5 Best Practices to Improve Purchase Order Flow Management
A purchase order is a document that authorizes a purchase transaction. This document mentions product descriptions, prices, discounts, quantities, date of shipment, terms of payment, and other terms and conditions. When the seller accepts all the terms and conditions mentioned in the purchase order, then the contract becomes legally binding on both the parties. A [...]
A purchase order is a document that authorizes a purchase transaction. This document mentions product descriptions, prices, discounts, quantities, date of shipment, terms of payment, and other terms and conditions. When the seller accepts all the terms and conditions mentioned in the purchase order, then the contract becomes legally binding on both the parties. A purchase order is used by the finance department of any company for forecasting and budgeting. Therefore, purchase order flow management becomes very essential for businesses that deal with large volumes of purchase orders. If any business fails at purchase order management, it can lead to chaos in the procurement and finance department. However, streamlining and organizing purchase order flow management is a time-consuming process for businesses. In this article, our supply chain analytics experts have highlighted a few best practices, implementation of which can help companies to improve their efficiency within their purchase order flow management process.
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Best practice #1: Assess existing workflow
For your purchase order management system to work efficiently, you need to track and analyze the existing process as designed and used on a day-to-day basis. An in-depth analysis of purchase order workflow can help you identify bottlenecks in the manual purchase order system. Also, it can guide in planning the purchase order lifecycle and can further help in addressing other inefficiencies in the business operations.
Best practice #2: Establish a central supplier directory
Establishing a central supplier directory can be a significant step towards improving purchase order flow management. This can help in enhancing the quality of information about different suppliers as well as communication across the different levels of an organization. Centralized repositories can further help in reducing the level of effort needed to retrieve and manage information throughout the organization. Additionally, it provides quality information leveraging which data analytics experts can visualize and implement strategic improvements.
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Best practice #3: Improve authorization processes
Purchase order flow management is sometimes sabotaged by the inefficient authorization process. A disruption in the purchase order management process can occur if manual paper processes are practiced or too many signatures are required on a single purchase order. Therefore, it is important to improve the authorization process.
Best practice #4: Quality Assurance
To have a better purchase order flow management system in place, accurate data entry of purchase order into the system is very important. Businesses should put a series of quality checks in place to ensure that all the required details have been accurately filled. Such details include purchase quantity, price, shipping details and whether the products are taxable or non-taxable.
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Best practice #5: Cancellation Process
To improve the purchase order flow management system, procurement teams in any organization need to be very careful about the cancellation process. They should accept cancellation only when it is properly formatted and documented in an e-mail or a hard copy of cancellation is forwarded to the procurement team from an authorized signatory. This can help in preventing procurement fraud and can help in improving the vendor-buyer relationship.
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