Assembling a purchase order is a common part of the routine of a company’s purchasing department. Within the company, the flow of materials is a fundamental part of the business’ economy and if carried out in a non-strategic way it can result in high risks and losses.
Companies that manage purchases inefficiently tend to lose market competitiveness in the market, which could lead to bankruptcy. With this in mind, acquiring quality inputs means, in short, maintaining a high standard of quality in the services provided. And as we know, high quality service translates into staying in the market!
A good purchase order process is essential to ensure this. In addition to organizing the demands, making the purchasing process simplified and optimizing the time, a good purchase order process is critical to maintaining a healthy and lasting relationship with suppliers.
The purchase order process follows simple 5 steps:
Purchase Order Analysis
In general, purchase orders come from a requesting department or employee. With a certain frequency, a single department or employee does not have a clear idea of what is in the company’s best interests, such as prices and payment terms, and tend to take into account only the need they have at a given moment.
Because of this, the overwhelming majority of purchase orders need to be reviewed, and adjusted to the reality of each company. This means that there are some internal communication problems in the company, and this can be solved quite simply!
Training employees to fill out a purchase order is critical. Each detail of the document should be presented, and their respective need explained. This way, the employees will begin to better understand what they are filling out, and will do so with greater zeal.
It is common that purchase orders contain quantities, minimum and maximum deadlines for delivery, conditions of delivery (assembly of equipment, the possibility to assemble at delivery, etc.) and the costs. Feel free to include any information you find useful!
Remember: orders need to be strategically thought out to make it easier to find suppliers and close the deal!
After identifying the need for purchases, it’s time to select suppliers. For this, a search is made to choose the best options for each demand, and price quotes are requested for evaluation.
In order to choose the most suited suppliers, factors such as company reputation, price, punctuality and compliance with deadlines and conditions, company experience in the area, negotiation criteria, and even the values that govern the company’s activity should be considered.
This task needs to be done with caution so that the choice of vendors is assertive!
Once chosen, suppliers must send quotes, containing the prices and conditions they can offer for each need. Remember to ask for full quotes, with all possible information! This is important so that you can cross check them with what you were informed in the purchase order, and decide which supplier will serve you the best.
Attention: Try to keep this process as light and fast as possible, so you do not cause delays in the next steps!
Choice of supplier and order shipment
After receiving the quotes, it’s time to weigh the pros and cons of each supplier. In addition to analyzing the prices and conditions that each company has proposed, you can request samples or demonstrations of the products, to help you in the final choice.
With the supplier chosen, the purchase order is submitted, and from here the process will be out of your hands, momentarily!
Here’s a note: Always set an average time to submit your order to suppliers to create a standard within your business. By always following this deadline, you develop one more credibility factor with your vendor concerning meeting deadlines!
When you receive a delivery, verify that all conditions of the purchase order have been met. Check quantities, formats and other data in the invoice, and watch out for incidents or delays not reported or justified.
Once checked, the merchandise can be sent to the requesting department, which will review all the information. The person responsible for the order must inform if everything is in agreement, and release the request for the last step!
Supplier Billing and Payment
After all necessary inspections, the department responsible for payment must receive the receipt and the acceptance report from the requesting area. With this information in hand, the purchase will be approved and paid for!
If everything goes smoothly, without any unforeseen circumstances or problems, this will be the basis for the next deals.
Now, some final tips:
Use a management software
You can make the process easier and more organized with the help of a management software. There are many options available, that allow you to insert every important information and do quick follow ups on every purchase order.
Keep a good control of your inventory
The best way to prevent purchasing items unnecessarily is to keep good control of inventory. You can also use a management software here, to make things simpler to keep up with, and much more organized.
Stay loyal to the sales predictions
Every company makes predictions concerning the sales expectations for the next year, or semester. What some people seem to forget is that the sales predictions are fundamental to understand how the financial situation will be for the period in question.
When analyzing purchase orders, always check if the sales predictions justify the acquisition, and if it is possible to pay for it without jeopardizing the company’s budget.
Always adjust your purchase predictions to the sales predictions! Even though some of the purchases come from unplanned needs, the majority of them are predictive repairs and replacements that you can map quite easily.
We hope that you’ve learned why it is so important to assemble a good purchase order, and how to do it without complication! So, does your company manage the purchase orders in a different manner? How? Do you have any tips or other insights not mentioned here? Leave them below in the comments!
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