Do not assume that using purchase orders is only for large businesses that operate with multiple departments. For almost every small business, it makes sense to use purchase orders. Why? There are several good reasons with the most important one being monitoring and controlling cash.
One of the primary reasons that small businesses close up shop and go out of business is a cash flow problem. Without a level of control over your expenses, you are invariably going to feel the cash flow pinch. You certainly want to avoid that “pinch” from becoming a much larger and more devastating issue. You may decide to control the cash by handling the purchasing yourself; however, you’ll quickly end up with a pile of paperwork on your desk, and you become the bottleneck to efficient operations.
Purchase orders formalize and document how money is being spent and create the necessary check and balance to ensure that what was ordered has been received. Has your company received the right items in the right quantities? Is the invoicing for the purchase accurate? Using purchase orders helps maintain control over verifying these aspects that ultimately impact your bottom line.
Purchase orders also reveal how and where you are spending money. That information can help you with budget planning and future negotiations with vendors. An accurate budget helps eliminate overspending, so you avoid that cash flow pinch. Plus, when you have a track record of buying, you can use that to negotiate a better deal for future purchases with your vendors.
Purchase orders create a verifiable audit trail and can help reduce fraudulent spending. No one likes to think that employees might take advantage of a buying privilege (e.g., asking for a higher amount than needed and pocketing the difference), but it happens. You can greatly reduce that risk with the right procedures and documentation in place, and purchase orders should be a part of that process.
Don’t assume that purchase orders generate more paperwork. They can, but they don’t have to. Using an automated system can streamline your operation and reduce the pile of paperwork on your desk. But you must choose the right automated system for your business. Req2PO is a web-based app designed specifically for small business to help simplify the process, expedite purchasing, and save time and money.