PO System For Life Sciences Companies

Suppose you are a life science company’s lab manager or Finance leader. In that case, you know how important it is to keep the scientist productive to focus on science and not spend their time on non-research-related activities.

From a CFO’s perspective, controlling spend and having an effective Spend management process is important to track your burn rate effectively. With longer research and development cycles, it is imperative to track costs for different phases of the drug development process. It is also important to keep track of indirect spending so that you can keep track of other expenses that grow with the increase in headcount.

An effective PO(Purchase Order) system for life sciences companies solves this problem for you.

This article is for you if:

• You are a lab manager struggling with managing purchase orders in spreadsheets
• You are a controller struggling with a manual invoice approval process and unable to close books on time

In this blog, we will cover the key aspects of the PO system and how it helps improve productivity and effective Spend management.

Let’s get started.

What Is A PO System For Life Science Companies?

A PO system for life science companies is a system that automates the end-to-end purchasing process for life science companies. Whether purchasing lab supplies, pharmaceutical manufacturing, or purchasing CRO services, the system provides a mechanism for automating the cost control process for a company.

A cost control process generally involves getting purchase approval before making the purchase and a process for finance to check if the required budget is available before making the purchase.

Life science companies like pharmaceutical companies that don’t have a PO system manage the cost control process manually. I.e., a combination of spreadsheets for order tracking and emails for approvals. Though the process works when you have less than 10 purchase orders a month, it doesn’t scale with the purchase order volume. A PO system allows you to set up a cost control process without hiring an additional headcount to manage the purchase order process.

Controllers, on the other hand, need to worry about regulatory compliance. That means compliance with purchasing policy and ensuring you only pay approved invoices.

Without an automated process, invoice approval is highly manual and requires continuous follow-up with stakeholders to get invoices approved and paid on time.

A PO system helps controllers to automate the invoice matching and approval process and close books faster.

A PO system helps finance get better visibility into their commitment spent and understand what still needs to be invoiced and paid to the vendor.

What Are The Key Features Of A PO System For Life Sciences?

In this section, we will cover the key features of a PO system to help drive business impact in your organization. We will use ProcureDesk as an example, but the feature set should be available in all purchasing systems.

Purchase Requisition

If you purchase lab supplies and capital equipment, you know how painful it is to visit different websites, copy the data in an email and ask someone to place the purchase order.

You then need to wait for someone to confirm if the purchase order has been issued and continuously track or ask for delivery status.

This time-consuming process keeps scientists and researchers from doing research, which is a huge drain on productivity.

There is a better way to purchase lab supplies and equipment. Imagine a process where you can select what you want with a few clicks and submit it for review and approval. That is what purchase requisition can achieve for you.

Once you log in to the application, the PO system allows you to select the vendor from where you want to purchase the product.

Let’s say you want to purchase suppliers from Fisher Scientific.

The system shows you all the suppliers that are pre-configured for you.

For example –

Now, you must click on the vendor logo, and the system directs you to the vendor’s website. You can see all the items you generally purchase and then add them to the cart.

Once the items are added to the cart, click on “Return cart to purchasing application,” and the system automatically copies the requested information back to the system.

And here is how it shows up in the purchasing system.

It’s that simple!

No need to copy and paste the data from different websites to your purchase request. It is all done for you.

The process is very simple if you need to purchase items not part of a vendor’s online catalog.

Just type in the information, and if you have received a quote, attach the quote with the purchase request.

The PO system not only helps you reduce time spent on creating requisitions but also reduces the errors in purchase orders and the back and forth with the vendors.

If you struggle with continuous back and forth with the vendors because the price keeps changing, this process takes care of that.

Budget Tracking

One of the issues for the finance team is to keep track of budgets and ensure that the team is not spending too much. That is where a PO system helps you track budgets and ensure budget checks in real-time,

Whether you are a small company using QuickBooks online or a scale-up using Netsuite, you can use the budgeting process in ProcureDesk.

The budgets can be set up by Account (chart of accounts) or a combination of Account, class, department, or any other dimension.

Systems like ProcureDesk automatically import the budgets from the accounting system, so you don’t have to worry about keeping both systems in sync.

After the budget is imported, the system checks in real time if the budget is available before the user can purchase the product or service.

This provides real-time visibility to the stakeholders and approvers to track whether they are on track.

Here is an example of how a purchasing system checks for budget availability.

Purchase Approvals

One of the time-consuming activities for Life Sciences Organizations is to get approvals on time. They use emails to get approvals, and then you have to chase managers to get approvals continuously.

This not only wastes valuable time but also causes delays in getting the product or service. A PO system is required to streamline the purchasing approval process.

Here is how a PO system can help with speeding up the approval process:

One dashboard to track approvals:

With a central dashboard, tracking all pending items in the queue for approval is easier.

Let’s say you get 10’s purchase request for approvals. You can go to the dashboard and easily see what items are pending in the queue for approval to process the purchase requests quickly.

Approvers can see all the information they need for approving a document, and with budget control, they can be confident that they are not going over budget.

Mobile App for approvals:

The Mobile app notifies you when a request is pending your approval, and you can approve it directly from your phone—no need to delay the approvals to future times when you are in front of your computer.

You can approve from anywhere with mobile approvals and speed up the approval process.

Email Approvals

Systems like ProcureDesk not only automate the approvals, it also makes it easier to approve the purchase request from your email.

ProcureDesk allows you to approve the purchase request right from your email. The email has all the information you need to approve; you only need to click the “Approve” link.

Purchase Order Automation

Scientists spend 10% of their productive time chasing purchasing orders. This includes:

• Generating a purchase order document.
• Getting the purchase order document signed by an authorized person.
• Emailing the purchase order to the vendor.
• Confirm that the vendor has received the purchase order.
• Work with the vendor in case of any change orders and then resend the purchase order to the vendor.

All this can be eliminated with purchase order automation.

ProcureDesk helps you automate the complete purchase order process.

Once the purchase order is approved, the system creates a PO document and is issued to the vendor. Whether you are working with large or small vendors, the system can email or use EDI to send the purchase orders to the vendors.

The system then requests the vendor to acknowledge the purchase order and confirm the promised delivery date so that you know when the product will be delivered.

One of the main reasons for change orders is that the buyers had old pricing. You always get the latest pricing with punchouts to avoid the change orders.

Once the vendor is ready to ship the product, they can ship the ASN (Advance Shipping Notice) with the delivery details, including the tracking number.

The system then automatically tracks the purchase through the whole process and informs you when the delivery is made.

Receipts Tracking

Loosing or missing the packing slips?

That is the biggest problem with manual receipt tracking. You are missing receipts, and the AP team doesn’t know whether an invoice can be paid.

This leads to a manual process where every invoice must be approved, which takes time.

Imagine approving the purchase order first and then approving the invoice again for the same purchase!

That is a sheer waste of time and money.

Instead of wasting time chasing receipts, you can set up a receipt process in ProcurDesk or any other purchasing system.

ProcureDesk allows you to easily create receipts from your mobile app to create a receipt as soon as the product is received.

Open the app, select the purchase order, take a picture of the receipt, and you are done!

PO Invoice Matching

Manually matching invoices is no fun; it is time-consuming and error-prone.

Who likes to spend their day comparing invoice lines with purchase orders? I don’t think anyone does.

That is why automated matching can eliminate the need for manual invoice matching.

There are two types of automated matching processes:

3-way Invoice matching

The three-way invoice matching process is when you have an invoice, purchase order, and receipt to compare. That is always the case with material purchases.

Here is how the 3-way matching process works:

• The invoice is received from the vendor.
• The invoice is matched with the purchase order and receipt. The system checks for quantity invoiced, quantity received, and quantity ordered. The system also checks for invoiced unit prices and order unit prices.
• If all three documents agree, the invoice is approved for payment and sent to the accounting system for payment.

Here is an example of a 3-way match exception:

If a document is not matched, a manual review is required to check the discrepancy, approve the invoice, or work with the vendor to identify the reason.

2-way invoice matching

Two-way matching is generally used for service invoices. Let’s say you want your office floors cleaned. You called the vendor, they gave you a quote, and the purchase order was sent to the vendor.

Here is how a 2-way invoice matching process works:

• The invoice is received from the vendor.
• The invoice is matched with a purchase order because no receipt was created.
• The invoice price is matched and then sent for invoice review.
• The invoice review involves a review from someone in operations that the service was provided, and the vendor can be paid.

Once the invoice is reviewed, the invoice is marked as ready for payment, and the vendor is paid.

Invoice Approvals

What happens when you receive an invoice from a vendor with no purchase order? This is the case with legal services, utilities, or other one-off services.

That is where an invoice approval process comes in handy.

An invoice approval process allows you to route the invoice for approval before payment.

With a PO system, you can have an electronic invoice approval process instead of a manual review process.

This speeds up the approval process and helps with the audit because the audit trail is electronic, and you can easily provide compliance proof from the system.

Inventory Tracking

If you have a lab, an inventory tracking system is a must.

With an inventory tracking process, you can achieve the following:

• An accurate on-hand inventory count and the total value of the inventory.
• You can avoid duplicate orders because everyone has visibility into what is in the inventory, and they can check before placing an order.
• You can track accurate usage of inventory at an experiment level.
• You can use the usage information to optimize the inventory levels.

ProcureDesk makes it easier to track inventory and usage of the inventory.

As you receive the inventory, the system automatically updates the on-hand inventory. You can set up multiple locations and track inventory at each location.

Here is how the inventory report looks in ProcureDesk:

Management Reporting

Management reporting enables different teams to review their total spending at any given time.

For example, You want to see who are your top suppliers, what you are purchasing from them, and who is making those purchases.

You can easily review that in ProcureDesk.

Let’s say you want to plan for cash flow and want to know your open commitments, what has been invoiced, and what is still pending to be received. The open order report can provide you with this information.

Or Let’s say you are in accounts payable and want to know what invoices have been received, but you haven’t received the invoice; there is an accrual report.

Since you have all Spend data in one place, it is easier to understand the total drug development cost and cost of different experiments. With this cash flow visibility, you can easily plan for future drug development costs.

Here is an example of a Spend Dashboard:

How To Select A PO System For Your Company?

To ensure your laboratory operations run seamlessly, it’s essential to select a Purchase Order (PO) system that perfectly aligns with your unique requirements. Here are a few considerations for selecting a purchasing system:

Seamless Integration With Punchout Catalogs: Smart Purchasing Made Easy

In the intricate world of life sciences, specialized equipment and supplies are the lifeblood of your research. A reliable PO system should seamlessly integrate with Punchout catalogs, allowing you to explore a diverse array of trusted suppliers directly from your procurement platform. Think of it as a virtual shopping cart communicating effortlessly with your PO system, streamlining the process, and ensuring precise orders for your critical research items.

Adept Support For Indirect Purchases: Managing The Minutiae

While groundbreaking research might be your core focus, everyday necessities like office supplies and maintenance materials keep your laboratory humming. Your chosen PO system should effortlessly accommodate these indirect purchases, treating them with the same efficiency as your high-value acquisitions. Look for features that offer categorization, budget management, and streamlined approval workflows to ensure that scientific and administrative procurement are handled seamlessly.

Smooth Implementation Process: Transitioning With Ease

Implementing a new system shouldn’t be a daunting task. Opt for a PO system with an intuitive interface and an easy onboarding process. The quicker your team adapts to the new system, the sooner you’ll experience the benefits of optimized procurement workflows. A hassle-free transition translates to minimal disruptions and heightened productivity for your vital scientific endeavors.

Harmonious Integration With Accounting Systems: Precise Financial Alignment

Accuracy is paramount, especially when it comes to financial matters. The ideal PO system should seamlessly integrate with your accounting software, fostering a seamless connection between financial data, cost allocation, and expense tracking. This integration mitigates errors and empowers informed decision-making, ensuring that your financial and procurement processes work in perfect synergy.

Sustained Innovation And Support: Pioneering Future-Ready Procurement

The world of life sciences is ever-evolving, and your PO system should be poised to evolve with it. Prioritize a solution that offers regular updates, enhancements, and responsive customer support. A provider committed to continuous innovation ensures that your procurement processes remain agile, adapting to industry trends and the advancement of digital technologies.

How A Biotech Company Increased Spend Visibility

Cerebral Therapeutics, a clinical-stage biopharmaceutical company specializing in innovative therapies for neurological diseases, faced significant challenges in tracking and analyzing spending, hindering its growth and operational efficiency. Before implementing ProcureDesk, the finance team was dealing with the following struggles:

• Manual Spending Processes: Cerebral Therapeutics relied on outdated manual processes, including Microsoft Word-generated purchase orders (POs) and Excel spreadsheets for expense tracking, leading to inefficiencies and errors.
• Lack of Spend Analysis: The company lacked insights into cumulative spending against POs, vendor-specific spending over time, and future budget projections, hampering financial planning and decision-making.
• Scaling Challenges: As the company grew, the manual processes became increasingly unsustainable, requiring additional administrative staff to manage procurement and accounting tasks. To address these challenges, the company adopted ProcureDesk’s procurement software, which automated manual processes, provided spend analysis reporting, and integrated with existing accounting software. Cerebral Therapeutics implemented ProcureDesk’s procurement software, which addressed their challenges through the following features:
• Automated Processes: The software automated PO generation, order tracking, and reconciliation, streamlining day-to-day operations and reducing the risk of errors.
• Vendor Cost Analysis: ProcureDesk provided detailed vendor-by-vendor cost analysis reporting over time, empowering the company to make informed decisions based on spending data.
• Integration with Accounting Software: The software seamlessly integrates with Xero accounting software, ensuring accurate financial tracking and reporting.
• As a result of implementing ProcureDesk, the team was able to achieve the following results:
• Streamlined Operations: With automated processes, Cerebral Therapeutics eliminated errors associated with manual POs and order tracking, ensuring accurate financial management.
• Cost Savings: By adopting ProcureDesk, the company avoided hiring additional administrative personnel to manage manual processes, resulting in significant financial savings.
• Detailed Spend Analysis: ProcureDesk’s reporting capabilities allowed Cerebral Therapeutics to analyze vendor spending and stages of drug/device development costs and plan for future expenses, enhancing forecasting and budgeting.
• Efficiency and Accuracy: The software improved efficiency and accuracy in financial processes, enabling the company to focus on core activities and strategic initiatives.

This transformation resulted in streamlined operations, cost savings, and enhanced financial analysis capabilities, positioning the company for continued growth and success in developing innovative neurological therapies.

The Bottomline

In conclusion, the challenges faced by Life Sciences Industry lab managers and finance leaders are undeniable in maintaining scientific productivity and efficient spend management. The intricacies of research and development, manufacturing processes, clinical trials, and the need to control costs across different drug development phases highlight the urgency for a comprehensive solution.

The advent of an effective Purchase Order (PO) system emerges as a beacon of hope for these challenges. The PO system streamlines purchase orders and invoice approvals by replacing manual processes and cumbersome spreadsheets, leading to heightened productivity and accurate spend tracking. Lab managers can now refocus on scientific endeavors, while finance leaders gain better control over burn rates and indirect expenditures that can escalate with headcount growth.