We often see that companies use Excel or Word to create purchase orders. We know that purchase orders are a great way of gaining control of spend but the real values are first created when adding a purchase order system to manage it. Boston Consulting Group estimates that a company can gain a 10% cost reduction and at the same time reduce time spent by up to 30%.

We have looked into some of the main benefits you can experience when using a purchase order system;

 

1 – Reduced time spent on procurement processes

You can reduce time spent on most tasks related to procurement by implementing a dedicated system

  • Less manual data entries
  • Digital and secure approval processes are faster than manual ones
  • One-stop shop for information saves you time searching for relevant information.
  • Time spent on invoice processing typically goes down
  • Less time spent on tracking commitments when doing budget controlling.

With the whole team involved in the purchase process working together in a dedicated system, they will all have access to the same information in real-time.

 

2 – A purchase order system ensures good data quality

Using Excel and Word for your purchase orders can be a good start but it will always be a vulnerable solution, especially when it comes to updating purchase order numbers, address changes, or other vital information on the purchase order. A purchase order system will ensure that the correct PO number is assigned and that all purchasers use the same PO data.

 

3 – Improved control of the procure-to-pay process

Important information related to a purchase order can be added beyond the purchase order sent to the supplier. It can be:

  • Information related to the processing of invoice (account, department, project)
  • Information about billing or cost allocations
  • File attachments related to the purchase order (e.g. quotes)

In a procurement software, this can be added as fields or comments related to the purchase order, which means that you get all the relevant information in one place.

 

4 – Achieve real-time cost control with a purchase order system

While it takes a long time for an order to be executed until an invoice becomes visible in the accounting system, the purchase order system will see all committed costs at any time.

By using the purchase order system for budget control you get full control by having a “live” picture of how much is committed on a budget at any time. By having full control, you are able to make better decisions and will identify possible budget overspendings early. ..

Matching a purchase order against an invoice ensures that you capture any deviations from the invoice and that the purchase order system and the accounting system always are “in sync”.

Less time spent on reporting. More time available for proactive work following up budget status.

 

5 – Easy access to historic data with a digital archive

  • A searchable archive is a source of information that helps you in many ways. Here you can easily find previous orders, retrieve information about how much has been ordered from a vendor over a period, retrieve reports on orders related to a budget, etc.
  • This is information that can help you better control costs or optimize rates and terms.

 

6 – Simplify internal approval

Approval of purchase orders via email or paper is time-consuming. Emails must be followed up and documents may be lost when handling paper. By using a purchase order system, you have a complete overview of which purchase orders are for approval and with whom. In addition, history becomes traceable.

7 – Improved data security with a purchase order system

Through digital access control, you can decide who should have access to view, change, approve data in the purchasing system.

Many systems come with extra security measures as well. Some examples could be 2-factor authentication or Single-Sign-On feature. These security measures along with frequent backup routines protect your valuable data.

 

8 – Less people dependent than with manual processes

With a system in place, you are no longer dependent on the internal IT expert or knowing what is sent from the mailbox to the individual. Everyone finds up-to-date information in the purchasing system

 

To read more about purchase orders click here

You can also find more information about tracking cost commitments here

 

If you want to read the full report from BCG you can find it here:

https://www.bcg.com/capabilities/procurement/digital.aspx