How to set up a purchase order system

Written by frank luger Google
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How to set up a purchase order system
A purchase order system can make your business more efficient. (Medioimages/Photodisc/Photodisc/Getty Images)

According to accountant Steven M. Bragg, any coherent system has a logical flow of operations and a set of rules to deal with all, or most, eventualities. Setting up a purchase order system, either using a software application or not, is a matter of integrating and fine-tuning business processes so your company can be supplied with the items it needs as required to allow it to do its business.

Skill level:

Things you need

  • Purchasing requisition forms
  • Purchase order forms

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  1. 1

    Appoint a purchasing manager. Negotiate to add this responsibility to one of your existing employee’s duties, where you are a small business of about five or fewer staff. Take on the role yourself if you are a one-person business.

  2. 2

    Inform employees with the authority to requisition items that they should requisition them from the purchasing manager by completing and submitting a purchasing requisition form. Explain that this form needs to be completed carefully to give the purchasing manager all the details required to be able to purchase the correct items.

  3. 3

    Inform the purchasing manager of the requirements of the role. Explain that this consists of processing and rationalising the requisition forms, researching items for sale in terms of suitability and cost and authorising purchases as appropriate. Point out that it is the purchasing manager’s job to choose a supplier or suppliers for the items requisitioned, with due regard to the principles of best value to the company.

  4. 4

    Require the purchasing manager to send formal purchase orders to the chosen suppliers. Tell the purchasing manager to prepare the orders in duplicate so the company can keep a copy of all orders placed. Set up an efficient system for storing duplicate copies of orders so you and the purchasing manager can easily locate them, as required.

  5. 5

    Have the purchasing manager check the supplies when they arrive, referring to the duplicate copies of the purchase orders, to make sure the orders have been fulfilled completely and accurately. Oblige the purchasing manager to contact suppliers in the case of any missing or incorrect items.

  6. 6

    Require the purchasing manager to inform the accounts department when all items have been delivered correctly, so payment can be transacted.

Tips and warnings

  • There are several purchase ordering system software applications on the market that can automate these processes, including QuickBooks, SpendMap, The Purchase Order Control System, Brightpearl’s Purchase Order Software and Aestiva Purchase Order (see Resources). These complex applications offer a very wide range of add-ons, extensions and module options, some of which relate to the wider business landscape.
  • Naturally, costs vary depending on your chosen application, pricing plan, number of users and whether you wish to purchase additional services such as multi-currency systems, inter-linked consultancy services and wider assets management.
  • In their own way, most of the purchase order control applications on the market allow you to create, approve and issue purchase orders to suppliers, receive goods against those purchase orders and track stock levels.
  • Some suppliers require payment upfront before despatching goods.

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