10 Reasons for Using a Purchase Order Approval Software

Business Cost Control Invoice matching Procurement Purchase order

Using software for purchase order (PO) approval, does not only save you tons of time but comes with additional values you might not have considered.

In this article, we will provide you with 10 key reasons for using software to manage your approval process. We will also look at key factors to consider when selecting a purchase order software for your business.


What is a purchase order (PO)

In simple terms, a purchase order (often referred to as a PO) is a document that forms a binding agreement between your company and the supplier. It speaks for itself that this is an important document. The decisions leading to forming the agreement are vital for the company. They dictate many important aspects of a purchase, such as scope, price, delivery date, delivery times, payment terms, liquidated damages (if any), and more.


What is a typical purchase order process?

A typical purchase order process consists of five steps as below.

Purchase order process

  1. A Purchase Request is created and sent to the relevant approver(s).
  2. The request is approved and converted into a Purchase Order (PO) with a specific PO number.
  3. The PO is sent to the supplier.
  4. The goods/services are received from the supplier.
  5. The supplier invoice(s) is matched with the invoice, ensuring that the invoice is in line with the Purchase order and what has been received. This is called a 3-way matching process. 


What are the main reasons to use software to manage purchase order approvals?

1- Huge time saver

Many companies are coming from a situation where purchase requests are approved by papers being sent around to the relevant approvers or by e-mail. By managing the approvals in a digital system, you can automate the approval process so that the request is automatically routed to the right approver. The approver is reminded either via app or email and can easily go in and approve the request. In the same process, the approver can also decline the request with comments explaining why the request was declined.

So, in a digital world, you eliminate the sending of papers or emails around between your colleagues.


2 – Visibility

Instead of chasing papers, the visibility in software is much better. You can easily the approval flows and who has the request for approval at any time so that you know who to chase.


3 – Come in early enough to ensure a good decision.

One key reason to approve requests is to ensure a good process before the commitment is made with the supplier. There are many aspects of a purchase decision that are important. Examples of this can be making sure the purchase is made to the right supplier, with the right scope, and price, with the right delivery date, delivery terms, payment terms, and other terms and conditions that are important for your company.

Using software, key documents such as quotations can follow the request which will make it easier for the approver to make an informed decision.


4 – Having the right visibility at the approval point

In addition, one unique insight you get from using software is that the approver can see the impact of approving the request with real-time information. As an example, the approver will see how much funds are available on the specific budget or down to the budget category level and then see the financial impact of approving the purchase.

Purchase order approval

Note! In CostTracker you can also set restrictions to ensure no overspending is allowed without increasing the budget.


5 – Automation (emails, reminders)

In a manual process, a purchaser would need to send the relevant document (by paper or email) to the right approver. Next, the approver would need to approve and forward to the next and so on.

Using software all of this is done automatically, the approvers are automatically notified and directed into the software. And the process only requires one click… Approve!


6 – Audit trails

Another key element is that all actions are stored in the software so that you have a complete trail of who did what and when. This is useful for internal purposes, but also important for auditors or other third parties auditing the company’s key processes.


7 – Information carrier

A related benefit of the above is that in software you can use the purchase request as an information carrier, where you can store comments and documents that are of importance to the purchase.


8 – PO automation

When a request is approved later steps can easily be automated such as PO creation, PO number generation, and sending the PO to the supplier. When the goods are received one can also easily mark off what has been received to the PO with limited efforts.


9 – AR process automation and optimization (see who approved, decide)

In the last step of the process, one or multiple invoices are received from the supplier. From the purchase order, many parts of this process can be automated such as data input and qualify checks against purchase orders and goods receipts.

With full visibility of the purchase, the accounting function can easily see who has approved the PO and determine the need for supplier invoice approval based on this and the company’s guidelines.


10 – Capture cost commitments (use for budgets, for cash flow forecasting).

Last, but not least, a PO system brings many related advantages related to the financial side of the company. This involved tracking financial commitments from a purchase request is approved which is a vital process for many companies to stay in control of their cost base. In CostTracker you can also generate cash flow forecasts based on the data in the system.


How to find the right purchase order approval software

So, if you are looking to improve the purchase order approval process, the good news is that there are several solutions available on the market. However, most solutions are tailored towards different types of businesses. For example, finding software aimed at a business in your industry and company size can be important to ensure that you get a good match.

We recommend that you read the following article that provides insight into the key decision factors before you decide:

5 steps to find the best Purchase Order (PO) system


CostTracker is a cloud-based purchase order software designed to provide you with total control over cost and cash flow. CostTracker makes cost control easy for hundreds of companies all over the world. It can be used stand-alone or integrated with your accounting software.




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