As a new company, it’s all hands on deck, lots of communication and informal approvals. As an owner or manager, you know everything that is happening and nothing is getting purchased unless it is needed and approved (informally). As your company grows, your staff still makes purchases of what they believe they need, at what they believe is the best price.
Joe needs a computer, so he gets one. Tom thinks he needs one too, so he also buys one. Did they get the best price? Does Tom really need a new computer? Using Purchase Orders allows you to manage the purchasing process to be sure you are getting the best price and only buying what you need, not what your staff wants. Joe and Tom’s computers could have been combined into one purchase to get a better price and save on shipping costs.
Automated approval process
A formal Purchase Order process will establish an approval protocol before items are purchased. A new Purchase Order should be approved before it is sent to a vendor. Pricing should be reviewed to the point of even setting up vendor contracts to guarantee best prices. Aggregating multiple purchases into one order can help drive quantity discounts and save on shipping costs.
[Related: The next step accounting solution for growing SMBs]
Implementing a Purchase Order system should do the following:
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Provide an approval mechanism before purchases are made.
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Provide a platform for documenting the best vendor price, terms and delivery times.
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Document for all parties the items requested, agreed pricing, delivery dates and shipping terms.
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Allow for a separate receiving function to ensure the items were received in good condition.
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Provide a match to the vendor invoice to ensure the agreed to pricing appears on the invoice.
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Provide the ability to analyze vendor on-time performance, and the quality of their items.
It is sometimes hard to change old procedures that worked when your business was much smaller. It seems like you’re adding more work to the process, but really, you are saving your company money and making sure items are received on time.
At Gravity Software® (Gravity), we have the ability to manage the whole Purchase Order process and manage what actually happens in the real world. Gravity’s cloud-based accounting software is written on the Microsoft Power Platform (aka Dynamics 365). A very open and robust platform allowing users to pick and choose which modules they want to include for their business. For example, a company can choose accounting from Gravity Software, Sales from Microsoft and Field Service from a 3rd party like Modus-O.
Gravity’s goal is to fill the gap between entry level accounting software like QuickBooks and expensive enterprise applications. Determine if Gravity Software is the right fit for your organization before committing and schedule your online demo today.
Gravity Software
