Posted in Financial Process Automation

How to optimize purchase order processing. Hint – Stop using Excel!

Organizations of every stripe – small businesses, schools & colleges, and even some large companies – continue to email Excel sheets to approve purchase requests and issue a purchase order. While that’s better than paper, Excel still has numerous disadvantages particularly in today’s mobile-centric, data-driven world. You need a fully digital solution.

You could certainly invest in a turnkey e-procurement system like Coupa or SAP Ariba. However, these systems tend to be expensive and often take a long time to implement. Usually, large organizations that procure a lot of stuff deploy these systems.

For the rest of us, easy, affordable process automation solutions are available that can help you quickly digitize your purchase order and other procurement processes. You won’t need to make major investments, hire expensive staff or spend months doing it.

Get started today and stop using Excel. First, let’s take a quick look at what exactly is a purchase order and what the PO process looks like at many organizations.

What is a Purchase Order?

A purchase order is one of the most common business documents. Buyers specify the goods and services they want to buy by creating a purchase order. It is an important document for both buyer and seller as it minimizes any uncertainty in the requested items /quantities and avoids any discrepancies or payment delays later.

You can read more details about what’s on a purchase order, and view some samples by reading our Definitive Guide to the Purchase Order Process.

Understanding the Purchase Order Process

This process can be quite complex.

Purchase Order process

The form has a lot of data – vendor details, buyer details, a line for each item being purchased with item codes, prices, subtotals. It may have discounts, taxes, shipping and other calculated fields.

The PO usually also needs multiple approvals and the associated signatures. Depending on your business standards, the approval chain could itself get complicated. For example, some companies require POs above a certain amount to require additional approval.

An accounting employee has to reconcile each invoice with the proper PO as well as with receiving to ensure goods and services were delivered before it’s approved and payment is made.

Read more: Purchase Orders vs Invoices – what you need to know

Finally, organizations must store POs & invoices somewhere. If you’re using paper, that means filing cabinets. If it’s Excel or PDF, that means a network drive or SharePoint repository. Searching for and finding a PO years later is tedious and difficult. Yet, it may be necessary to satisfy an audit.

Scanning and saving into an electronic document management system helps but that’s an expensive, manual process and is itself prone to errors.

Clearly, there are challenges but they aren’t insurmountable and you don’t need a big budget or a months-long project.

From paper to Excel

A typical Excel purchase order

Until recently, businesses – unless they were large – would simply order by making a phone call, sending an email or a text message or even a hand written paper order.

These were inefficient and rife with the usual problems – misinterpretation due to lack of complete information, handwriting that’s indecipherable, unreturned phone calls, or even lost messages.

These methods lead to confusion and chaos due to lack of proper information flow and authorization.

So, organizations did the logical thing – they shifted to readily available digital options like an Excel spreadsheet. It’s a fair choice since Excel can perform calculations, it can be shared electronically and, in a pinch, can be used on a mobile device – a must in today’s world.

Excel is better but still has problems

Emailing Excel sheets around is an improvement over paper or verbal POs. You can be reasonably sure that POs won’t have calculation errors, they won’t be lost since email is trackable and digital storage is cheaper than filing cabinets.

Yet, there are numerous problems:

  • People email the Excel to the wrong person for approval.
  • Security is a concern – what if an employee accidentally emails the PO outside the company?
  • It’s hard to be sure that no one tampered with the Excel data.
  • Employees must print Excel sheets for signatures.
  • There’s no way to validate for missing or invalid data e.g. wrong part number. An Excel error even cost JP Morgan more than 2 billion dollars.

In spite of these concerns, the business world still widely uses Excel. After all, it’s familiar and sort-of works. Not for too long. Organizations that continue to use Excel for their business processes will be at an increasing disadvantage as technology continues to advance at its current pace.

For example, Excel locks away your data in spreadsheets on network drives. You can’t think of taking advantage of modern technologies like machine learning (ML) to analyze this data (Excel ML add-ins notwithstanding). You won’t be able to derive valuable business insights to optimize and improve your processes.

That requires digital data and processes.

Process Automation to the rescue

Process Automation

The best way to address these problems and simplify the PO process is to transition it to a fully automated online workflow. Online workflows have numerous advantages:

  1. Error free forms. Online forms validate data and ensure completeness. That means employees stop wasting time correcting mistakes.
  2. Easy calculations. In most cases, users only need pick the items they’re buying from a pick list and enter a quantity. The form automatically computes all prices, subtotals, taxes, and the grand total.
  3. Built-in mobile support means employees can submit, approve and sign anytime, anywhere and from any device.
  4. Conditional routing, email notifications and automatic reminders mean employees can’t bypass business standards , skip necessary approvals or cause delays.
  5. Digital signatures protect data ensuring that purchase orders are secure and tamper proof.
  6. Integration with SQL databases, Active Directory and other business systems reduces data entry. The form automatically pulls in things like user information and inventory data.
  7. Reduced paper usage. Less paper saves money wasted on physical space for storage as well as the cost of paper, ink etc. More important, it’s good for the environment and burnishes your sustainability credentials.
  8. Digital processes generate digital data. It’s easy to store, search and retrieve. More important, it sets the stage for deploying advanced technologies like machine learning and artificial intelligence. These new technologies are fueled by large amounts of digital data.
  9. Real-time analysis of data provides actionable business insights to optimize the internal process and react to a rapidly changing business environment.

Knowing all this begs the obvious question: why are companies still using Excel? Perhaps, they think that process automation software is cumbersome, expensive and they don’t have the skills to implement it. Nothing could be further from the truth.

Using Excel vs Process Automation for Managing Purchase Orders

ExcelAutomated workflow
Fewer errors lead to less wasted timeExcel supports limited validation.Electronic forms support sophisticated validation and error handling. It’s easy to guarantee that only valid data is submitted.
Sophisticated, fine-grained security measures are availableSecurity is limited to document rights. It’s also hard to ensure that data isn’t tampered with.Easy to integrate with Active Directory or existing authentication system. Individual/group access rights can be defined for the workflow, individual steps, or for sections of data.
Integration reduces data entryIt’s practically impossible to connect to SQL or other systems for dynamic data.Data can be stored and accessed from a database. Form fields can be pre-filled from SQL reducing data entry.
Dynamic forms are easier to fill outWith Excel, you cannot create modern, dynamic behavior.Every modern process automation system includes business rules. In many cases, these rules can be created visually resulting in an easier user experience.
MobilityExcel sheets are notoriously hard to use on mobile devicesModern, online forms seamlessly work on mobile devices without programming resulting in a vastly improved user experience.
Routing, Notifications, RemindersExcel sheets must be routed by email, reminders must be sent manually and errors are rampant, especially if the approval chain is dynamic.An electronic workflow always routes to the right person at the right time. It sends notifications, automatically sends reminders if necessary and can easily handle dynamic use cases without making mistakes.
Reduce paper usageMost PO approvals require signatures. With Excel, you must print, sign and scan for a signature.Electronic forms and workflows almost always support digital signatures. They’re far more secure and don’t require printing. That directly translates to reduced paper usage. Not only can approvers can sign anytime, and from anywhere but it’s also vastly better for the environment.
Digital data is easier to analyzeExcel POs are usually saved to a shared network drive or an email folder. The data is hard to index, search and analyze.Electronic workflows generate digital business data. It’s saved in accessible formats like a SQL database. Modern data analysis tools can easily use this data for sophisticated analyses and derive important, actionable insights for optimization.
Records keeping and document managementSaving Excel POs to your EDM system is often a manual process. The spreadsheet must be dropped into a specific sync folder or uploaded to the system. Indexing is also manual.The online workflow simply integrates with EDM systems. Documents and data are transferred electronically and automatically and they’re also fully indexed without errors.

Electronic purchase order workflows have numerous advantages over Excel. The good news is that it’s much easier to deploy process automation today.

Modern, visual software is easy and affordable

It certainly used to be the case that implementing business process automation (or BPM) software was a months-long effort with high costs and personnel needs. Indeed, some BPM software from large vendors like Appian and Pega Systems is indeed expensive and time-consuming. To be fair, those products have capabilities targeted to large enterprises.

However, modern low-code platforms like frevvo offer an easy visual system for automating everyday processes. You don’t need to be a coder-by-trade to use these tools. For example, our platform offers everything you need in a simple, easy-to-use package:

  • Drag-and-drop form design.
  • Visual, zero-code business rules for dynamic behavior.
  • Drag-and-drop, wizard-driven workflow routing.
  • Integration with SQL and other systems.
  • Authentication using your existing Active Directory or other security system.
  • Visual, drag-and-drop PDF mapping and generation.
  • Analytics to analyze and optimize your processes.

Most important, electronic processes generate digital data paving the path for new technologies like ML and AI.

Check out the 6 min video below to see how.

Simple visual tools for business process automation

Conclusion

Companies really need to get over their spreadsheet addiction and understand the long term impact.

Organizations that fail to take advantage of powerful yet easy-to-use online systems will not be able to reap the benefits of digital data and, over time, will become industry laggards. Those that understand the urgency and digitize their everyday operations will unlock rewards, boost growth and obtain higher ROI.

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