Purchase Order (PO) System for QuickBooks

purchase_order_process_quickbooks

QuickBooks purchase order feature provides an effortless and straightforward way for companies to create purchase orders.

Finance departments can easily track the working capital needs to satisfy business obligations.

Many small companies don’t have a purchase order or process, and they rely on vendor invoices to understand their cash flow needs. The problem is that you won’t know the cash flow requirements until the invoice shows up.

A small business owner can’t afford surprise invoices that negatively impact your cash flow.

There is one challenge with using QuickBooks online or Desktop for purchase orders – to use QBO or QuickBooks Enterprise for purchase orders, you have to enter every purchase order manually. 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)

Quickbooks purchase order process is designed with small businesses in mind; it is simple and effective.

It is designed for employees to go into the system, create a purchase order and send it to the supplier.

There are two problems with using QuickBooks for purchase orders

Scalability

Every invoice needs to be created in the system by your accounting team unless you open up access to QuickBooks for your entire team.

If you are a single owner or a small business, you might not be creating purchase orders at all.

Your purchasing process might be as simple as calling the vendor, and the vendor ships whatever you need.

However, if you have revenue of more than $5M and more than 100 employees, You are probably creating purchase orders to order products and services.

So manually creating purchase orders is not scalable for a large volume of purchasing activity.

Cost control and Authorization of Spend

The other issue is pre-authorization of Spend before you make the purchase.

Before creating a purchase order in the system, you must ensure that management approves the purchase request.

If you use QuickBook’s online purchase order process, you 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 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 it by clicking the Icon-add purchase orderoption on

the top right-hand side of your QuickBooks Online menu.

That will open the below menu; click on “Create purchase order” option:

Create_purchase_order_QuickBooks

Once you click on the purchase order link, Quickbooks opens the following screen where you can key in the purchase order details. The screen is self-explanatory, but we have highlighted the key sections of the purchase order screen.

Create purchase order - Quickbooks

The key section includes

1. Payee name, which is also called supplier name.

2. Email: This is the supplier email where QuickBooks will send the purchase order.

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 must be shipped.

6. Item details: List of items purchased by the buyer.

QuickBooks also allows you to add items directly from the item master, making it easy to reorder commonly purchased items.

From there on, you can save the purchase order or send the purchase order to the supplier.

ProcureDesk can automate sending the purchase orders after it has been appropriately authorized. Curious to see how we do it? Click here to schedule a demo.

How to submit the purchase order to a supplier

Submitting purchase orders is very straightforward.

Submitting purchase order

To send the purchase order to the supplier, click on the save and send option. Once you click on that option, Quickbook will open the following window.

Send PO by email quickbooks

There are a couple of things to point out here.

On the top left-hand side, you can see the email for the supplier. This is the email where QuickBooks will send the purchase order.

This is the email you entered while creating the purchase order. If you want to change this email, you can always go back to the previous screen.

If you want to send the physical copy, you can print the purchase order and then send it to the supplier.

If you want to download the purchase order, you can hover over the PO image and download the purchase order.

To send the purchase order, click on Send and Close.

So there you have it, creating a purchase order in QuickBooks is a very straightforward 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.

Since QuickBooks has no purchase order approval process, the requisition needs to be created manually.

The employee initiates a request for a purchase order by entering the product or service details.

The employee then requests approval via email by filling up 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 an administrator to create the purchase order.

This section 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. Still, we will cover multiple aspects of making the whole process better by improving the end-to-end purchasing process in QuickBooks.

How to improve QuickBooks purchase order process

The average cost of issuing a purchase order is between $50 to $500.

If you know the PO cost, you are probably looking at ways to reduce the cost of PO and the overall process cost.

In the following section, we will discuss ways to improve the purchasing process in QuickBooks. 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 in QuickBooks

Implementing a purchase approval process is the logical next step in reducing QuickBooks’ purchase order cost.

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.

Provide an easy way for employees to submit a purchase request.

Employees should 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.

Here is an example of a simple requisition process:

Click here to see this in action.

The second step 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 the efficiency of the process.

For example, if you set up a process in which every purchase has to be approved by the department’s Director, then that might not be the most efficient use of their time.

Here is what a simple approval looks like:

Invoice_Approval_workflow_Software

Click here to see this in action.

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 get approval, the less attention is paid to the details.

If the senior management is concerned that the Spend might be out of the budget without these approvals, then there is a simple solution.

Implement Budgets, and ProcureDesk automatically ensures that the Spend remains under the budget.

budget_approvals

Click here to see this in action.

So here is what we suggest on approvals

  1. Identify the most efficient process for approvals, don’t overcomplicate it.
  2. Use category-based approval workflows to ensure that you are purchasing the right products. For example, route all IT-related purchases to an IT manager for approval.
  3. 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 an administrator can always change the approval process.

If you are starting, you might not have any historical data.

In that case,  you might have to try a more straightforward process first and then add conditions to it as required.

Implement catalogs for better employee experience

After approvals, the next step is implementing a better purchase process using catalogs.

Catalogs allow you to group commonly purchased items so that your users don’t have to keep entering the same data again and again.

Employees can use catalogs for products and services.

For example, if you have a contract with a temp agency for temporary resources, configure that in the catalog.

Next time someone needs to purchase temp services, they can pick it up from the catalog instead of calling procurement.

Here is an example of an internal catalog:

vendor_catalogs_better_experience

Click here to see this in action.

You can use external catalogs for items like office supplies, also called punch-outs.

Punchouts are external catalogs managed by suppliers but with specific pricing and product catalogs.

For example, you can use their existing catalog instead of creating a catalog with 1000’s of items from Staples or Office Depot.

When Punchout integrates 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 employees can place the order.

staples punchout catalog

Click here to see this in action.

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 typically 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 is 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 phone.

The buyer then sends the quote to the requestor. The requester then creates a purchase request and sends it for approval.

After the requisition is approved, the buyer creates the purchase order and then sends it to the supplier.

The process mentioned above is not an exaggeration but a 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 a requisition first and then into the purchase order.

• It is tough to keep track of quotes for audit purposes. 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, increasing productivity and reducing 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, a buyer can convert the exact quote into a purchase order. Once the order is approved, the system creates the purchase order directly in Quickbooks and then sends the PO to the supplier.

This process is efficient and less error-prone. Systems like ProcureDesk can quickly achieve this.

Here is an example of purchase quotes:

Supplier_quotes

Click here to see this in action.

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?

  1. How do you ensure that budget owners have complete visibility into the budget consumption? How much of their budget is already consumed, and what amount is left?
  2. How do you ensure that the budget owners can review the purchase before it is made against their budgets?

These are the questions that every company needs to address to ensure they have complete transparency in the process.

This process might look overwhelming, but the following can improve the purchasing process.

  1. A process whereby the order is matched to a budget –  In that process, a system is checking whether funds are available against the selected budget (based on past consumption).
  2. An approval process in which the budget owners approve the purchases based on the purchase volume.
  3. A reporting process to report on purchases made against a specific budget.

A purchasing system like ProcureDesk can automate all this.

Here is an example of the budget reports:

spend_by_budget

Click here to see this in action.

Automatically create purchase orders in QuickBooks

We talked about a couple of ideas in the sections above on improving the purchasing process in Quickbooks.

But all this would be useless if you had to create the purchase order in the QuickBook manually.

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 purchase order request is approved in the purchasing system, the purchase order is sent to the QuickBooks system.

QuickBooks integration is straightforward, 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 identify all the use cases by working with our Clients 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 send the purchase order to the supplier contact automatically.

By automating the process, you ensure that there is no additional step required to send the purchase order to the supplier once the order is approved.

One word of caution, though, we often see that our customers don’t maintain a clean vendor database.

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 getting delivered to suppliers.

The best practice in this area is to ensure you get generic emails for orders, for example, order@suppliername.com. 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.

What is the cost of a Purchase order?

Purchase order cost is the total 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 spent 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.

If the requisition is not routed to the correct person, it needs to be re-routed to the correct person.

Time spent 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 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 a purchase order could be as high as $506.52 or as low as 35.88

If you want to calculate your own cost, use the ProcureDesk purchase order cost calculator.

Conclusion

Quickbooks online is a simple and robust system, so it has such a wider adoption of the system across SMB’s.

By using the options mentioned above, you can significantly improve the efficiency of your purchasing process in QuickBooks. This leads to increased productivity and efficiency improvement for the purchasing team and company.

Want to know how ProcureDesk can help improve the Purchase order process in QuickBooks? Click on the button below to schedule a demo.

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