No supply chain operation runs in an ideal setting with no mistakes and faux pas. However, if those mistakes become more frequent, they can significantly hurt the procurement team’s efficiency and profit margins. For instance, one-off purchase order slip-ups in the procurement department are acceptable. However, if they are occurring very frequently, it is a cause of concern for the given enterprise. Businesses using purchase order approval software can curb their PO gaffes and mistakes easily. We will discuss this bit in detail. First, you need to identify the mistakes that a procurement team makes while handing purchase orders.
Why PO Mistakes Become Frequent?
Before we start outlining the PO mistakes, we should know why they become so common in the first place. To begin with, the modern supply chain and procurement processes involve a lot of data and information. The manual handling of that overwhelming amount of data intrinsically increases the chances of errors and mistakes.
Moreover, when the PO data is not handled and processed through a centralized platform like purchase order approval software, coordination becomes pretty difficult for the procurement team. Poor coordination or the lack of it is also a recipe for purchase order mistakes. Lastly, if the PO handling is spread across online and offline domains, it becomes challenging to steer the relevant process error-free.
4 PO Mistakes to Watch Out for
Let’s look at some specific mistakes that a procurement team should be mindful of.
1. Not Being Specific with Details in the Order (Hint: Purchase Order Approval Software Can Help)
As mentioned earlier, contemporary purchase orders and other procurement documents entail a lot of information. It is worth mentioning that all this information is not redundant. The different segments of this information serve different purposes and help parties on both sides of the deal, i.e., the buyer and the supplier. In contrast, a purchase order with ambiguous details and little information can only create confusion and cause miscommunication.
Let’s try to understand it with the help of an example. A packaged food enterprise wants to procure semi-sweet white chocolate for its dessert division. The PO generated for this procurement just states that the company needs X amount of chocolate at a Y unit price on a certain date. This PO has a lot of critical information missing.
For instance, the description (semi-sweet white chocolate) is not there. The vendor can supply any variant of white chocolate as per the PO. Moreover, the item code, tax details, and department information are also missing from the order. The lack of all this data from the PO can make procurement tracking and internal audits a lot of hassle.
Enterprises should use a well-thought-out PO template to ensure it becomes as specific and clear as possible. Every piece of information about the ordered item, from complete vendor to shipping details, should be there on the PO.
2. Working with a Mismatched Invoice
A PO not matching the invoice is a problem that affects both buyers and suppliers. If you work with a recurring supplier and a mismatched invoice comes in any of the transactions, it can mess up all the future purchase orders. Therefore, you need to be very diligent in assessing and appraising an invoice.
Many procurement teams don’t bother to match invoices with orders because they don’t use streamlined PO templates. Moreover, many can’t detect the inconsistencies in the purchase order and the ensuing invoice because data presentation on those documents is not full and optimized.
Therefore, an enterprise must ensure that its purchase orders have a good scannable format. They should also proactively ask vendors and suppliers to use invoices that spell out the required information.
3. Approving POs without Quotations
In an ideal procurement ecosystem, an enterprise first makes RFQ (Request for Quotation). A supplier then sends a quotation upon which a PO is made. However, many enterprises don’t follow this process flow due to time constraints or laziness. They just send out the purchase order even without waiting for the supplier to mail their quotes.
A good quotation document features many key points. Apart from quoting the total price, it also provides cost breakdown, information on payment methods, payment terms & conditions, and when the quote will expire with its existing T&Cs. Having all this information at the time of making a PO rules out the chances of any confusion and unnecessary back and forth with the supplier.
4. Using Paper to Make POs
Gone are the days when your procurement teams would make purchase orders verbally or on a piece of paper. It still happens among mom-and-pop businesses. However, an enterprise operating in a competitive environment can’t rely on paper to handle its purchase orders. Using paper for POs is not just poor practice, it is a mistake. We have maintained that strong opinion about paper-based POs for various reasons.
- Paper-based POs work at a snail’s pace. It may take up to a week to process a paper PO within the organization and then to send it to the supplier.
- Paper-based POs kill productivity. Employees need more time to make hardcopy POs as compared to making it on a purchase order approval system.
- Handling paper-based POs is a lot of hassle. They can easily get lost and also cause desk clutter.
Using Purchase Order Approval Software: A Solution to Many PO Mistakes
An organization can overcome PO mistakes and cut down their occurrence by using purchase order approval software. A well-thought-out purchase order approval system helps an organization centralized all its PO work on an online platform. Moreover, it helps them create, modify, verify, approve, and send a PO to suppliers from the same channel. A PO doesn’t have to travel multiple desks when purchase order approval software is your default application for the task.
SimplyPurchasing by Microsys is a procurement management system that boasts features of any good purchase order approval software. It helps you streamline your procurement requests and reduce pertinent mistakes with its well-thought-out PO section. Get in touch with Microsys and deploy SimplyPurchasing in your procurement department for its wide-ranging set of functionalities.