The role and benefits of a PO system in procurement

Manual errors. Delayed approvals. Compliance issues. Without a formal process or system in place, purchase orders (PO) can be the cause of headaches and expensive errors. 

That’s why more and more businesses are turning to automated purchase order systems.

Read on to learn how a PO system can help you save time, improve spend control, and accuracy.

How does a PO system work?

A purchase order (PO) system plays a crucial role in procurement by providing a structured and controlled process for managing purchases.

Purchase orders act as formal agreements between buyers and vendors, detailing the products or services to be provided, quantities, and agreed prices, and payment terms. This clarity helps in avoiding disputes.

A PO system automates everything in the purchase order process from requests and approvals to PO generation and submission, with visibility into order tracking and management, while ensuring compliance through detailed transaction records essential for audits.

In addition to automating the PO process, a purchase order system centralizes all PO documents in one place. This allows you to manage and analyze big picture purchasing patterns. 

If your PO system exists within a larger procure-to-pay system, you can link your purchase orders to your broader financial operations. For example, Fraxion lets you link purchase orders directly to invoices for easy matching and receiving. Fraxion also integrates with most ERP and accounting systems, as well as e-commerce sites via PunchOut catalog integrations.

5 Benefits of a purchase order system

The benefits of a PO system can be summarized into five key elements:

1. Automated efficiency

Automation of the purchase order process reduces manual effort, speeds up order processing, and minimizes errors, leading to faster and more efficient purchasing. Processes can be completed via a mobile app, reducing delays and bottlenecks.

2. Improved accuracy and reduced errors

Human error can incur costs. A PO system improves accuracy by:

• Logging the goods or services to be acquired with specific quantities, prices, and terms.
• Tracking purchase orders with complete visibility and audit trails.
• Enabling matching capabilities - checking purchase orders against supporting documents, such as goods received notes and invoices.

3. Purchase order consolidation and savings

Consolidating purchase orders gives you a bird’s eye view of your overall spending. That means you can track, store, match, analyze and audit all of your POs in one place.

This perspective allows you to identify opportunities for optimizing your purchasing cycle. For instance, you might consolidate orders with a single vendor to qualify for volume discounts or other cost-saving opportunities.

4. Reduce risks to buyers and sellers

By recording the purchase order clearly, a PO system acts as a source of truth for the buyer and seller. Once an order is received, a PO system enables users to easily verify received items against the original purchase order by recording the number of items delivered, the delivery date, and unit costs. Some systems can even include shipping or tracking links. Having centralized purchasing records and digital logs greatly improves auditability. 

5. Improve spend management

In a PO system, a purchase order cannot be issued unless the associated purchase requisition is approved and compliant with budgets and configured policies. This means no accidental orders, unauthorized spending or internal miscommunication. 

Why shouldn't you just create POs manually?

If you have a manual process in place, you may not think a digital PO system is necessary. However, an automated PO system can greatly enhance your procurement process by reducing manual errors, streamlining approvals, and ensuring compliance. The end result – quicker, more accurate purchasing cycles.

Even better? Most PO software solutions enable purchase order template customizations to meet your company's requirements.

Key features to look for in a PO system

In addition to the above criteria, you should ensure that your PO system has the following mission-critical features in addition to automated purchase requisitions, budget visibility, policy checks, and approval workflows. 

1. Mobile agility

When selecting PO software, mobile app functionality with purchase order capabilities is critical. It should provide real-time visibility into purchase orders, enable users to download and send purchase orders on-the-go, and allow for efficient remote tracking of received goods. This ensures streamlined procurement processes, timely updates, and accuracy, all from a mobile device.

2. Seamless integration with financial systems

While evaluating platforms, check that your PO system connects with your ERP or accounting system. Seamless integrations are key to accurate data synchronization, reduced manual entry, efficient workflows, and comprehensive financial oversight.

3. PunchOut catalog integrations

A PunchOut catalog integrates a vendor's product listings directly into your procurement system, streamlining purchase requests, approvals, PO generation, and reducing errors. This ensures access to real-time product information and pricing, maintaining consistency and compliance with purchasing policies. Consider solutions with PunchOut catalogs from major vendors, such as Amazon Business. As an example, Fraxion offers over fifty vendor catalog integrations. You could qualify for bulk discounts and business-only pricing that drive cost savings and enhance procurement efficiency. By linking vendor catalogs directly to your purchasing and approval processes, spend management is optimized and overall, worklfows are streamlined and efficient.

How to choose a PO system

Finding the right PO system for your business doesn't have to be complex. As you compare options, use this list as a guideline:

Features - what features are important to your company's day-to-day operations? 
Pricing - what is the pricing model: subscription-based, monthly, or annual payment plans?
Integrations - will this platform complement and extend my existing or future financial / accounting system?
Security - does this company regularly undergo third-party tests and threat assessments?
Company size - is this tool built for companies of my size?
Scalability - will I be able to scale operations with this tool as my company grows?
Customer reviews - does this software have positive customer reviews on Capterra, Software Advice, GetApp, or similar platforms?
Industry - does the software platform have customers and success stories in my industry?

Explore Fraxion’s PO system

Fraxion’s purchase order software offers comprehensive functionality for companies of all sizes. It's an all-in-one solution for purchasing, expense, and accounts payable (AP) automation, complemented by seamless ERP / accounting and PunchOut integrations, a robust mobile app, and spend analytics. Interested in learning more? We'd like to connect with you to determine if Fraxion is a good fit for your business requirements. Get in touch to arrange a demo, customized to your needs.