How purchase order systems can cut costs?

Businesses always aim to have full cost control and visibility over their procurement processes in real time. 79% of CPOs are prioritizing procurement cost savings in 2024 and years to come. When 10s or 100s of approvals are processed manually every week, tracking all PO and non-PO invoices with 100% accuracy becomes challenging.

This is where the need for purchase order systems becomes imperative. Let’s see how a Purchase order management system empowers businesses to gain greater control over spending, prevent costly overruns, and achieve significant cost savings.

Five Cost-Saving Benefits of Having a Robust Purchase Order Management Systems


Automated workflows

A procurement process involves many repetitive tasks. An ideal PO system can automate mundane manual tasks such as data entry, routing for approvals, and sending purchase orders, freeing up valuable man-hours for other strategic initiatives. An automated PO system can electronically route purchase orders to appropriate departments without requiring any paperwork.

Learn how Moglix reduced PR to PO time for a leading cement manufacturer company with a robust PO system for achieving 20% higher working hour efficiency.

However, for automated workflows to work effectively, businesses need to standardize data entry, approval processes, and communication protocols to avoid errors and delays. It is also imperative to integrate PO systems with existing ERP and accounting systems to ensure smooth data flow without any data silos.

Therefore, it is recommended to start by automating a few tasks and gradually expand as comfort levels increase.

Eliminating Manual Errors and Delays

PO systems come with a central platform for all purchase order communication. There is no need to communicate through lengthy email threads and scattered documents. Automated notifications keep everyone involved on the same page regarding order status updates, approvals, and any potential issues.

This streamlined communication minimizes misunderstandings and errors that can lead to order delays and additional costs. Some PO systems also allow real-time collaboration with suppliers to make informed sourcing decisions. This helps in better pricing negotiation and prevents unauthorized or unnecessary purchases.

Also Read: How Your Accounting Processes Is Being Undercut by Manual Processing?

Real-time Tracking of Purchase Orders

Advanced PO systems offer you real-time tracking capabilities. You can see where each order is in the process – from placement to delivery. As a result, you can identify potential delays or issues with orders early on.

This enables proactive intervention to minimize disruptions and prevent cost overruns. The real-time status of incoming materials also allows businesses to manage inventory better. They can easily avoid stockouts and unnecessary purchases, which leads to cost savings. If the status shows potential delays in order arrival, businesses can explore alternate vendors to save money on expensive rush orders.

Identifying Spending Patterns and Trends

PO systems are not just for streamlining workflows; they can also analyze your purchase order data to identify spending patterns and trends as well. This leads to cost savings. For instance, the analytics can highlight the areas of high spending, such as overused categories, unnecessary purchases, or potential vendor markups.

This analysis helps you develop targeted cost-reduction strategies. For instance, you can plan to negotiate better pricing with existing vendors or consolidate purchases with fewer suppliers. With historical spending data from purchase order management software, you can create more accurate budget forecasts and have tighter control to prevent unnecessary spending.

Ensuring Budgetary Compliance

Purchase order management software allows you to set spending limits for departments or categories. When purchase orders exceed these limits, the system would require additional approvals. This helps businesses prevent unauthorized or excessive spending.

Also, as you can track spending in real-time against the budget, it becomes easy to acknowledge how departments are utilizing the spending limits. As all purchase orders are managed from a centralized platform, there is no risk of duplicate or unauthorized purchases. Businesses can have better financial control and cut back on unnecessary expenses.

The Way Forward

Leveraging purchase order software offers huge cost-saving opportunities for CPOs. They feel empowered with real-time data to prevent departments from exceeding pre-defined budgets, identify opportunities for cost savings, and strengthen the company’s position during contract negotiations.

However, it is imperative to partner with an ideal procurement solution provider, like Moglix Business, to overcome the associated challenges with purchase order software implementation easily.

Ready to experience the cost-saving power of PO systems?

Explore procurement solutions from Moglix today!

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