Bonus Material: Purchase Order Tracker Template

Struggling with purchase order tracking?

Growing companies that don’t have a purchase order system often struggle with keeping up with the volume of purchase orders.

Using this strategy, you can reduce the chaos in tracking purchase orders.

You can go from not knowing where the orders are to exactly being able to track all the orders.

With this strategy, you can reduce purchase order delays and ensure transparency across the purchase order lifecycle.

Here are some of the results our customers have achieved using this strategy in under 10 days:

In this article, we are going to cover 3 ways you can track your purchase orders. We will talk about somewhat free options and a better way to use purchase order software.

Nothing is really free, even though Spreadsheets might be free but there is a cost of employees’ time to track the purchase order in Spreadsheets.

If you are already using Google docs for order tracking, we understand your frustration! It’s hard to keep the spreadsheets up to date. A purchasing system can automate the order tracking for your team and make it easy to track orders. If you want to see if ProcureDesk is a good fit for you, click here to schedule a 1-1 demo. 

Before we get started, let’s cover some basic questions

What Is Purchase Order (PO) Tracking?

Purchase order tracking means the activity of tracking the lifecycle of a purchase order so that everyone has complete visibility into the supply chain. This could be real-time tracking of purchase orders or through a manual process.

The objective of purchase order tracking is to provide real-time visibility  (where possible) to all involved in the procurement process.

Purchase order lifecycle

Issued:

This is the first step of the purchase order lifecycle. After the purchase requisitions are approved, one more purchase order(PO) number is generated and the purchase order is sent to the vendor.

You might be creating the purchase order in spreadsheets, or using an electronic purchase order system, or using purchase order templates in Microsoft Word.

The typical information on the purchase order includes line items purchased, terms like payment terms, method of payment, and the timeframe in which you need the delivery of the product.

It could also include special delivery terms and how to manage cancellation requests for a purchase order.

Acknowledged:

After you issue the purchase order to the vendor, the vendor acknowledges the order to confirm if they can meet the purchase order requirements.

For example, the ordered product might be discontinued or back-ordered. By acknowledging the order, the vendor is communicating whether they can deliver the product and by when. The communication is sent to the individual stakeholders or supply chain manager.

Delivered:

When the vendor ships the product, the status of a purchase order changes to delivered.

Buyers generally create a Goods Receipt Note (GRN) to record the delivery of the product and capture other details like serial numbers etc.

A buyer might need a reminder for creating receipts.

Closed:

A closed status means that no more activity can happen for this purchase order. For example, an order is delivered in full and no more activity can happen.

There are two variations of the closed status

1. When the purchase order is delivered or
2. When the purchase order is delivered and the associated invoices have been paid.

When Should I Use Purchase Order Tracking in the Procurement Process?

The short answer is that you should always have a purchase order tracking solution in place.

However, with a larger purchase order volume, the purchase order tracking process is more relevant.

Here is a quick checklist on when purchase order tracking makes sense:

1. If you only issue 3 purchase orders a month, there is not much to track!
2. However, if you are issuing 100 purchase orders a month, you definitely need a process to track the purchase orders.

The second aspect is the complexity and vendor count.

1. If the 100 purchase orders are only issued to 2 vendors, it might be easier for purchasing department to just call the vendor and figure out the status.

So in a nutshell, if you have a large purchase order volume that is spread across multiple suppliers, a purchase order tracking process is an absolute must.

Do You Need an Approval Workflow for Purchase Order Changes?

The short answer is Yes, it is always recommended to have an approval workflow for purchase orders.

We call this compliance triangle:

During the purchase order lifecycle, the information regarding the purchase orders changes often.

Here are a couple of examples of why you might need to change the purchase order.

1. Changes to the items purchased because of the requirements change.
2. Increase or decrease in the ordered quantity due to change in business demand.
3. Change to the purchased items because the original ordered items have been discontinued.

Here is why you might need an approval workflow for purchase order changes.

Purchasing compliance:

ou want to know why something was changed and when it was changed.

For example, an employee placed an order for a widget that cost $1,000.

The original order was for 100 widgets but now they need to change it to 150 to accommodate for increased business demand.

That is an increase of $50,000 in additional Spend as compared to $100,000 that was originally authorized for the purchase.

Depending upon the size of the company, this could have a significant impact on the company’s budgets and should be authorized at the appropriate level of management.

Prevents Fraud:

Continuing with the above example, if you don’t have a purchase order approval for changes, any employee can change the purchase order and palace orders for items that were not authorized for purchase.

By having an approval process for changes, you can ensure that you have the control mechanism to prevent procurement fraud.

Another benefit of a purchase order approval process is that you can easily control rogue Spend. Rogue spending is when employees purchase products but vendors other than what is chosen by your purchasing department.

Specifications changes impact:

If the product specification changes as a result of the change order, then having an approval workflow affords you the opportunity to review the impact of specifications.

For example, you purchase a widget from a vendor but for some reason, the widget is back-ordered.

The vendor offers a replacement part but unless that is approved through a New Product Introduction process, you don’t know if it meets your requirements or not.

How to Implement Purchase Order Tracking and Streamline PO Tracking

There are multiple ways you can implement a purchase order tracking system. We cover three options here:

Spreadsheets, an online purchasing system, or your accounting systems like QuickBooks.

These options vary from free to paid.

In each option, we would cover the details on when to use this option and where it doesn’t make sense to use that option.

Let’s get into details.

ProcureDesk makes it easier to track the purchase order life cycle. Want to see how? Click below to schedule a no-obligation product tour.

 

Option1: Tracking Purchase Orders With Spreadsheets  – Manual Purchase Order Tracking

The first option is of course a Spreadsheet. There is nothing that can’t be solved using a Spreadsheet!

Go ahead and download the template here:

And get started with tracking purchase orders.

Who it is for?

Purchase order tracking is useful for companies with the following purchasing attributes

1. Low purchase order volume: If you are creating less than 10 purchase orders a month, tracking purchase orders in a spreadsheet is a viable option for you.
2. Limited changes to the purchase orders: If your purchase orders rarely change after the order is placed then spreadsheets might be a good option. For example, the vendor ships the order the next day so there is no room for changes.
3. Limited order cancellation: If multiple orders are being canceled, it becomes difficult to keep track of those orders by updating the spreadsheets all the time.
4. One or two people tracking orders: If you have one person tracking the order tracking sheet, then there are fewer chances of information being overridden by teams.

How to do it:

Create a simple spreadsheet or a Google doc that your team can easily maintain.

All you need is some basic information like the order number, date, supplier name, order status, etc.

To get started, download our free purchase order tracker template and modify it to add any additional columns you need to track purchase order data.

Pros:

1. It is easy to get started. All you need is your favorite spreadsheet program.
2. It is free, assuming that you already have Microsoft License installed. You can also Google docs which is totally free.
3. There are no additional process changes required other than having an individual or a team that is responsible for tracking the purchase orders.

Cons:

1. Spreadsheets are difficult to maintain and prone to human errors. The information about purchase orders keeps on changing and you always need constant updates to the spreadsheet.
2. You might be missing purchase order information if the person updating the tracker forgot to update the document.
3. Though the spreadsheet is free, there is still a cost of the process. Let’s say a person spends 2 hours every day to maintain the tracker, that is 40 hours a  week. Assume a $40/hour rate, you are spending $1600 on maintaining a purchase order tracker.

 

Option 2: Implement Real-Time Purchase Order (PO) Tracking With Purchase Order Management Software

The second option is to use an electronic purchase order tracking system. Instead of using a manual process to create and track purchase orders, you can use an electronic purchase order system. There are additional benefits to using a purchasing system, i.e. better process and purchasing compliance.

Who it is for?

You should think about implementing a purchasing system for order tracking if your purchasing process looks like the following

Higher purchase order volume:

If you are creating more than 10 purchase orders a month, chances are that a manual spreadsheet process is not going to work for you.

With a large purchase volume, it is difficult to keep up with entering and maintaining the purchase order tracking data in spreadsheets.

Multiple locations:

In the case of multiple locations, chances are that multiple people are maintaining their individual tracker or multiple employees are maintaining the same purchase order tracker.

There are also chances of data missing in case someone forgets to update the spreadsheet with a new order they have created.

Multiple changes to purchase order:

The more frequent changes you have to the purchase orders, the more updates you need to the spreadsheets.

The most important thing to know is what changed and who changed it. The more the changes, the more laborious it is to update the spreadsheets with order tracking information.

A large spread of vendors and items:

If you have a large spread of vendors and items, that means more orders and different purchase order methods across the board.

For example, some vendors might expect the orders to be placed on the website or some might expect the orders to be placed over the phone.

With the different order methods, there is an increased chance of errors in updating the spreadsheet.

How to do it:

There is multiple purchase order tracking software available in the market.

The key is to find a solution that works best for your requirements.

Here is a set of key features you would need for purchase order tracking software

1. A single repository for all your purchase orders.
2. Ability to handle Purchase order approval process
3. Ability to track shipping status and automatically inform the users about the order status. For example, you can track status as follows:

1. An easy way for users to confirm the receipts of the product or services. For example, this is how you can track purchase orders in ProcureDesk:

1. A system that integrates with your accounting package, for example, QuickBooks

<blockquote?If you would like to see how ProcureDesk can help you with purchase order tracking, feel free to

schedule a demo

with one of our purchasing experts.

Here is an example of how you can track orders in ProcureDesk:

Pros:

1. It is completely automated, so no more spreadsheets.
2. You would increase the team’s productivity because your company would spend less time creating and tracking purchase orders. By leveraging catalogs, you can simplify the purchasing process for your employees.
3. You get the added benefit of cost control because with a purchase approval process you can control how employees are spending money and on what.

Cons:

1. It is an additional expense. But the good part is that the payback period is generally within a month or two. So I’m sure your CFO would be OK with this investment.
2. If the product is not fully adopted, you can’t get all the promised benefits. That is why it is important to go with a partner who is willing to invest in training and increasing adoption.

Option 3: Accounting systems like QuickBooks or ERP

The third option for tracking purchase orders is to use your existing Accounting package.

We are using QuickBooks Online here but you could replace this with Sage, Xero, NetSuite, or any other system that has a purchase order functionality.

Who is it for?

Using your accounting system as a purchase order tracking system is feasible. However, there are certain limitations.

It is best suited for companies with:

Low purchase volume:

If you are creating 10-20 purchase orders in a month, then this strategy could work for you. The volume is low enough that the purchase orders can be directly

Predictable life cycle and simple inventory management:

If the purchase order lifecycle is predictable, then that means fewer changes to the purchase order process.

The lower the number of changes, the less you have to change the purchase order in QuickBooks.

Limited products or service purchases:

If you have a limited set of items you purchase, it is very easy to set those items up in QuickBooks as an item master.

That gives you the ability to create the purchase order faster by picking up the items from the item master instead of entering the line description manually.

This speeds up the process as well as reduces errors while creating purchase orders.

A single person in the procurement team creating purchase orders:

If you don’t have multiple locations or multiple people entering purchase orders, then this strategy could work for you.

The problem with multiple locations or multiple people entering purchase orders in QuickBooks is that now you have to open access to multiple people.

That is not a good strategy because QuickBooks doesn’t have a way to restrict access only to the purchase order functionality. No Controller is willing to take the risk of opening Books to multiple people in the company.

How to do it:

Here is how to set up a purchase order tracking system in QuickBooks.

1. Set up a process for users to request a purchase. You could set up a simple requisition form that the employees can use to submit a request. For example, a sample requisition form is as follows:

Download purchase requisition template

1. We recommend setting an approval process so that the management has the opportunity to review the expense before the purchase order is issued.
2. Setup a purchasing email so that employees can email the purchase requisition to that email after approval, for example, purchasing@yourcompany.com
3. Identify a single person who is responsible for creating purchase orders in QuickBooks. This person can review the request and create purchase orders in QuickBooks. Here is how you create a purchase order in QuickBooks:

1. You can use QuickBooks email functionality to dispatch the purchase order from QuickBooks.
2. After the purchase order is generated, send a copy of the purchase order to the requester. You can then track purchase orders in QuickBooks:

Pros:

1. The process is very simple, employees don’t need to learn a new system.
2. There is no additional expense for a purchasing system. Since you are already paying for QuickBooks, you can use the native capabilities for no additional charge.

Cons:

1. The requesters have to keep a track of their individual purchase orders. Even though purchase orders are in QuickBooks, employees don’t have access to QuickBooks.
2. The process doesn’t scale with volume. It is a good short-term fix but long term you need to go to a purchasing system.
3. Since the process is manual, there is a high chance of errors. It is not uncommon that your employee forgot to convert a requisition to a purchase order.

Now your turn

Decide which option is best for you and get going.

Here is how to decide what option is best for you.

1. If the purchase volume is low, for example, less than 10 purchase orders a month, use a SpreadSheet based process for order tracking.
2. If you have 10-20 purchase orders and you have a person who can enter and manage the purchase orders in QuickBooks, then use option 3 – QuickBooks or your accounting system.
3. If you create more than 10 purchase orders and you have multiple locations and 10+ employees, use a purchasing system to track your purchase orders.

If you are interested in seeing how ProcureDesk can help you with automating your purchase order tracking, use the button below to schedule a 30-minute demo with our team.