Purchase Orders vs Budgets for tighter spend control
Recently, we ran a webinar where we shared some industry best practices for establishing full spend control, increasing financial data quality, and optimising company spending.
Did you miss it? Watch it here.
During the webinar, which was attended by around 80 people, we were asked a very thought-provoking question, and we have dedicated an entire blog post to answering it:
“If you have clear budgets for spending by departments, does the usefulness of POs lessen?”
There are several ways to efficiently plan and control business expenses:
- Allocate a budget,
- Use Purchase Orders (POs),
- Both of the above.
Budgets and POs play different roles: POs ensure visibility inside the budget – i.e. to see in detail who has spent what and in which amount, as well as to make a forecast for the next month. A budget shows the picture as a whole.
Owners of small businesses, or those who have well-prepared departmental budgets, may think that Purchase Orders have a smaller impact for their company or department. However, they provide value on all business levels. In fact, your business needs both budgets and Purchase Orders, regardless of its size.
Benefits of Using Purchase Orders
Using POs can help you manage your spend in a more transparent and accurate manner. This translates into stronger spend management, allowing you to watch your business flourish because:
- At-a-glance, you can see if you’ve received what was ordered (Excel spreadsheets and piles of papers are inefficient and time-consuming, not to mention stressful).
- POs can reduce the risk of errors, discrepancies, overpayments, inaccurate deliveries, and internal fraud.
- POs can help small and medium-sized businesses plan better, control cash flow, and stay within budget.
Using Purchase Order Management Software
Any business can benefit from using Purchase Orders in addition to budgets, but what’s the best way to get started? By using software which allows for Purchase Order creation and approval outside of your accounting platform.
Efficient software is crucial to effective business management in this day and age. Irrespective of the size of organisation, you can set up POs to suit your business needs and tailored to your company’s mission, stature, and structure.
Purchase Order Management software like ApprovalMax helps you stay on top of your spend, especially when you use it with clear purchasing policies. It provides the following benefits:
- Employees can raise Purchase Orders without having to access the accounting platform.
- Granular settings are provided for PO creation, e.g. limits by amount, supplier, tracking category.
- Requestor roles can be flexibly set up to ensure POs are raised strictly in line with the authorisation level of the Requestor.
To learn more about the ApprovalMax solution for PO creation and approval, and to see how it works, read here.
During the webinar, we ran a poll and asked attendees about their “Spend Management” priorities. The answers were as follows:
With Purchase Order Control taking one of the top spots, it’s clear that POs are an important tool that all businesses should use to ensure spend stays within budget. Without them, tracking expenses is more difficult and prone to errors, and validating delivery reports becomes a nightmare. For efficient control, both POs and budgets are required.
Planning your spending in this way gives your business a competitive advantage.
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