QuickBooks PO (Purchase order) module provides a very easy and straightforward way for companies to create purchase orders Finance departments can easily track the working capital needs to satisfy business obligations. If you are relying only on vendor invoices then you won’t know the cash flow needs until the vendor invoice shows up and that can cause uncertainty for a lot of people.
There is one challenge though – to use QBO for purchase orders you have to manually enter every purchase order and that could be a bottleneck for Accounting and finance teams.
In this blog post, we will cover the basic purchase order process in QuickBooks Online but we will also cover how to make the process better by leveraging purchase order tool that works with QuickBooks Online or Desktop (a.k.a QuickBooks Enterprise)
But first, let’s look at some data about QuickBooks online a.k.a QBO.
Quickbooks online is a widely adopted Product and have a huge number of customers. As per number from Intuit – the company behind QuickBooks, they have over 2.2 million customers using Intuit Quickbooks online.
The product is being used over 193 countries and most of the customers are either small businesses or single owners.
However, you would be surprised when you look at some of these small businesses have a large number of employees.
For example, in the data below from idatalabs.com, almost 40% (total sample size of 3,482 customers) of companies have more than 50 employees.
And around 11% of companies have more than 500 employees.
What the company size has to do with the purchase order process in QuickBooks online?
Quickbooks purchase order process is designed with small business in mind, it is simple and effective.
It is designed for someone to go into the system and create a purchase order and send to the supplier.
There are two problems with this process
If you are a single owner or a very small business, you might not be creating purchase orders at all. The process might be as simple as calling the vendor and the vendor ships whatever you need.
However, if you have revenue more than $5M and more than 100 employees, You are probably creating purchase orders to order product and services.
So manually creating purchase orders is not scalable for a large volume of purchasing activity.
Authorization of Spend
The other issue is pre-authorization of spend before you make the purchase. So before you create a purchase order in the system, you need to make sure it is approved at the right authorization level.
If you use Quickbooks online purchase order process, you then either need to have a manual approval process or some sort of bolt on to approve the purchase orders before they are approved.
Luckily there are many options for implementing an approval workflow process for the QuickBooks purchase order process. We will cover these options in this blog post but more importantly, we will cover steps you can take to make the whole process more efficient and productive. So read on…
Quickbooks purchase order process
Let’s first talk through the process in QuickBooks, if you are just getting started with Quickbooks online process, you might find this helpful.
If you are already familiar with the purchase order process, feel free to skip this section and go to the next section on how to Improve the purchase order approval process
How to create a purchase order in Quickbooks Online
The easiest way to create a purchase order in Quickbooks is to create is by clicking the option on the top right-hand side of your QuickBooks Online menu.
That will open the below menu, click on “Create purchase order” option
Once you click on the purchase order, Quickbooks opens the following screen where you can key in the details of the purchase order. The screen is self-explanatory but we have highlighted the key sections of the purchase order screen.
The key section includes
1. Payee name which is also called supplier name.
2. Email: This is where the Quickbook online will send the purchase order to the supplier.
3. The ship to address and the item details for the purchase order.
4. The total amount is displayed on the right-hand side.
5. Ship to – is the address where the order needs to be shipped.
6. Item details: is the list of items which needs to be put on the
QuickBooks also allows you to add items directly from the item master so it is easy to reorder commonly purchased items.
From there on you can save the purchase order or send the purchase order to the supplier.
How to submit the purchase order to a supplier
Submitting purchase order is very straight forward.
To send the purchase order to the supplier, you can click on save and send option. Once you click on that option, Quickbook will open the following window
There are a couple of things to point out here
On the top left-hand side, you can see the email to which the purchase order would be sent out. This is the email you entered while creating the purchase order. In case you want to change this email, you can always go back to the previous screen.
In case you want to send the physical copy, you can print the purchase order and then send it to the supplier.
In case you want to download the purchase order, you can hover over the PO image and download the purchase order.
To send the purchase order, just click on Send and Close.
So there you have it, creating a purchase order in QuickBooks is a very straight forward process.
QuickBooks purchase order approval process
Now let’s talk about what happens before you go to the purchase order screen and create a purchase order.
The request for a purchase order is initiated by an employee who needs a certain product or service.
That request is probably sent via email and most likely attaching a requisition form.
That request is then being approved through a series of email chains back and forth and finally, when it is approved, it is sent to the purchasing team or some administrator to create the purchase order.
In this section, we will talk about implementing a purchase order approval process on top of the existing purchase order process in QuickBooks.
However we will not just limit the discussion to the approval of purchase orders, but we will cover many aspects of how to make the whole purchasing process better by improving the end to end purchasing process in QuickBooks.
What is the purchase order cost?
Purchase order cost is the cost of sending the purchase order out to the supplier. This includes the cost of all the resources required to send the purchase order to the supplier. What do we mean by resources?
That includes everyone included in the process and the time spend by them. Let’s understand what these resources are
Time spent to create a requisition- This could vary from minutes to a couple of minutes depending upon the length of the requisition.
Time spent to get it approved – This includes the time spent to get the requisition approved. That also includes the time spent by executives to approve the order.
In case if the requisition is not routed to the correct person, then it needs to re-routed to the correct person.
Time spent on creating the purchase order: Once the requisition is approved, someone needs to create the purchase order in the system and then send the purchase order to the supplier.
So every step mentioned above adds to the cost of the purchase order process.
What does your purchase order cost?
The best way to understand your cost is to do your analysis, we covered this in detail in how to calculate your own purchase order cost
If you are just curious about what these costs look like, as per one study, the cost of purchase order could as high as $506.52 or as low as 35.88
Why such a broad range?
There are two reasons for it
• The survey is across different industries so the process could vary significantly.
• The $35.88 cost is for top-performing companies whose operations are fully automated. So depending on the automation level in the purchasing process, this could vary.
As per our assessment, the cost of the purchase order could be in the high $60 range.
Here is a very high-level calculation
If you want to calculate your own cost, use ProcureDesk purchase order cost calculator.
How to improve QuickBooks purchase order process
In the above section, we covered the cost of a purchase order. Once you look at your cost, you probably looking at ways are reducing the cost of PO and the overall process cost.
In the following section, we will discuss ways to improve the purchasing process. We will cover how to automate the process, we are using ProcureDesk (Yes, we are biased!) as an example but feel free to replace it with any other purchasing system
Implementing a purchase order approval process
1. This is the obvious step in reducing the purchase order cost using QuickBooks. Instead of manually routing the requisition for approval, you can use an automated purchasing system like ProcureDesk. Here are the steps involved in the process.
An easy way for users to create a requisition in the system, users should be able to create a requisition using a simple interface instead of using spreadsheets to enter data.
You can further simplify the requisition process by implementing catalogs for frequently purchased items so that users don’t have to type that information. We will discuss supplier catalogs in the next section.
2. The second step in the process is to have an approval process for routing the requisitions to the correct person for approval. Here you want to think about the efficiency of the process and find a balance between approvals and efficiency of the process.
For example, if you set up a process that every purchase has to be approved by the Department Director, then that might not be the most efficient use of their time.
Imagine if you have 10-15 requisitions per day, then the Director might be spending 20-30 minutes just approving requisitions. That is not an efficient use of the employee’s time.
The other factor to consider while setting up approval is that the higher you go for approval, the less attention is paid to the details.
If the senior management is concerned that without these approvals, the Spend might be out of budget then there is a simple solution to that. Implement Budgets and ProcureDesk automatically ensures that the spend remains under the budget.
So here is what we suggest on approvals
• Identify the most efficient process for approvals, don’t overcomplicate it.
• Use category-based approval workflows to ensure that you are purchasing the right products. For example, all IT purchases should be routed to IT for approval.
• Define a threshold above which the requisition needs to be approved by senior management. This way you can control that only a few items are sent to the senior management.
Keep in mind that the approval process can always be changed. If you are just starting out and you don’t have much historical data on approval timing a history then you might have to try a simpler process first and then add conditions to it as required.
Implement catalogs for easy search
The next step is implementing a better purchase process in Quickbooks is the use of catalogs.
Catalogs allow you to group together commonly purchased items so that your users don’t have to keep on entering the same data again and again.
Catalogs can be used for products and services. For example, if you have a contract with a temp agency for temporary resources, then configure that in the catalog. Next time, someone needs to purchase temp services, they can just pick it up from the catalog instead of calling procurement.
For items like office supplies, you can use external catalogs, also called punch-outs.
Punchouts are external catalogs managed by suppliers but with your specific pricing and product catalog. For example, instead of creating a catalog with 1000’s of items from Staples or Office Depot, you can just use their existing catalog.
When Punchout is integrated with a procurement system, it allows the user to go out and browse the items but then the system routes the requisition back for approval before the order can be placed.
This is the best of both worlds, your users get the online shopping experience and you are routing the purchases to your preferred vendors.
Improve the productivity of the Purchasing team by implementing a request and quote process.
A purchase order is a final step in the purchasing process. Before that, you would normally see a request and a quote process.
Let’s take an example
Mike in marketing needs to print brochures from a new product launch. Since it is a new product, he doesn’t have a preferred pricing and a preferred supplier.
If your company has a purchasing team, Mike will reach out to the team at this time to ask for quotes from a few suppliers. Most likely this a back and forth over email on specifications, quantities, etc.
Once that is finalized, a buyer from the purchasing team would reach out to the suppliers to get quotes via email or over the phone.
Once that is done, the buyer sends the quote to the requestor, who then creates a requisition that is sent for approval.
After the requisition is approved, the buyer creates the purchase order and then send to the supplier.
The process mentioned above is not an exaggeration but a very common occurrence in many companies. There are two problems with the manual request and quote process.
• It is highly inefficient since there are multiple manual steps in the process and the same data is being entered in requisition first and then into the purchase order.
• It is very difficult to keep track of quotes for audit purpose. For example, if your policy requires you to keep track of quotes, then you probably have to dig through your emails to find those quotes
The process mentioned above can be easily automated, which increase productivity and reduce errors while creating orders.
For example, Imagine a process where the requestor can send the request electronically, the buyer can send that request to the supplier electronically.
Once the response is received, the same quote can then be converted into a purchase order. Once the order is approved, the system creates the purchase order directly in the Quickbooks and then send the PO to the supplier.
This process is efficient and less error-prone. Systems like ProcureDesk can easily achieve this.
Reduce spend through Budget controls
Quickbooks has a great way to structure the budgets in the system.
But how do you link those budgets to your purchases?
• How do you ensure that budget owners have complete visibility into the budget consumption and how much of their budgets are already consumed and what amount is left?
• How do you ensure that the budget owners can review the purchases before the purchase order is placed against their budgets?
These are the questions that every company needs to address to ensure they have complete transparency into the process.
This can all sound overwhelming but the whole purchasing process can be improved by the following
• A process whereby the orders are tied to the budgets. In that process, a system is checking whether funds are available against the selected budget (based on past consumption).
• A process whereby the purchases are always approved by the budget owners based on the purchase volume.
•A process where you can easily report on purchases made against a specific budget.
All this can be automated by a purchasing system like ProcureDesk.
Automatically create purchase orders in Quickbooks
We talked about a couple of ideas in the sections above on how to improve the purchasing process in Quickbooks.
But all this would be useless if you have to then manually create the purchase order in the QuickBooks systems.
Luckily, this process can be fully automated using purchasing systems. By integrating your purchasing system with QuickBooks online version, you can easily streamline the workflow for purchasing.
Once the order is fully approved in your purchasing system, or any other front end module for the PO process, the purchase order can then be sent to the QuickBooks system for further processing.
The integration with Quickbooks is straight forward, but you should clearly define the use cases for integration and test them to ensure that purchase orders are moving to Quickbooks seamlessly.
For example, In ProcureDesk implementation, we clearly identify all the use cases by working with our customers and then set up a test plan for ensuring successful integration.
Automate transmission of a purchase order to suppliers
As we saw in the earlier sections, Quickbooks allows you to send the purchase order out to your suppliers. You can email it to your suppliers or download the purchase order and send it out to the suppliers.
Since we have already automated the purchase order process so far, why not fully automate it by automatically sending the purchase order to the supplier.
The bolt-on purchasing system you are using with Quickbooks should easily be able to automatically send the purchase order to the supplier contact.
This way you are ensured that once the order is approved, there is no additional step required to send the purchase order to the supplier.
One word of caution though, we often see that our customers don’t maintain a clean vendor database, so you might want to ensure that the order contacts in your supplier records are correct and up to date. Otherwise, you can land up in a situation where orders are not being delivered.
The best practice in this area is to ensure you get generic emails for orders, for example, firstname.lastname@example.org. The reason for that is that supplier sales personnel would often keep on changing and if the email used is not generic, you have to keep on updating the vendor records.
Quickbooks online is a simple and powerful system and that is the reason for such a wider adoption of the system across SMB’s.
By using the options mentioned above, you can greatly improve the efficiency of your purchasing process in Quickbooks. This leads to increased productivity and efficiency improvement for the purchasing team and company.
Leave a comment to let us know how you have improved the purchasing process in Quickbooks.
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