Why Paper-Based Purchase Orders Waste Time and Money

I’m sure you are one of those people who still trust the physical element of using paper-based purchase orders. Its tangibility dupes you into believing that you’ve got all your company’s purchases under control. But nothing could be further from the truth!  

What you don’t realize is that filling out paper requisitions, waiting for approvals for weeks on end and faxing through purchase order forms compound your costs and can ultimately deplete your bank balance.

Your business ends up wasting time and money that could go towards growth.  Without knowing it, paper-based purchase orders can also make you rent space that your business doesn’t need to store the growing piles of paper. Or one of the most common trappings of Small and medium-sized businesses (SMB’s) – your business is likely to waste time and money on unneeded purchases!

Ultimately, the fate of your business depends on the decisions you make. The poorer the decisions made by you and your employees the likelier it is that your business will sink.  

It is not the use of paper-based purchase orders in itself that will ultimately drown your business, but the problems caused by using outdated systems in general. Let’s explore each problem associated with paper-based systems.

Paper-Based purchase orders are prone to errors

A paper-based purchase order is associated with human errors which may result in reporting inaccurate financial reports. This may, in turn, limit the chances of securing financial assistance, should the need arise, from banks, venture capitalists, etc.

Given that your business is not generating a projected profit so far, human error may be part of that problem. In certain situations, human error is inevitable but a lot of times, it is preventable. High-stress levels can affect anyone’s ability to function efficiently. Stressors such as weather, toxic work relations, or personal issues can heavily weigh on your most competent employee(s) and cause them to make simple mistakes, like ordering 200 boxes of a product instead of 20.

Here are some tips to prevent errors in processing your purchase orders:

1. Use your Excel spreadsheets alongside an easy to use purchase order software such as Procurementexpress.com.
2. Use a purchase order software that will allow you to view purchase orders in PDF format.
3. Extract the purchase order data from the PDF before printing from time to time.
4. Extract data directly from PDFs without scanning or optical character recognition, you eliminate errors at the source.
5. Ensure that accurate data is entered into your system by placing alerts if essential data is missing.

Tweet this: A paper-based purchase order is associated with human errors which may result in reporting inaccurate financial reports

Paper-Based purchase orders expose you to fraud

Your business plan didn’t have a section which spelled out how you will protect it against fraudsters.  These are people who would send an email that looks valid to an unsuspecting eye. It will ask you or your employee to click on a link or attachment that will download malware to your system.

Fraud experts established what is known as the “10-80-10 rule”. This rule states that 10 percent of people among any group will never steal, 10 percent are inclined to steal and the other 80 percent could go either way depending on circumstances and opportunity. The opportunity to steal is greater when your business uses paper-based purchase orders.

Preventing fraud is difficult with paper-based purchase orders because they do not give you an instant view of purchases. Anyone can forge your signature or amend quantity or price figures without you knowing it!  A supplier can also commit fraud by knowingly submitting inflated or duplicate invoices with the intent to defraud, either acting alone or in collusion with your employees.

This is how you can prevent fraud:

1. Make sure that you get instant notifications every time your employee create a purchase order.
2. Ensure that all staff involved in financial decisions are properly trained.
3. All purchasing processes should follow a three-way match (a checklist) to ensure accuracy.
4. If a staff member moves departments or leaves your company, remove all of their current permissions and authorities and replace them immediately.
5. Implement a variation limit for costs on both contracts and on projects. If the costs go over an agreed limit, the reasoning should be explained and investigated before it is too late.

Late deliveries

Late deliveries are commonplace when using paper-based purchase orders. In some cases, this means your company will wait for goods that are of out of stock for weeks on end. To make things worse, you will only find this out when you pick up the phone to follow up with your supplier and ask: “When are you guys going to deliver my order?”

If your supplier uses paper-based inventory systems he won’t be able to give an answer immediately. He’ll put you on hold and you may hear him cursing under his breath while struggling to locate your order. Only after minutes of going through a clutter of papers would he tell you that your delivery will be late.

Here are tips you should use to avoid late deliveries:

1. Simplify all purchasing processes because it will encourage your employees to place orders in a timely manner.
2. Create a list of reliable suppliers so that you always have a plan B.
3. Use EDI (electronic data interchange) where possible as this will allow your business to track purchase orders easily.
4. Have a good relationship with your suppliers.

How to avoid unneeded purchases

There are countless studies on consumer behavior that show us how emotions urge us to overspend. This is could be the case with all those unneeded purchases processed by your staff thus far. And things are likely to remain this way, forever and ever amen. Unless you change how purchase orders are processed in your company.

The better way to turn off the temptation to waste company money is to have complete control over your bank account. Become a business owner who can spot unnecessary purchases earlier and stop them before they can destroy your business.

Now, imagine having a friend who will nudge you every time an employee is about to waste your company’s money! In other words, every time your receptionist is tempted to order materials at a whim, your trusted friend will prevent misuse of money from happening without you being in the office. This is definitely not some kind of magic and is totally possible! You can have that friend by using a user-friendly purchase order software like Procurementexpress.com.

With Procurementexpress.com you can prevent overspending and save time and money by implementing customized approval rules and one-click approvals. You’ll get an alert every time an employee submits a PO. You and your executive(s) can approve or reject PO requests before they are sent to a supplier. This way you don’t have to worry about fraud, errors and late deliveries.  

Take a first step in protecting your bank balance by signing up for a free trial today!

Purchase Orders: What They Are, Why Use Them, and What To Do With Them. [New Data]