This article will show you a proven strategy to control spending through purchase order management. The result is that the finance team spends a lot of time cleaning up the mess, which is time wasted. That means employees spend a lot of time asking other employees what to do, or they just do what they want to do. You might have a buyer or a procurement team, but without an established process, there is low engagement.
#Importance of purchase orders how to#
When you don’t have a purchase order process, employees don’t know how to purchase. If you don’t have an established process, it is a productivity drag for the entire organization. But that is not the case for many growing companies.īy using purchase order software, you can see what you have committed to purchase and then plan your cash flow requirements. If you have unlimited cash in the bank, then not having visibility into Spend might not be a problem.
Since you don’t have a way to plan your working capital needs, your team suffers from poor cash flow planning. With a purchase order management system, you can still have purchase authorized and pay with a credit card. The biggest challenge is waiting for the credit card statement to see your total spending. That makes sense because it is convenient, and you don’t have to worry about setting a separate process for paying vendors using an invoice. Many growing companies rely heavily on credit cards. Or you have a lower adoption of purchase orders, so not all employees create purchase orders. You probably have tried creating purchase orders to forecast your spending, but keeping track of purchase orders in a spreadsheet is no fun. Surprise invoices show up without any heads up, and then the finance team needs to have enough working capital to support that. If you don’t have a purchase order management process, you are probably dealing with the following: It could be a surprise invoice or a large unplanned credit card expense. Without a proactive cost control measure, the finance team always reacts to what is coming their way. Without purchase order management, you don’t have an efficient procurement process, and you are always playing a catch-up game with your expenses. If you are flush with cash and don’t care about Spend management, stop here! This strategy is for the CFO or controller of growing companies who want to implement a tighter Spend control process. If you struggle with cost control and the purchase order process, this article is for you.
CFOs and controllers of growing companies always struggle with the purchase order management process.
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