allow for better decision-making, helping companies achieve operational excellence.

Security and Compliance

Digital systems offer centralized cloud-based storage for securely storing and accessing purchase orders. This reduces the risk of losing or damaging physical documents. The digital records can be accessed only by certain authorized users, reducing security breaches. 

Digitization and Archiving

Automating purchase orders enables digital archiving, which creates an audit trail that tracks every stage of the order process:

• Who created the purchase order?
• Who authorized it?
• When the goods are expected?

This also facilitates easier retrieval of records, improves compliance, and makes audits seamless. It eliminates the need for paper-based documentation, reducing errors and ensuring that records are stored securely.

Real-Time Purchase Order Approval

Digital purchase order systems support a real-time approval process. Bots follow predefined business rules and automatically assess purchase requisitions based on factors such as:

• Total cost and quantity limits.
• Vendor performance history.
• Lead time and manufacturing cycles.

If a purchase order doesn’t meet the criteria, the system flags it for human review, preventing unauthorized or non-compliant purchases. Additionally, automated three-way matching (invoices, delivery receipts, purchase orders) ensures smooth approvals and reduces the need for manual intervention.

Automated Three-Way Matching

Automation enables real-time three-way matching between purchase orders, invoices, and delivery receipts. This process ensures that:

• Only goods that have been received for which invoices are paid.
• Multiple purchase orders and invoices can be reconciled simultaneously without errors.

This not only enhances security but also speeds up the invoice reconciliation process.

Improved Communication and Collaboration

A digital purchase order system promotes better communication between the buyer and supplier. Businesses can send instant notifications to suppliers about changes or updates to orders.

They can track order acknowledgment and shipping status in real-time. This enhances transparency, prevents delays, and ensures both parties are working with the same information, fostering better collaboration.

List of Top Digital Purchase Order Apps

1. Cflow 

Cflow is an AI-powered workflow automation platform that is designed to streamline your procurement activities. Cflow now offers a new feature in OCR where it eliminates manual data entry making your procurement process truly digital. Customization is Cflow’s biggest advantage and can effectively integrate with existing accounting systems which makes it a great choice for businesses of all sizes. 

2. SAP Ariba

SAP Ariba is a procurement platform designed with robust features for large enterprises. It offers extensive purchase order management, supplier collaboration, and spend analysis tools. Ariba can integrate seamlessly with SAP ERP systems, giving companies real-time visibility into their procurement processes.

3. Precoro 

Precoro is a straightforward and efficient digital purchase order solution designed for small and medium-sized enterprises. It offers automation for purchase requisitions, approvals, and budget tracking, allowing teams to streamline procurement and reduce manual errors.

4. Procurify

Procurify is a cloud-based procurement platform that facilitates businesses to manage purchase orders, approvals, and expense reports efficiently. Its intuitive interface and mobile-friendly features help companies gain control over their spending and procurement workflows.

5. Spendwise

Spendwise focuses on simplifying purchasing and expense management for small to medium-sized businesses. With features like purchase order tracking, budgeting, and approval workflows, Spendwise helps organizations keep spending under control while providing visibility into their financials.

6. ProcureDesk

ProcureDesk provides an end-to-end procurement solution, covering purchase order creation, supplier management, and invoice processing. It integrates with various accounting systems, enabling efficient purchase order workflows, budget control, and reporting.

7. Ivalua

Ivalua is a comprehensive procurement software designed for enterprises with complex purchasing needs. It offers advanced tools for managing purchase orders, supplier relationships, and procurement analytics, ensuring control over large-scale spend management.

8. Basware

Basware is known for its purchase-to-pay solutions, providing efficient purchase order automation and e-invoicing capabilities. It helps large organizations streamline their procurement processes by automating repetitive tasks and improving supplier collaboration.

9. Jaggaer

Jaggaer is a leading procurement software that offers a wide range of tools, including purchase order management, supplier sourcing, and spend analysis. It provides companies with in-depth visibility into their procurement workflows, helping them make data-driven decisions.

10. GEP SMART

GEP SMART is a unified procurement platform designed to manage the full procurement lifecycle. The platform offers a complete solution streamlining purchase orders to supplier management and contract compliance providing businesses with better financial control and improved cost efficiency. 

Transitioning to Smart Purchase Orders with Cflow: A Case Study

Cflow’s Optical Character Recognition (OCR) feature streamlines data extraction from both physical and digital documents, eliminating the need for manual entry. This advanced tool effortlessly pulls text from scanned images, such as invoices, forms, and even handwritten notes, transferring the data into customized form fields on the platform.

With Cflow’s OCR, the process is simple:

• Choose the workflow and relevant template for the document.
• Upload the scanned document image.
• Cflow instantly processes the image, extracting relevant data.
• Map and customize the form fields for your organization’s specific needs.

This feature, powered by machine learning, reduces the time and effort required to document and store records, making it ideal for sectors like healthcare, banking, and business operations.

Case Study: University Academy of Florida (UAF)

University Academy of Florida (UAF) a leading Islamic private school in Tampa was facing challenges with the manual purchase order process. It was challenging for their admin team as it was slow with errors and lacked transparency. The admin team struggled to track PO statuses and experienced delays in approvals.

They opted for Cflow for a quick solution. Cflow’s workflow automation solution streamlined UAF’s entire PO process, drastically reducing approval times, improving visibility, and enabling the team to identify and resolve bottlenecks efficiently. The automation, coupled with email notifications, accelerated PO processing, providing UAF with a faster and more transparent purchasing workflow.

Conclusion

Switching to digital purchase orders is no longer just an option but a necessity for businesses aiming to optimize their procurement processes. Digital purchase orders streamline operations, reduce human errors, and enable real-time tracking, leading to faster approvals and better communication with suppliers. 

Automation is the key to streamlining digital purchase orders and you need to have the right tool for your business. Cflow offers comprehensive procurement solutions ensuring long-term sustainability, scalability, and competitiveness in the modern business environment.

Talk to our experts and schedule a demo today!