Revolutionizing Purchase Requisition Routing with Tech Tools
â€In the world of business, the key to a successful operation lies in the efficiency of your processes. Among these processes, the transformation of a buyer’s purchase requisition into a purchase order â€“ a procedure known as purchase requisition routing is one area ripe for optimization. With the advent of digital technology, purchasing departments now have the opportunity to streamline this process, enhancing accuracy and efficiency, and ultimately, boosting profitability.
Understanding the Significance of Purchase Requisition Routing
In today’s fast-paced world, where most transactions are completed with just a few taps on a screen, the purchase requisition to purchase order process might seem cumbersome and outdated. However, for businesses aiming to maintain effective spend management and establish robust relationships with suppliers, this process is invaluable.
This procedure allows businesses to capture essential spending data, enabling strategic spending and process optimization. By making this process more efficient, businesses can reap a multitude of benefits:
- Reduction in the average cost and time required to process a purchase order, leading to significant savings over time.
- Ensuring purchases are made at the best possible price from the most suitable vendor.
- Creating value through the elimination of wastage in terms of time, resources, and talent.
- Capturing, organizing, and making transaction data readily available for analysis, reporting, budgeting, forecasting, etc.
- Encouraging compliance with internal buying policies and controls to reduce risks associated with maverick spend, invoice fraud, and damaged supplier relationships.
A 15% reduction in the average cost of processing a purchase order might seem insignificant at first. However, when multiplied by thousands of purchase orders, the cumulative savings can significantly boost a company’s bottom line.
Demystifying Purchase Requisitions and Purchase Orders
Before delving into the optimization of purchase requisition routing, it’s crucial to understand the distinction between a purchase requisition and a purchase order.
- Purchase Requisitions (PRs) are initiated by the buyer who submits a purchase requisition form to the finance department for approval. This internal document, often referred to as a “permission slip” to purchase goods and services, includes critical information such as a unique purchase requisition number, purchaser’s information, description of goods or services requested, vendor information, and pricing and payment terms. Depending on the company’s procurement policies, the requisition may require multiple levels of approval before progressing to the purchase order stage.
- Purchase Orders (POs), on the other hand, are created from approved purchase requisitions. They constitute an official, legally binding order between the buyer and the supplier, which includes a unique purchase order number correlating to the original requisition, the purchasing company’s contact and invoicing information, vendor contact details, and delivery date.
Once the purchase order is submitted to the supplier, it forms the basis for creating invoices. This document is compared with the original purchase order and any shipping documents for validation, a process known as three-way matching, which forms an essential paper trail for financial reporting, budgeting, and audits.
Streamlining the Purchase Requisition Process
The main hurdles to an efficient purchase requisition to purchase order process include delays in approval, non-compliance with buying policies, and reliance on manual, paper-based workflows. However, these obstacles can be overcome by adopting best practices and investing in purchase order software.
1. Embrace Automation and Analytics
If your business still relies on paper-based workflows or outdated email-based solutions for creating purchase requisitions, you’re losing valuable time and resources with every purchase order. Adopting a cloud-based, mobile-friendly procurement software solution like Planergy can eliminate the need for paper, centralize data collection and management, and expedite the approval process.
This software empowers your accounts payable and procurement teams to:
- Automatically populate contract and supplier data, eliminating the need for error-prone manual data entry.
- Use spend data to create customizable, automated approval workflows.
- Gain full spend visibility, enabling more strategic spending and planning.
- Create a guided buying system that suggests the right vendors at the best possible pricing and terms.
- Manage cash flow more accurately.
- Dedicate their time and skills to higher-value tasks.
- Leverage automation, AI, and analytics support across all procurement processes.
2. Refine Your Buying Policies and Empower Your Team
No matter how sophisticated your eProcurement tools are, they’ll be ineffective if your team isn’t compliant with the controls you’ve established.
- Choose a software solution that offers ongoing education and training to ensure your team is on board.
- Establish role-specific approval levels tied to budgets and include self-approvals to speed up the purchasing process and improve accountability.
- Implement “fast track” approval streams and automatic reorders for business-critical goods and services to protect business continuity and develop a robust supply chain.
Budgeting at the Department Level to Control Costs
While decentralizing your purchasing system, it’s crucial to maintain control over spending, particularly ensuring purchases align with your company’s budget. Purchase order software enables employees and department managers to view the calculated budget availability when entering or approving a purchase requisition. If a requisitioned item is over budget, the solution automatically flags it for over budget approval routing. This feature reinforces the importance of staying within budget and curbs rogue buying.
Tracking Vendor Service Contracts, Blanket Purchase Orders, and Purchase Requisitions Under Contracts
Without contract management software, it’s challenging to track purchase requisitions against contracts or to track contract expiration dates, leading to less control over spending. A contract management system allows employees to enter all information, including the contract amount and datesâ€”whether itâ€™s a vendor service contract, blanket purchase order or internal CapEx project. By tracking your purchase requisitions against your contracts, youâ€™ll be able to better gauge exactly how much your company is spending.
Gaining Visibility to All Purchasing Transactions and Their Approvals
Transparency about the amount, budget availability, and approval of purchases will help your organization maintain internal spending controls and adhere to external auditing requirements. Procurement software helps fulfill both internal and external compliance requirements by providing contract approval dates and attached documents. Easy access to this information aids in timely contract completion and effective purchasing and contract management.
While the path to success might be fraught with challenges, you can pave the way for your company by taking control of your purchase requisition process, investing in the right technology, and ensuring your entire organization complies with your buying policies and internal controls. By doing so, you’ll not only cut costs and reduce errors but also empower your team to create more value, leading to a more profitable and efficient business operation