Blogs

Home / Blogs / How to Automate Purchase Order Processing

Table of Content
The Automated, No-Code Data Stack

Learn how Astera Data Stack can simplify and streamline your enterprise’s data management.

How to Automate Purchase Order Processing

Ammar Ali

Content Manager

June 14th, 2023

In today’s fast-paced business environment, an efficient purchase order (PO) processing system is integral to an optimal sales cycle. The quicker a business can process purchase orders, the sooner it can prepare invoice requests for payment to ensure a faster purchasing process and better cash-flow management.

Most enterprises receive purchase orders for goods or services via email attachments. The files mainly come in a digitized or scanned PDF format, so extracting relevant data like item descriptions, quantity, quality, and other specifics can be tricky and time-consuming.

In this blog, we’ll delve into the purchase order process and see how automating purchase order processing can help team members in any business seamlessly capture data from PDF files.

The Basics of the Purchase Order Process

A purchase order (PO) is a legally binding document initiated by a buyer to request goods or services from a supplier. It serves as a written confirmation of the buyer’s intent to purchase and outlines the specific details of the transaction, including item descriptions, quantities, agreed-upon prices, delivery dates, and terms of payment.

The purchase order process encompasses a series of actions undertaken by businesses to initiate, authorize, verify, handle, and monitor purchase orders, starting from identifying a requirement to the point of delivery or sale.

The Purchase Order Process Flow

The purchase order process involves multiple stages all aimed at ensuring the efficient processing of purchase orders within the specified timeframes. Let’s understand the purchase order process flow with an example:

Request and Approval

ABC Electronics’ procurement department identifies the need for 100 units of a specific electronic component. The department prepares a purchase request, detailing the item, quantity, and any specific requirements. The request is then reviewed by the department manager and approved, ensuring it aligns with the company’s budget and procurement policies.

Vendor Selection

The procurement team researches potential suppliers for the electronic component. They evaluate factors such as quality, pricing, delivery timeframes, and supplier reputation. After careful consideration, they choose Supplier X based on competitive pricing, reliability, and positive customer feedback.

Purchase Order Creation

Using the chosen vendor’s information, ABC Electronics generates a purchase order. The document includes the component’s description, quantity (100 units), unit price, total cost, requested delivery date, and any specific shipping instructions. The purchase order also outlines the agreed-upon terms and conditions, such as payment terms and any warranty requirements.

Order Confirmation

Supplier X receives the purchase order from ABC Electronics. They review the details to ensure accuracy and feasibility. After confirming the availability of the electronic component, they send an order confirmation back to ABC Electronics, stating their acceptance of the purchase order and reiterating the agreed-upon terms.

Goods Delivery

Supplier X prepares the 100 units of the electronic component according to the specifications outlined in the purchase order. They package the items securely and arrange for shipping to ABC Electronics’ designated location within the agreed timeframe.

Receipt and Inspection

Upon delivery, ABC Electronics receives the package and conducts a thorough inspection. They verify that the received quantity matches the purchase order, examine the quality of the components, and check for any damages or discrepancies. If everything meets their requirements, they proceed with the next step. However, if any issues are identified, ABC Electronics promptly contacts Supplier X to address and resolve the problems.

Invoicing and Payment

Supplier X generates an invoice for the 100 units of the electronic component based on the agreed-upon unit price. The invoice references the corresponding purchase order number. ABC Electronics reviews the invoice, matches it against the received goods, and initiates the payment process. The payment is made within the agreed payment terms, ensuring timely and accurate settlement.

Limitations of Manual Purchase Order Process Systems

A standardized purchase order process is essential for effective procurement. However, relying on manual systems can present numerous challenges, including:

  1. Human Error: Manual data entry increases the risk of human errors, such as typos, miscommunications, or incorrect calculations, leading to delivery delays, financial discrepancies, and strained vendor relationships.
  2. Inefficiency: Tracking, managing, and processing multiple purchase orders can be overwhelming, resulting in inefficiencies, and missed opportunities.
  3. Lack of Visibility: The lack of real-time visibility makes it difficult to track orders, monitor inventory levels, and make informed business decisions promptly.
  4. Compliance Risks: Manual processes are prone to compliance risks, such as non-adherence to procurement policies, inadequate documentation, or potential fraudulent activities.

The Solution: Automated Purchase Order Processing

 

Purchase orders differ in terms of their design and layout. Even though all purchase orders outline the same information, such as PO number, vendor information, order details, payment terms, delivery date, etc., every business uses a different template, making it difficult for machines to capture the data.

For visual proof, simply open a spreadsheet and search for “purchase order.” You’ll come across a variety of templates that can be edited and personalized to include elements specific to your needs.

An automated data extraction product or service allows companies to capture the relevant datasets and assess the types of data extraction for different types of purchase orders without manual intervention.

By leveraging an automated solution, businesses can design a seamless purchase order document flow, where unstructured data is captured, transformed, validated, and stored in a database as structured data.

How Does It Work?

data extraction stages in purchase order processing

  • Import: Source systems such as purchase order documents, typically available in a PDF format, are imported from a defined source, which can be a folder or an email server.
  • Extract: Important data fields are captured through intelligent document processing and converted into a structured format.
  • Verify: Pre-defined data validation rules are applied to identify inaccurate or missing fields to ensure accurate and high-quality data.
  • Export: The extracted, transformed, and validated information is loaded to a target destination, typically a data warehouse or an ERP system, for reporting and analysis in real-time.

Top Benefits of Automated Purchase Order Processing

Automating PO processing allows businesses to handle order requests from different vendors and seamlessly manage major accounts that provide regular business. In contrast to manual purchase order processing, it offers several key benefits, such as:

Higher Efficiency

By removing manual interventions, finance teams can process purchase orders faster. Automation and incremental extraction saves precious business hours that can otherwise be used in other high-value activities to provide a richer customer experience.

For instance, Ciena Corporation, a global telecommunications provider, started using an automated solution to extract key data from purchase orders. By switching from manual data entry to an automated solution, the company sped up the processing of sales order transactions by 15x.

Cost Savings

Faster purchase order processing offers greater cost savings. Automation eliminates the need for inefficient manual purchase order data extraction, where business users must hand-key purchase order details to the ERP system.

Advanced AI can quickly identify key fields and import all relevant data into data pipelines. This reduces transaction costs severalfold, especially when processing large volumes of files.

Better Data Quality

For transactional data like that in purchase orders, high data quality is paramount to ensure a seamless approval process. Removing human intervention also eliminates the possibility of human errors, such as mistyped information and transposition errors (e.g.,18 vs. 81).

Therefore, the extracted data is highly accurate, which helps avoid potential delays in generating purchase requisitions, thereby improving the sales cycle. Business users can also add pre-defined validation rules to ensure maximum data relevancy.

3 Signs You Need an Automation Purchase Order Processing Solution

Here are some signs that you must consider replacing manual purchase order processing with procurement software that automates your solution:

  • Your business spends too much time looking for information: Your account managers find it difficult to reconcile inventory and invoices when they don’t have timely access to purchase order information.
  • The purchase order records contain inaccurate or missing details: Inaccurate purchase order records result in missing and wrong orders, which are hurting your reputation and bottom line.
  • Your employees spend most of their time in manual data entry: Your employees spend most hours of the day on tedious and repetitive data entry tasks.

How to Choose the Right Purchase Order Processing Solution

Once you’ve determined that you need to automate purchase order processing, it’s time to find the right solution. A purchase order automation solution should :

  • Have advanced OCR and AI capabilities that can extract data from scanned images and multiple templates without manual intervention.
  • Offer functionalities like data transformations and workflow setup to orchestrate the various data extraction processes across your system.
  • Be scalable to meet the growing needs of your business. Ideally, you should pick software that is code-free and supports on-premise as well as cloud deployment.
  • Have data validation capabilities to identify blank fields, missing values, and typo errors to ensure data accuracy.
  • Integrate with your existing business modules like email servers and ERP systems to facilitate seamless data extraction from multiple data sources.

For example, in addition to data extraction from purchase orders, an automated data extraction tool may allow you to create a data pipeline to further clean and enrich your extracted data before loading it into your data warehouse or cloud-based ERP system.

Automate Purchase Order Processing with Astera ReportMiner

Extracting data using Astera ReportMiner

Astera ReportMiner is an enterprise-grade, AI-powered, data extraction platform that can help you process large volumes of purchase orders seamlessly. The zero-code solution combines the power of an enterprise-grade ETL engine and AI algorithms to enable business users to process complex business documents available in different types of files and formats.

Using our data extraction automation solution, you can create custom data quality rules and validate extracted information to ensure maximum accuracy for huge amounts of data. Moreover, you can design workflows for repetitive extraction tasks and schedule jobs to run at specific intervals.

Would you like to experience the power of Astera ReportMiner? Contact our team to schedule a free demo, where our technical team will answer all your questions. We also offer a 14-day free trial, so test-drive our enterprise-grade data management solution and see if it’s the right fit for your organization.

You MAY ALSO LIKE
Information Governance vs. Data Governance: A Comparative Analysis
Data Quality Framework: What It Is and How to Implement It
Considering Astera For Your Data Management Needs?

Establish code-free connectivity with your enterprise applications, databases, and cloud applications to integrate all your data.

Let’s Connect Now!
lets-connect