Every business that regularly works with vendors needs to thoroughly understand how to create a purchase order (PO) to keep the lights on and the cash flowing. A well-designed purchase order form and approval process allows businesses to conduct transactions quickly and efficiently while minimizing operational disruptions.
Even though purchase orders are one of the most common business documents and they all convey similar information about the terms of a sale, they actually present a number of challenges for customers and suppliers alike. A purchase order form needs to clearly communicate a lot of specific information that both businesses must be able to interpret easily in order to avoid delays and confusion. Moreover, vendors who handle a lot of different accounts may face crippling inefficiencies and errors resulting from a wide range of formats that have to be processed manually.
As a result, purchase orders are a foundational test of a successful business relationship that impacts the performance of every department from billing to finance. Here’s everything you need to know about creating, automating and optimizing your purchase order form workflow.
How to create a PO
Purchase orders need to be well designed because they are formal offers for goods and services from one business to another. That means the terms and conditions they express become legally binding once they are accepted by a vendor. Any lack of clarity may disrupt your supply chain and expose your business to reputational and financial risk – even when there are honest mistakes or errors.
Because of that, they should be laid out for maximum ease of processing and include the following information:
- Buyer and seller addresses and contact information
- Purchase order number and date
- Descriptions of products or services to be acquired, including itemizations, unit prices and totals
- Payment terms
- Expected delivery dates and locations
- Any special instructions
Of course, many aspects of purchase orders can be templatized. But with a properly integrated CRM and ERP, it’s possible to automate approval workflows, 3-way matching processes and optimize purchase order creation to reflect changing market conditions. These activities not only reduce errors and accelerate approval on the front end, but make it easier for your AP team to verify a purchase order has been fulfilled, approve payments and resolve errors on the back end of the procurement cycle.
The lifecycle of a purchase order
Once a purchase order is created, it goes through a series of steps to ensure it is fulfilled properly and payment can be sent. A purchase order form needs to support efficiency and accuracy for each of the following activities to avoid bottlenecks and costly mistakes.
Approval
Because they are legally binding documents, a purchase order form is always subject to an approval process that confirms all the information it contains before it is transmitted to a vendor. This includes forwarding to a manager as well as any other relevant departments like legal or security.
Unfortunately, it takes 58% of businesses two days on average to approve and send purchase orders – especially when they rely on manual work to cross-check and proofread the details. Moreover, managers are often handling approval workflows for billing, payroll and payments as well. When these are also checked by hand, it can grind your supply chain to a halt.
Sending and processing
Once a purchase order is approved, it is sent to the vendor. This is often done via email or directly through a purchase order system or ERP. Once it’s received, the vendor will approve the PO and formally create a contract between buyer and seller.
Fulfillment
Next, the vendor will fulfill the terms of the purchase order and deliver the products to the buyer. When they are received, the buyer inspects the contents and creates a goods received note (GRN) to confirm delivery. Then, the vendor will send an invoice requesting payment.
Payment
The customer’s accounts payable (AP) team is responsible for verifying the details of the transaction and approving payment. This is done through a 3-way match process that compares details of the purchase order, GRN and invoice to confirm they are accurate.
3-way matching is crucial for minimizing lost revenue due to errors or fraud. According to a recent Forbes survey, 95% of businesses are aware of fraudulent invoicing issues with 1 in 5 reporting over 20 instances every year. Worse, reliance on manual processes for 3-way matching is time-consuming and can result in a 12-15% error rate, whereas automated processes both accelerate approvals while drastically cutting errors and exposure to fraudulent practices.
Optimizing purchase order forms through automation
Many businesses today rely on Word docs, QuickBooks or free purchase order software to generate POs. These strategies usually rely on manual inputs that drag out the processes, introduce errors and take even more time and resources to resolve. Worse, they typically don’t scale well. With data speeds enabling startups to achieve unprecedented rapid growth, these processes can quickly reach an inflection point of stagnation and failure.
That’s why ERPs like NetSuite are popular choices for generating POs. They’re based on your system’s data streams, not user inputs, which makes it possible to automate many aspects of the workflow and reduce costly mistakes. The more integrated your ERP is with your CRM, the more time and hassle you can save through automation by relying on a single source of truth for customer data.
However, these systems are rarely sufficient on their own to eliminate bottlenecks surrounding approvals and 3-way matching. Even if the majority of your procurement cycle is automated, these pain points can mitigate many of the benefits.
Streamlining approvals
In a study by Levvel Research, faster approvals, reduced errors and increased productivity were all top benefits organizations were looking for from AP software solutions. ZoneApprovals allows increased visibility and efficiency in the approval process for NetSuite users by extending its native capabilities to deliver:
- Real-time and future tracking with 100% audit visibility
- Fewer approval errors by leveraging automation to reduce manual errors by 99%
- Bulk approvals to minimize transaction processing time
- Auto delegation so employees can approve any time, anywhere
These benefits allow ZoneApprovals users to optimize approval routing entirely within NetSuite, approve transactions via email without being tied to an ERP and mass approve or reject purchase orders without the need to review one-by-one. And even when the approval process is complex, ZoneApprovals supports drag-and-drop, codeless workflows so anyone can manage business processes with ease.
When global e-bike manufacturer envolio’s new in-house finance team was confronted with 50% growth in just four years, their existing processes and strategies quickly reached a breaking point. By upgrading their workflow with ZoneApprovals, they were able to fully automate procure-to-pay entirely within NetSuite to stay out in front of current and future scaling needs.
Optimizing 3-way matching
Checking invoices, purchase orders and GRNs is a classic bottleneck for finance teams that can impact nearly every aspect of the business and damage relationships with vendors by extending days payable outstanding (DPO) timelines. Each individual document has to be checked by hand to ensure accuracy, and with nearly unlimited formats and high data volumes, it can quickly become a nightmare when businesses experience rapid growth.
ZoneCapture leverages cutting-edge optical character recognition (OCR) technology to extract data from all 3-way matching documents and seamlessly import it into your ERP. It’s designed to help businesses on NetSuite optimize AP workflows and reduce manual processing tasks by up to 83% by delivering the following benefits:
- Improved accuracy and efficiency through automation and innovative OCR software
- Increased visibility and control, including audit report generation, invoice status tracking and workflow approval monitoring
- Scalability that leverages automation and eliminates manual tasks
And when used in tandem with ZoneApprovals, ZoneCapture unlocks unprecedented optimization and scalability that will support your finance team through even the most complex periods of growth and acquisition.
Accelerating approvals and 3-way matching with Zone & Co
For as simple as a purchase order form may seem, it’s a core document that can disrupt your entire procurement cycle if it doesn’t support optimized workflows leveraging automation. Zone & Co is helping businesses overcome systemic obstacles resulting from manual processes to support even the most rapid growth and scaling challenges.
ZoneApprovals and ZoneCapture are two tools that can enhance your ERP’s native capabilities and deliver automated workflows that make the most of your financial team’s time and resources. Learn more about what Zone & Co can do for your procurement cycle workflow with automation solutions that prepare your business for the future.
FAQs
How do I create a purchase order form?
Purchase orders can be created in a Word doc or with help from QuickBooks, but these are extremely inefficient strategies that burn time and resources while introducing costly errors. Ideally, purchase orders should be automated through your ERP and supported by workflows that optimize the entire procurement cycle.
What are the benefits of automating purchase order forms?
Automating purchase orders reduces errors and minimizes delays, but it also has significant downstream implications. By investing in integrations and systems that enhance automation, you can future-proof your business and prepare for growth and scaling challenges.
Can purchase order forms be integrated with accounting software?
Yes. The procurement cycle is an end-to-end challenge that involves optimizing your core systems with integrations that support automated processes. Products like ZoneApprovals and ZoneCapture streamline your core systems to increase the visibility and accuracy of your approvals.
