Purchase Order Process: Key Takeaways
- A purchase order process includes a few key steps, from request through approval, ordering, receiving, invoice matching and payment
- Manual purchase order workflows are slow and prone to data entry mistakes
- Purchase order workflow automation speeds up approvals, reduces errors and gives finance teams real-time spend visibility
The cost of processing a single purchase order can run anywhere from approximately $14 to over $54 depending on various factors.
For a company handling 100,000 orders a year, this range can add up to more than $4 million annually, according to research published in Supply Chain Management Review.
A clear purchase order process optimizes spending and improves visibility, closing the gap between what a business ordered and what it paid for.
In this guide, we’ll cover:
- The steps in a purchase order process
- Who’s involved in the purchase order workflow
- Common problems that slow the process down
- How purchase order automation works
- How to build a better purchase order workflow
- Why choose doForms for digitizing your purchase order processes
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Purchase Order Process Steps
Whether it’s paper or digital, a purchase order goes through the same steps.
The Purchase Requisition
A team or department recognizes they need new equipment, office supplies, or a service contract.
They submit a purchase requisition, which typically includes the item, quantity, estimated cost, and reason for the purchase.
Approval
The requisition is then reviewed by a manager or department head. They check the request against the budget and confirm that the item can be bought.
Larger or higher-risk purchases often require sign-off from more than one approver.
Purchase Order Creation & Delivery
Once the purchase request is approved, the procurement team creates a formal purchase order that lists the agreed price, quantity, delivery date, and payment terms.
The PO is sent to the vendor, who accepts it and confirms that they can fulfill the order.
Receiving The Goods Or Services
When the goods arrive or the service is completed, the delivery is checked against the original PO to confirm that the right items arrived in the right quantity and condition.
Invoice Verification
The vendor sends an invoice, and the accounts payable department compares it against the purchase order and the receiving record.
Known as a three-way match, this step aims to catch pricing errors, quantity mismatches, or unauthorized charges before payment is made.
Payment & Closing The Purchase Order
The final step in the process is the release of payment according to the agreed terms.
Keeping records organized makes future audits and vendor disputes much easier to resolve.
Every purchase order process follows the same steps, whether it’s handled on paper or through digital forms
Who Is Involved In The Purchase Order Workflow?
A purchase order workflow usually involves several people across different departments, with each person responsible for a different part of the process.
- The employee who needs the item submits the initial requisition.
- The manager or department head reviews the request against budget and policy before it moves forward.
- The procurement team creates the purchase order and manages the vendor relationship.
- The vendor accepts the PO and fulfills the order.
- Accounts payable matches the invoice, processes payment and closes out the order.
Splitting these tasks between different people helps catch mistakes early.
Common Purchase Order Process Problems
Most purchase order processes run into the same problems.
Slow Approvals
Requests can sit in someone’s inbox for days before anyone attends to them, pushing back the entire timeline before the order even reaches the vendor.
Manual Data Entry Errors
Typing the same information into a spreadsheet, an email and an accounting system multiplies the chance of a typo.
A single wrong quantity or price on a PO can lead to disputes with the vendor later.
Invoice Mismatches
When the invoice and the purchase order show different information, someone has to track the discrepancy manually.
This can hold up payment and strain the vendor relationship.
Poor Visibility Into Spending
Paper forms and scattered spreadsheets make it hard to see what’s been ordered, what’s still pending, and how much of the budget has already been spent.
Finance teams often find out about a spending problem only after it’s happened.
How Purchase Order Automation Works
Purchase order workflow automation replaces manual steps with digital forms, automated routing and built-in checks.
Instead of a paper requisition or an email, the person requests an item by filling out a digital form on a tablet or smart phone.
The request routes automatically to the person who needs to approve the requisition, and they can sign off from a phone or tablet.
Once approved, the purchase order is generated automatically and sent to the vendor.
When goods arrive, the receiving record is logged and matched against the original PO.
Accounts payable can then run the three-way match against digital records instead of chasing down paper copies, which improves accuracy and speeds up payment.
Automation moves each of the purchase order process steps off paper and into one connected system
How To Build A Better Purchase Order Workflow
If your current purchase order approval process feels slow, you may want to consider a few changes.
Standardize Your PO Templates
Create a purchase order document that has the same fields, in the same order.
This makes requests faster to fill out and easier for approvers to review because they know exactly where to look for the information they need.
Set Clear Approval Tiers
Small purchases don’t need the same review as big ones. Set spending thresholds so low-cost, routine purchases are approved faster while larger ones are reviewed more carefully.
Digitize Requests & Approvals
Replace paper requisitions and email chains with digital forms and implement automation.
This cuts down on lost paperwork and forgotten approvals that come with manual handoffs.
Connect Your Systems
Link your purchase order process to your accounting, inventory and vendor management systems so you can see information updates immediately across all of them.
Review Performance Regularly
Track how long requests sit at each stage of the process. If approvals or invoice matching take too long, think of changes.
This can include adjusting the approval thresholds, adding a backup approver, or digitizing your work order process if you’re still using paper requisitions and orders.
Improve Your Purchase Order Process With doForms
doForms is a mobile forms solution that can help your business move off paper and benefit from digital forms throughout your purchase order process.
With doForms, your team can:
- Fill out purchase order forms from a phone or tablet, even without an internet connection.
- Capture signatures on the spot.
- Attach photos of received goods directly to the record.
- Store all requests and orders in one searchable system.
See more about mobile vs paper forms.
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Purchase Order Process: FAQs
How long should a purchase order approval take?
There’s no fixed rule, but delays of several days usually mean the approval chain isn’t optimized. Setting spending thresholds and routing requests automatically can bring approval times down to a day or less for routine purchases.
How can automating the purchase order approval process boost productivity?
Automating approvals brings routine purchase order turnaround down to a day or less, since requests route straight to the right person instead of sitting in an inbox. This boosts productivity because teams get what they need faster and keep working.
How does a digital purchase order workflow reduce errors?
Digital forms cut down time for retyping data, route requests to the correct approver automatically and match invoices against purchase orders and receiving records without manual checks. This reduces the mismatches and delays that come from handling purchase orders on paper or across separate spreadsheets.
