Purchase Order Tracking - How Does It Work?

Purchase Order Tracking March 05, 2021

Hanh Truong

Introduction to Purchase Orders

Purchase orders, often abbreviated as POs, are critical documents for businesses. These forms entail key information that connects every stage of transaction and order fulfillment.

Therefore, to have full control and transparency in these processes, managers must perform purchase order tracking. This practice allows companies to keep track of the movement of their purchase orders, ensuring that procurement activities are accurate and efficient.

What is Purchase Order Tracking?

Purchase order tracking is the process of monitoring the status and movement of an order in real-time. This helps with managing the PO cycle, which encompasses creating a purchase order, having it approved, and receiving the goods. A tracking system also allows procurement staff to identify inefficient steps in their procedures.

A purchase order is often viewed as a legal contract between a company and its suppliers. By effectively tracking these contracts, businesses can ensure they receive the right goods in the expected quantity and quality. This is important for maintaining optimal inventory levels and reducing waste. Additionally, organizations can protect their bottom line by making sure they are partnering with reliable suppliers.

How Purchase Orders are Traditionally Tracked

In order to improve existing PO tracking strategies, organizations need to understand manual monitoring methods. Traditionally, this process involves 4 steps.

1. Contact Procurement Department

When a department identifies that their team needs new supplies or products, they must first contact their procurement department. After a request is made for goods, the procurement leader will make sure they have enough funds in the budget.

2. Procurement Team Creates a Purchase Order

If the company has enough capital, the procurement team will approve and create a purchase order addressed to the supplier.

3. Send Purchase Order to Supplier

The team will then mail the physical purchase order document to the supplier.

4. Department Contacts Supplier

Once the supplier receives the purchase order, the department will regularly call them for the delivery status.

Why Manual Purchase Order Tracking is Insufficient

Although the manual process of order tracking appears simple, it is considered outdated and slow for modern companies. Key reasons why physical purchase order tracking is insufficient include

Increased Paper Waste - Physical papers are expensive and are unsustainable if companies have piles of documents they do not use. Additionally, paperwork is hard to correct and duplicate and will require more documents to be created.

More Hands-On Work - Physical tracking necessitates manual data entry, corrections, and processing. Without automation, companies would have to assign employees specific roles to file and prepare purchase orders.

Time-Consuming Work - Organizations that have large volumes of purchase orders will have to spend more time communicating with suppliers and procurement teams. This can become unmanageable, especially if documents become lost, forgotten, or are inaccurate.

Increased Spending - When manually tracking orders, organizations will need a physical storage or filing system to preserve their paperwork. Invoice fraud and spending oversight could also occur if businesses are not effectively handling their purchase orders.

Benefits of Using Automation When Tracking Purchases

To avert the inefficiencies of manual purchase order processing, organizations should implement automation into their practices. Modern technology has allowed for the creation of cloud-based systems that streamline order management and the procurement process.

For example, business owners can utilize inventory ordering software to gain visibility into their procurement activities and track purchase orders. These systems are equipped with artificial intelligence and can be connected to existing business platforms with an integration tool.

Using automation will provide various benefits, such as the following.

User Friendly Interfaces

Automated order solutions empower users to easily track their purchases using an intuitive interface. Since these systems are cloud-based, staff can also monitor supplier deliveries remotely from any location with an Internet-connected device. It will also provide users with documents on demand, allowing them to communicate with vendors and make real time decisions.

Purchase Order Templates

Ordering software will automatically populate key information in purchase orders, such as vendor details, payment agreements, and suggested quantities. Not only does this streamline the process of creating a purchase order, but it will also ensure all information inputted is accurate and improve inventory management. This will effectively save teams time and prevent delays in procurement.

Optimize Vendor Management

Automation will help businesses guarantee they are ordering their goods from preferred suppliers. For example, managers can program their templates to preselect and populate the correct vendor name on purchase orders.

The systems will also help with contract management since they provide data regarding supplier pricing and delivery schedules. Teams can leverage this information by selecting the best vendor that aligns with their needs and budgets.

Centralize All Transactional Data

These automation tools can compile all purchase order data, such as recent deliveries, spending, and historical orders. Having all key metrics in a centralized location will make reporting and auditing easier. It will also streamline supply chain management, accounting procedures, and inventory control practices.