Is It Necessary to Establish Purchase Order Control?

Posted by articlelink01 on October 16th, 2014

A business is built by a series of processes. If you’re into manufacturing or retail, for example, your business begins with purchasing the raw materials or the inventory. Then you proceed with work-in-progress (for manufacturing) or repackaging if you’re into retail. Then the goods are sold in the market. This is just a snapshot of the purchasing cycle.

Within these processes, there must be sets of control in place to minimize errors and other huge issues that can affect not only your cash flow but the reputation of your business.

If you have a purchasing cycle, you need a purchase order control to reduce shrinkage, the reduction of profits due to waste or theft. If the difference is large, you may be forced to increase the price of your goods to make up for it, which won’t be great for your business as that would make you less competitive in the market.

What Causes Shrinkage?

One of the reasons why you should seriously purchase order approval software is you want to reduce the risk of shrinkage. Based on the survey for national retail security conducted by University of Florida in 2009, a huge part of the problem can be attributed to theft: 44% to employee theft and another 35% to consumer theft.

While you can always install security guards and cameras around the store so you can control consumer theft, you need something more with employee theft.

Here’s why: employees can steal goods even in the early part of the purchase order process. Without any form of purchase order control, they can always increase your order—at your own expense—discreetly then reduce them by getting the excess inventory for themselves.

Meanwhile, when you use purchase order approval software, you can properly designate the responsible parties for the purchasing process, and you can create a digital trail that is mostly out of their control. You can check the process anytime you like and grant limited administrator access to authorized personnel.

You can choose to add and delete persons to approve, as well as establish no limit as to the approval levels. Authorized personnel may also receive notification for any purchases or inventory that require approval to speed up the process.

Using a cloud-based program gives you an added advantage since employees responsible for receipt can let vendors, or their representatives, directly sign on documents, proving that X number of goods has been delivered to the business. The document will be immediately uploaded to the purchase order approval software.  

Is That It?

Highly useful and multi-functional purchase order control programs can do more than create digital trails or transparency and accountability. You can avoid common administrative mistakes including discrepancies in the warehouse inventory or goods misplaced.

You can properly account for goods that may have been damaged or lost in transit, whether due to a fortuitous or man-made event (think of highway robbery).

You can integrate the purchase control application with other programs or systems such as software for making company budgets and accounting.

Resource Box

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