Purchase Order Management: Best Practices

Men working on the purchase order management information

Effective purchase order management will make certain that your business experiences a consistent inflow of materials required for your operations. To that end, are you certain that your business is employing the proper purchase order procedures? If not, you can use an automated purchase order management system software and make sure that you implement these four guidelines.

Approve All Purchase Orders Prior to Supplier Intimation

Purchase orders are legally binding. If you raise an order without sufficient money to pay for them, you’ll be responsible for making payments when it affects delivery. To avoid confusion when making purchase orders, they should be signed and approved by key individuals including your department head, chief purchasing officer, and finance manager before being intimated to suppliers.

Keep Purchase Orders Short

Keeping your purchase orders easy to create and simple is essential to timely procurement. Ideally, your purchase orders should contain the following key details: the date and order number, quantity and description of orders, requisition department, authorized signatures from relevant signatories, and the expected location and date of delivery.

Purge Pending Purchase Orders Regularly

Pending purchase orders could result in mix-ups once your store or warehouse receive the orders. Prevent this by purging your purchase orders on a regular basis. Otherwise, this could also result in inaccurate calculations of supply rates, which in turn could result in your business losing money. In addition, order mix-ups could lead to multiple payments to one vendor.

Determine If You Need Blanket Purchase Orders

In general, businesses create blanket purchase orders to make their purchase order management simpler and easier. Usually, these are raised for more affordable materials needed in high volumes regularly. However, make certain if you need them and check if you’re losing money because you order excessive quantities. Is the current amount optimized for appropriate use? Consider investing in an automated purchase order management solution to help you with the analytics of your purchase order management system and other related tasks.

The Bottom Line

You need to be confident that your purchase order management process is as efficient as can be. This will ensure that your costs are always under control and that you’re not spending unnecessary funds on materials that you don’t need.