Why You Need a Purchasing Management System

30 July 2021
Why You Need a Purchasing Management System

Almost all types of businesses have the need to purchase goods or services to fulfil their operational needs. No matter how big or small, every business also needs to keep good records of purchasing activities so that information can be used by bookkeeping and other operational purposes.

The Problem with Spreadsheets

If you are a start-up company you probably can get away with just using spreadsheet at an early stage. It is when your business takes off, you could find yourself overwhelmed with a large amount of PO and invoice processing work.

Chances are when the business starts to take off, your team size also starts to grow. The business needs to instil rules and processes in order to operate in a healthy and controlled manner. Authorisation of a purchase can no longer be just a nod from the boss. Rather, a purchasing policy and perhaps some budget limitations should be in place to govern the purchasing activities. For P&L forecast and monitoring, you probably want to know your spending in real-time so you can stay on top of it. For auditing purpose, you will also need to take and keep records on who bought what and why etc.

At such a point, a spreadsheet simply cannot do the job effectively any more. You could use some help from a purchase management system that takes care of daily processes so that you can be released from such burdens and focus your effort on more strategic matters such as business growth.

Benefits of Using a Modern Purchasing Management System

There are some clear benefits to employing a well-designed purchase management system,

  • Save Time on Daily Processes

    With everything in one place, you no longer need to comb through piles of paper documents or thousands spreadsheets. It's very easy to get hold of what you need when you need them. A modern PO system provides a central place of facilities and information for your daily procure-to-payment process needs. Typically, such system comes with some level of automation, such as automatic request forwarding and over-budget warning, that helps you to get tasks done not just quickly but also accurately.

  • Help With Enforcing Business Rules

    When you have a sizable business and a growing team, access control starts becoming a requirement. Multiple budget streams and complex projects often have their own unique rules and needs. A modern PO system allows you to assign permissions based on user roles to enable them to act accordingly in your business processes. The combination of budget limits and user permissions settings help you to enforce business rules that you know will be followed with absolute confidence.

  • Help With Budgeting

    Budget preparations and reviews can consume a lot of brain power. Annual budget preparation often needs historic data to verify that the proposed figures for the next year are within expectation. Quarterly budget reviews need real-time spending amount in order to know if the business are likely to be over or under budget. Without the information readily available, you are going to have to spend a lot of time and effort to check and summarise the raw data manually. It can be slow and painful, possibly not very accurate either. A modern PO system can provide the right information to you with just a few clicks, so very easily you can see previous budgets vs spending performance, and from there you build up new budgets with speed and confidence.

  • Ensure No Wrong Payments

    After a whole year of hard-working, the last thing you want is the good efforts undermined by silly errors that wipe off your cash or profit. Manual processes are prone to human error and wrong payments can easily be made without everyone noticing. Modern PO systems provide 3 way matching that automatically check and match purchase orders, deliveries, and invoices. You are notified on any abnormality detected. Therefore, when you authorise an invoice for payment, you know everything is correct and it won't be a wrong payment.

  • Enable Business Insights

    To be profitable, you must monitor both income and cost. When it comes to managing cost, you need to stay on top of your spending profile. In tough times you might also need to adjust your spending priorities every now and then to bring cost down and keep the business above the profit line. To look at where to save cost, you might also want to know which section, budget, or team has large expenditures, and who are the top suppliers that may provide you price negotiation leeway. All these insights can be easily made available to you with the analytics features provided by modern purchase management systems.

  • Provide Legal Protection

    Purchase orders act as a legal document. You can attach well structured terms and conditions when sending out an automatically generated purchase order to your supplier. Once it is accepted by your supplier, it is effectively a contract binding you and the supplier. Such purchase orders protect you by giving you a legal, enforceable record of exactly what you ordered. It also guards your company against unexpected price increases. If you receive an incorrect quantity or item, or if you’re charged the wrong amount, you can refer back to the purchase order and resolve the issue with the back up of a clear record.

Summary

Modern purchase management systems replace the spreadsheets and manual processes. They save time, remove burden, and eliminate human error by providing all you purchasing needs in a central place with automation. Moreover, they bring additional benefits such as enforcing business rules, enabling business insights, providing legal protection, and so on. It really is a vital tool for any business that demands controlled and efficient operation.

Approvol is a solution for efficient budgeting and purchasing management. It provides all above benefits with easy access, being a cloud base system. If you are ready to move onto modern purchase management, Approvol can help. Contact us today to request a demo or find out more.