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What Is Purchase Order Management Process? – You Must Know About

    With business processes getting more complicated every day, it has become necessary for businesses to adopt newer means to ensure that all processes are running smoothly and ensure that there are no forms of mismanagement in the process. 

    Mismanagement of processes will make work difficult for the employees as record-keeping becomes difficult. Therefore, to avoid such problems, businesses have adopted the purchase order management process to ensure that all receipts and cheques are signed for and verified. 

    In this article, we will help you understand a purchase order management process and how to successfully implement it in your business to make operations and bookkeeping easier.

    What Is Purchase Order Management Process?

    The purchase order management process uses various procurement processes for goods and services. It allows businesses to internally manage all purchases made by the companies, especially when it concerns the purchase of goods. 

    This is essential because purchasing goods require proper inventory management, which is makes the following purchase policies important for the business and its employees.

    To make a purchase order, you must help employees by outlining guidelines and policies to keep accurate records of all the firm’s purchases. This makes all receipts justified in the eyes of financial laws and makes them optimized for making entries in books of accounts and inventory management processes. 

    Why Do Companies Use Purchase Orders?

    Purchase orders are not only important for businesses; they are essential for the company or people that have sold products or services to the firm. This is because helping your business make purchase processes easier makes the other business who are selling goods to you have a better view of the entire process and update their books of accounts accordingly.

    Some of the benefits of implementing a purchase order management process are:

    • Vendors from whom your business is buying products understand what is required from their side to fulfill the order. 
    • For your business, you can officially confirm all purchases in the books of accounts when you receive all the documents like receipts and invoices from the vendor. 
    • If issues arise because of faults in the acquisitions, these documents can be used in legal proceedings to justify the stance of your business. 
    • Auditing accounts and income tax payments become easier when carried out. 

    Stages In The Purchase Order Management Process

    Businesses will have to complete the purchase order processes every time they purchase products. This process has many steps that are:

    1. Establishing A Purchase Order

    The first step is to establish a purchase order from the department that needs it. For example, suppose the logistics department of the business needs a new computer. In that case, they will need to request the purchases department to ensure that the department accepts the requisition for a new computer if they find its use justified. Also, the specifications of the computer need to be mentioned. 

    2. Asking For Requests For Quotation

    The next step for the business is to ask for Requests For Quotation (RFQ). In this step, the company asks all its computer parts suppliers to notify them of the prices they are willing to charge for assembling the new computer. This step is necessary because different vendors will ask for different prices. 

    3. Analyzing And Selecting A Vendor

    After each vendor has quoted their prices for assembling the computer, it is time for your businesses to analyze all the quoted prices. This step is essential as it helps your business understand which vendors are selling the same products at lower and higher prices. 

    If you see a vendor selling the same product to you at a lower price than others, do a background check to ensure that they are authentic, high-quality products. This is important because vendors often will quote low prices and sell off faulty products for cheap. Running a background check and seeing all its reviews is an important step that you should not miss out on. 

    4. Negotiating Contracts

    After you have selected the right vendor to purchase the computer parts from, it is time for you to negotiate a contract. A rule of thumb that is followed by businesses is to ensure that you get the best products at the lowest prices. Therefore, try to bargain with the vendors to lower their quoted price. If they drop it, it will be good for your business only since you will get it cheaper than the quoted price. Strike a deal if you are satisfied with the negotiated prices. 

    5. Receiving The Goods And Services

    After the prices are settled, and a deal is struck, it is time for you to wait for receiving the products. Make sure that all products are received in boxed packages. Boxed packaged goods can become beneficial for the business because it helps keep the products inside safe while warehoused. You should also check for faulty goods during this time. 

    6. Receiving And Checking Invoice

    After the goods are received, vendors will either send the bill on the same day or later. You have to check the invoices to ensure that the prices are accurate and no products are missing. 

    7. Managing Its Records in Books

    It is now time for your bookkeeper to input the prices of the purchases in the books of accounts, along with keeping a copy of all the receipts and invoices. 

    8. Completing The Purchase Order Process

    That’s it! Your purchased order process for a brand new computer is now complete. 


    A purchase order management process is required to be adopted by businesses to ensure that all its purchase receipts and invoices are checked ansd recorded in the books of accounts carefully. Employees need to follow this process strictly to ensure a steady flow of purchases and make sure that no investments turn out to be defective. 

    Kacee Christian is a freelance content writer and enthusiastic blogger. She is the co-founder of Exclusiverights. She contributes to many authority blogs such as Techrab, worldtech24, Worldnewsinn, Truehealthtips.