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Purchase Order Process Steps and Procedures

Purchase Order Process Steps and Procedures

Slow purchase orders are a big no-no in the massive global workforce of today, as they can cripple businesses like nothing else. What’s more, archaic systems and manual purchase order processing can significantly hamper the entire process, causing more harm than good. It would be fair to say that depending on manual purchase order processes with spreadsheets and emails is similar to using bank accounts without access to ATMs. 

Slow purchase orders are a big no-no in the massive global workforce of today, as they can cripple businesses like nothing else. What’s more, archaic systems and manual purchase order processing can significantly hamper the entire process, causing more harm than good. It would be fair to say that depending on manual purchase order processes with spreadsheets and emails is similar to using bank accounts without access to ATMs. 


Once you give thought to ATMs convenience in the banking world, it is hard to imagine waiting in line for long periods only to encounter an error made by the bank teller handling a straightforward transaction. Similarly, the old-school processes that businesses used to swear by back in the day feel out of place in the modern tech-heavy world. 


Digitalization has been excellent when it comes to making clumsy, unreliable processes work smoothly. It is especially effective for labor-intensive and tedious administrative processes such as invoice approvals, purchase orders, and much more. Utilizing a cloud based solution in the technological era is an excellent way to make your purchase order processes smoother. 


Before we take a deeper look into effective purchase order steps and procedures, let us understand what it truly means, making sure you have the right frame of reference when we discuss the steps. 

Purchase Order Process – What is it?

Purchase order processes are essentially a journey that begins from creation and ends at closure. The steps in between the starting and ending points are dispatch, invoicing delivery, quality checks, management of contracts, and budget checks. Purchase orders become legally binding documents after a vendor accepts them. What’s more, it outlines the payment terms, delivery expectations, and the agreed price. 


Purchase orders offer thorough instructions to vendors while providing buyers with a concrete paper trail which they can use as a point of reference whenever they seek clarity. 

Understanding the Steps Involved in a Purchase Order Process

The purchase order process includes specifying and confirming the needs for services and goods before commencing with the actual purchase. Furthermore, the procedure also includes auditing results and processing payments. So without further ado, let us discuss the main steps you will find in a purchase order process:


1. Forming the PR (Purchase Requisition)

A requisitioner will need to make a document to receive permission, ensuring the purchase is good to go. You can always add or amend the purchase requisition before receiving the approval or even before cancellation. 

2. PO Issuance

After getting approval for the purchase requisition, you can create the PO the agreement of terms and conditions, delivery, and prices. Organizations often issue RFPs (request for proposals) for sizeable purchases to a list of suppliers of their preference. You will need some financial authority for signing off on the purchase before the order’s issuance. In most cases, companies issue the purchase order electronically to their supplier.  

3. Purchase Order Approval

Once the company issues the purchase order, it has to wait for the supplier to approve it. The supplier could ask for revisions and amendments if they notice incorrect details. It will then approve the revised purchased order using email or an e procurement platform. 

4. Recording and Filing the Purchase Order

Once the supplier approves the purchase order, the purchaser will have to file and record the purchase order and wait for delivery. Once the receiver gets their service or product, the organization will review it to see whether it matches their standards. Once the organization deems the services or goods to be satisfactory, they approve them through a goods received note.  

5. Payment and Approval

Once the purchase order checks out, the approved invoice goes to the finance team, which takes care of the payment processing followed by closing the purchase order. 

The Problem with Manual Purchase Order Processes

Manual purchase orders can be quite pricey, ineffective, and time consuming. Furthermore, manual processes require loads of documents to process one order, which can be a massive inconvenience. Obtaining, storing, and finally sending manual purchase orders after undergoing the tedious approval loop is not worth the effort, especially considering that there is always a chance that the items might get damaged or lost. 


A reputable study conducted by APQC suggested that manual purchase order processing can cost companies around 500 Dollars for each purchase order. Let us look at some common points that prove why manual purchase orders are not worth the pain


  • The significantly increase organizational expenses
  • MOPs can be error-prone, inaccurate, and tedious
  • These processes involve loops of people, emails etc. 
  • Many businesses encounter compliance an bottleneck issues with MOPs
  • The process relies too much on human intervention
  • This procedure lacks visibility
  • You will notice a massive delay in the purchase order processing cycle


How Workflow Automation Can Address Purchase Order Process Issues

Every organization, no matter how big or small, can benefit from a workflow automation solution for their purchase order processes. Here is a list of benefits you can obtain by opting for a digital purchase order system


  • It may help your avoid procurement frauds
  • Workflow automation could help improve the buyer and vendor ‘s relationship
  • You can utilize workflow automation to streamline stock and order management
  • Your purchase order management’s efficiency will improve be tenfold
  • No more delayed or lost purchase orders
  • There will be a noticeable improvement in processing speed


Final Thoughts

Purchase orders and requisition are an essential part of the procurement process and ignoring them is simply not possible. Do you run a small or mid-sized company that does not want to face the complications and tediousness of SAPs? If the answer is yes, consider opting if you automated the entire procurement workflow in a scalable yet lean way in Slack with Ahoy team

It is a great way to make your purchase order process more streamlined, ensuring you don’t have through various hoops during this procedure. Instead, every step of the process will be incredibly swift and accurate, something that every business desires for long-term success. 







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