by martieLast Updated : May-19-2023
Need to generate a digital purchase order without spending endless hours converting a spreadsheet into a purchase order?
This article will cover how to use purchasing automation technology and purchase order software to automate creating a digital purchase order. We will also show you how hundreds of companies use a digital purchase order process to generate orders, work on electronic purchases, have complete control over your costs, and increase Spend visibility.
When a buyer and a supplier engage in a purchase transaction, they use an electronic document known as a Digital Purchase Order (DPO).
When a buyer wants to purchase goods or services from a supplier, they use a Digital Purchase Order (DPO) to make an official request. DPOs are electronic documents that include information such as the requested item or service, the quantity, price, and delivery date. Essentially, DPOs are like digital shopping lists that help buyers and suppliers stay on the same page.
DPOs are much more efficient and reliable than traditional paper-based purchase orders. Since they are created and managed digitally, they can be easily tracked, updated, and shared between different systems and platforms. This can save time and hassle, especially when communicating with suppliers and managing inventory.
DPOs can be used to ensure compliance with financial and regulatory requirements. Since all the information is stored digitally, it can be easily audited and traced back to the original request. This can help reduce the risk of fraud and ensure that all transactions are transparent and accountable.
This section will walk you through a step-by-step process for generating the digital purchase order for online purchases.
There are primarily two ways to do this. One using the technology and the second using a manual process.
Here are the steps for creating a digital purchase order:
Purchasing policy defines your procurement process and ensures that everyone understands how to purchase the required product or services.
If you don’t have a purchasing policy, that is the first step before implementing an automated digital purchase order system. If you don’t have a purchasing policy, you can download the template by clicking the link below:
Before creating the purchasing policy, consider factors such as the organization’s size, the volume of purchases, and the level of complexity in the procurement process. Here are some additional considerations:
The next step is to setup up the approval for the purchase request.
Here is how you can easily set up this in a purchase order system:
Setting up a purchase approval is as simple as adding steps to the workflow and deciding who should be part of each step.
Suppose you require a purchase approval system that involves the approval of a procurement manager. Once approved, it would proceed to the department head and the CFO if the purchase exceeds $5,000.
Then setting up this workflow can be done through these steps:
Step 1: Send to the reporting manager – Within ProcureDesk, users can designate a reporting manager for their purchase requests, allowing the system to route them accordingly.
Step 2: Send to the department head. During this stage, you can specify the names of various department heads. The system will then automatically assign the appropriate department owner based on the selection made in the purchase order request.
Step 3: Conditional workflow for CFO – In this step, you set up the conditional workflow to route the request for approval if the purchase amount exceeds $5,000.
Selecting the appropriate PO template is essential in creating a digital purchase order.
A PO template serves as a framework that guides the creation of a purchase order by providing a structure for necessary information, such as the item or service being purchased, the quantity, price, delivery date, and payment terms.
Several PO templates are available, ranging from simple to more detailed versions. You can ensure a smooth and efficient procurement process done by the procurement team by selecting a template that aligns with your organization’s needs.
Here is an example of a purchase order template:
Additionally, you can print standard purchase terms on each purchase order so that your vendors can see your standard terms.
With ProcureDesk, creating a purchase order request is easy.
You can use a purchase request by using vendor punchouts, internal catalogs, or typing in the description of what you want to purchase.
Here is an example of how the user creates the purchase order request for Amazon.com
After you log in to ProcureDesk, you click on the Amazon logo, and the system automatically navigates you to Amazon’s website.
Remembering user names and passwords is unnecessary, as the system automatically connects to your Amazon account.
The user then picks up the item they want to purchase:
In this case, let’s say you are purchasing batteries:
Once the user selects the item, they are given the option to Submit the item for approval.
That takes the data from Amazon’s shopping cart and moves it to the ProcureDesk cart.
The user can then enter the other details like the reason for purchase, shipping address, and proper account codes and submit the request for approval.
Once you have defined the purchase order approval workflow, the system does the rest for you.
The system automatically detects the appropriate workflow based on your predefined conditions, and then the request is routed during your approval chain.
Here is an example of an auto-generated purchasing workflow:
Once the user submits the request, the approvals are routed to the appropriate person.
The system notifies the person via email and Slack of text messages.
The approver can then log in to the system to approve the purchase request or use the mobile app to approve the purchase.
Below is an example of how a user can approve a purchase using the mobile app:
With purchase order automation, you don’t need to send the purchase order to the vendor manually.
Once the purchase order is approved, the system automatically generates it and sends it to the vendor.
The purchase order is sent to the vendor using one of the following ways:
Here is a sample email that the vendor receives from ProcureDesk:
One of the common challenges with using a purchase order system is that once the PO is issued, it goes into a black hole.
For example, you don’t know if the vendor has received the purchase order.
The other challenge is that you don’t know if the vendor will ship the product on time.
And when they finally ship it, you need to track the delivery status.
This could be a lot of work, especially with a small team.
That is where you can leverage a system like ProcureDesk to request order acknowledgment from the vendor. With an order acknowledgment, you can request that the vendor confirms the acceptance and provide a firm delivery date. All that is tracked in the system for easy reference.
Here is an example of order acknowledgment:
You can also update the tracking information and review the delivery status in real-time. The system also sends you reminders in real-time as and when the status of the delivery changes.
One of the challenges for the Accounts payable (AP) team is that they don’t know if the product has been delivered so that they can pay the invoice.
With a purchase order receipt, you can easily solve this problem.
The purchase order receipt is called a Goods receipt note (GRN).
Here is an example of a receipt:
With a receipt, the requester confirms whether they have received the product and the exact quantity of what has been received.
If you don’t want to use a purchasing system for a purchase order, alternatively, you can use a manual process.
Here is how you can set that up:
You need to set up a template using a manual process for purchase orders.
We recommend using a Microsoft Excel or Google sheet purchase order template.
We have covered this in detail here:
Set up a manual process so that employees can submit purchase order requests.
This could be a simple email where the requester specifies what they are looking for, their preferred vendor, etc.
The request is then sent over email, and after it is approved, it should be sent to a buyer for generating a purchase order.
One of the drawbacks of a manual purchase order process is the substantial effort required to ensure timely approval of purchase order requests and timely generation of purchase orders.
Most companies struggle with managing the purchase order volume using this process, especially if you are issuing over 20 purchase orders monthly.
Once the buyer receives the approved purchase order request, they convert that into a purchase order. Use the template you created above and then fill in the required details.
You might need to send the purchase order for approval based on your company policy, but that is not always a must-have.
A buyer then converts the purchase order into a PDF and sends it to the vendor.
One of the key requirements of a digital purchase order system is that it should integrate with your accounting system so that you don’t have to create the same data twice. Additionally, to improve your purchase order management as well.
Suppose the purchase order is automatically synced to your accounting software. In that case, the accounting and purchasing teams don’t need to waste valuable time keying the same data into the accounting package. This not only saves time but avoids data entry errors.
Here are some additional integration considerations for a digital purchase order system
Implementing a purchase order system can significantly reduce purchase order costs for businesses. A recent study shows that the purchase order costs between $70 and $700.
Why is the cost this high?
Think about any time someone touches a purchase order; that resource has a cost, and the more senior the resource, the more the cost.
For example, if a CFO spends 1 hour approving and signing purchase order forms, that is easily $250-$300/hour cost.
One of the main ways a purchase order system reduces costs is by reducing the time and effort required to create, process, and manage purchase orders.
With a digital purchase order system bringing digital documents, businesses can eliminate the need for paper-based purchase orders, reducing the costs associated with printing, shipping, and storing physical documents.
By automating the procurement process through a purchase order system, businesses can also reduce the time spent on manual data entry and document processing, freeing employees to focus on other tasks.
This means businesses can process more purchase orders in less time, reducing the cost per PO. Additionally, purchase order systems can help businesses avoid errors and discrepancies, such as duplicate orders or incorrect pricing, leading to costly returns or renegotiations.
A purchase order system is essential for businesses looking to improve their order-tracking capabilities.
With a manual purchase order process, tracking purchase orders can be daunting and time-consuming, especially for businesses with a high volume of orders. Manual tracking often involves spreadsheets or physical files, which can be easily lost or misplaced, leading to confusion and errors.
However, a purchase order system can track and manage all orders in one centralized location. This allows businesses to easily monitor the status of each purchase order and keep track of critical information such as delivery dates, shipments, and what orders need follow-up.
Furthermore, integrating order acknowledgment and receipts into a purchase order system can further improve order tracking capabilities.
By asking the vendors for order acknowledgment, companies can ensure that the vendors have received the purchase order. The vendors also can provide a more accurate promise date for delivery based on the current product availability.
Vendors can also provide tracking information once the product is shipped so that a buyer can track the exact status of the delivery of the product. This real-time tracking capability enables businesses to make informed decisions and quickly respond to changes or issues that may arise.
Once the product is delivered, you can create a receipt to confirm that the product has been delivered. This allows you to capture what was delivered and when. It also confirms to the Accounts payable (AP) team that they can pay the vendor invoice after performing a 3-way match.
Take note that this also helps you build better supplier relationships!
Implementing a purchase order system can significantly reduce the paper used in a business, leading to cost savings and environmental benefits.
Manual purchase order processes often rely on physical documents such as paper purchase orders, electronic invoices, and receipts, which can be time-consuming to create and manage. Moreover, paper-based procurement processes can be difficult to track, leading to errors and delays.
By digitizing the purchase order process, businesses can reduce expenses related to printing, storage, and transportation of paper documents. Additionally, electronic documents are easier to manage and organize, reducing the time and resources needed to manage physical documents.
Here are some implementation considerations for a digital purchase order system:
The purpose of a purchase order is to keep track of what is being ordered by an organization. The process starts when a buyer initiates a purchase transaction with the supplier by serving as an official request for goods or services. It includes details such as the item or service requested, the quantity, the price, and the delivery date. The purchase order helps to formalize the agreement between the buyer and supplier, track the order’s status, and provide a clear audit trail for financial and regulatory compliance purposes.
Amazon digital purchases using a punchout process work by allowing customers to access Amazon’s product catalog from within their e-procurement system, such as ProcureDesk.
In this process, when a user wants to purchase a product from Amazon, they click an “Amazon” button within their e-procurement system, redirecting them to Amazon’s website. Users can then search for and select the product they want from Amazon’s catalog.
Once the user has selected the product and added it to their cart, they are redirected back to their e-procurement system to complete the purchase. The purchase order is generated within the e-procurement system, and the purchase details are sent to Amazon for processing.
After the purchase, the customer will receive order confirmation, and the product will be delivered to their Amazon account as usual.
A digital purchase order (DPO) differs from a traditional purchase order in several ways:
Creation and management: Digital orders are created and managed digitally using a
purchase order automation software like ProcureDesk, while traditional purchase orders are created and managed on paper.
Processing time: DPOs can be processed faster since they can be created, sent, and received instantly, whereas traditional purchase orders can take longer to process since they are often sent by mail or fax. Thus, preventing late payments and encouraging quicker payment processes.
Accuracy: DPOs tend to have fewer errors than traditional purchase orders since they are created and managed electronically, reducing the possibility of human error.
Integration: DPOs can be easily integrated with other procurement tools and systems, such as e-invoicing and inventory management, which helps streamline the procurement process and improves overall efficiency.
Cost: DPOs are more cost-effective since they reduce the need for paper, printing, and mailing costs typically associated with traditional purchase orders.
If you are tired of manual purchase order processes that take up valuable time and resources, upgrade to a Digital Purchase Order system and purchasing software that can easily streamline your procurement processes.
Book a demo with our team today to see how our procurement software can help you fast-track your purchasing process and even help your purchasing department save time. Additionally, it only requires minimal setup. Don’t let slow, manual processes hold your business back any longer – click here to book a demo now!
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