Top Purchasing Software

In any organization “Purchasing Process” is at the core of the business process. It assists the underlying business operations in achieving the goals set by the organization in a given timeline.  A consistent “Purchasing Process” adds value to the organization’s product and improves business performance.

In simple terms, the objective of implementing a robust purchasing process is to;

• Purchase goods in the right quantity and quality
• Purchase at the right price
• Value for money
• Identify unnecessary spend and reduce the cost of business operation
• Build long term relationship with suppliers
• Reduce market delivery time to market

In the current era, the business cannot bear the expense of a mismanaged purchasing process. The excess ordering of goods may block organization funds, which can be otherwise used for marketing or other business-related tasks, while a scarce amount of goods can make an organization fall short on their commitments.  But there are other bottlenecks as well that might obstruct the smooth purchasing process; it could be incomplete paperwork, lack of equipment, delay in transporting goods, etc.  It is essential for business organizations to overcome these bottlenecks first to keep the business up and running.   By streamlining the purchasing process, the business owner can resolve these issues and facilitate the smooth transition of business processes.  However, streamlining the purchasing process with the traditional method may not be as simple as it seems, especially when business is expanding.

The organization has to adopt a better approach that is counterproductive, intelligent, and fast. This buyer guide for purchasing software is intended to help business owners, inventory managers, and purchase managers to get a better understanding on purchasing software and discuss some important aspects to consider before buying the software. It further elaborates on how business can benefit from a robust purchasing software and some future trends that will further enhance its capabilities.     

Step 1) Purchase requisition:  A purchase requisition is a formal document informing managers or purchasing staff about the decision on purchasing goods or services so that they can initiate the process of purchasing the requested products or services.  The requisition will go through an approvals process whereby the authorized person will approve the request.

Step 2) Invite suppliers and evaluate bids: After the purchase requisition, the organization will inform suppliers about the suppliers' purchase requirements. If the suppliers have already worked for the organization, they can send a direct message; if not, then they can invite suppliers for the proposal. Once they receive the quotations from suppliers, they evaluate them for the best prices.

Step 3) Dispatching purchase orders:  A purchase order is dispatched to the supplier to inform them about the company's intent to purchase. The purchase order will list the product’s quantity required and the price being paid. It will also mention the terms and conditions that relate to the order.

Step 4) Advance shipment notice: The advanced shipment notice is sent to the company by the supplier.  It is a notification sent to the company about the upcoming delivery. It consists of information like quantity of items, date and time of the delivery, weight, type of packaging, etc.

Step 5) Receiving and checking goods:  On receiving the goods, the authorized person checks the goods to ensure that they match what was ordered and that there is no damage.

Step 6) Recording invoice:  At the time of product dispatch, the supplier generates an invoice. The invoice may be either sent attached to the goods or separately.

Step 7) Three-way matching:  Once the invoice is received, the organization confirms the payment is made for the ordered goods, and it does not pay twice for the same goods.  They conduct the three-way matching, which involves matching three documents- the purchase order, receiving report, and invoice.  Note that some businesses may not prefer using three-way matches for small or recurring purchases.

Step 8) Payment to the supplier:  After verifying goods and prices, the finance department will proceed with the supplier’s payment.

Some users often interchangeably use purchasing with procuring, but there is a difference between these two.  

Procurement: Procurement is an umbrella term that includes purchasing as one of its components. It is a multi-process stage that includes sourcing, negotiation, and selection of goods and services.  It delivers an end-to-end solution for all procuring related tasks and usually takes longer to complete. The procurement process is more focused on value than price.

Purchasing:  The purchasing process is a small subset of the broader procurement process. It includes activities like ordering, expediting, receiving, and fulfilling payment. Purchasing is a simple transaction when organizations pay for and receive goods or services. It is the process of how services and goods are ordered. The purchasing process is more focused on price than value.

Purchasing as a standalone or as a part of procurement is an important segment for business. However, many businesses are still far from identifying the purchasing process’s true potential due to underlying challenges.

• Overspending: Overspending is the common scenario with the traditional purchasing method; it does not give a clear picture of the company’s requirement. Generally, the working staff place orders based on their personal estimation, which may sometimes go wrong, leading to excess order of goods and extra money.

• Unnecessary delay: Manual approval of purchase requisition is a time-consuming process and may lead to unnecessary delay.  It is possible that the authorized person may not be available all the time; in such a situation, the purchasing department has to either wait or take the approval request to the next authorized person. The purchasing process often gets complicated when the approval process is not consistent.

• Documentation: with a traditional process, documents are printed out and filed away to obtain signatures for approval purposes.  Managing approvals, purchase orders, and invoices this way could be costly and prone to errors.

• Improper supplier management: The traditional purchasing method focuses more on fulfilling the business objective with suppliers’ services rather than building client-vendor relationships or supplier management. Not having a centralized supplier management system, the business may struggle to locate the right vendor when the need arises.

• Human error: With the traditional purchasing method, human errors are inevitable. The error could be misplacing the supplier’s contract, sending the wrong quotation, or ordering the same item twice.  Without a proper purchasing order system, human errors cannot be tracked, and it could happen repetitively.

• Risk mitigation: Risk mitigation is an important aspect of the purchasing process.  If the supplier is violating the business policy and if there is no way to track those risk factors, it could lead to a business downfall. 

• Prolong market release: Delay in acquiring goods and improper supplier management can slow down the product release in the market.  It is not an ideal situation, especially when the business is surviving around stiff competitions.    

Yes, with the help of purchasing software, the purchasing process can be automated.  It is astonishing, but there are purchasing management software that can automate the entire purchasing process.  Once the purchasing workflow is fed to the purchasing automation software, it takes charge of the entire process.  The purchasing management software can automate the requisition approval, supplier profile management, order verification, and payment process. There is no need for partial manual control; everything could be done through automation.  The purchase order automation software can bring benefits to both large as well as a small business.  It allows users to eliminate the extra steps of the process that needlessly drag the purchasing process.

The purchasing software is essentially a system that enables businesses to streamline the entire purchasing process efficiently. The advanced purchasing manager software may even help to automate ordering inventory, integrating with other software, and managing supplier contracts. Besides that, the purchasing system software can be used for;

• Managing invoices and orders
• Placing purchase orders
• Manage a list of suppliers
• Forecasting future spending
• Updating inventory stock levels
• Maintaining accurate records of purchases

The purchasing manager software can help organizations decide what inventory to purchase, how much quantity to buy, and when it needs to be purchased.

• Controls excess spending: Several times, businesses tend to overstock the resources without any proper estimate. This primarily can be to avoid lack of supplies, and somewhere in that effort, they fail to comply with the budget thresholds. Generally, it is difficult to get a perfect estimation of the purchasing budget, but with purchasing software, it is quite possible.  

• Improves client-vendor relationship: The purchasing software allows users to match the items ordered and received.  If any discrepancies are found, they can quickly verify from which end the error was made and take the precautionary step before it gets worse. The purchase ordering software plays a bigger role in improving the vendor-client relationship.

• Enhance transaction speed: Since the purchasing software simplifies the purchasing process, the business's transaction speed excels. The purchasing software eliminates all unnecessary activities and enables users to focus on valuable tasks.

• Better document management: As the business expands, the number of vendors and trading partners in the process also increases, which adds more documentation like signing the contract, purchase orders, invoices, and so on. The purchasing software makes document management easy and quick by sharing the documents with the corresponding person. Some purchase order applications also operate on the cloud, which further empowers its efficiency, and allows users to store their documents from anywhere and access any time.

• Access from any device: The purchasing software supports mobile devices, making it easy for business owners to access purchase-related queries from anywhere and get a full view of staff requirements in real-time.

• Guided buying:  AI has taken the purchasing process to a new horizon with its “Guided Buying” ability. The buyer or seller simply prompts the purchasing software about their requirements, and AI will scan the company’s stock. Based on available stocks data, the AI-driven tools guide users to purchase the appropriate products or services from the preferred suppliers.

• Support audit trail: The purchasing software supporting the "audit trail" feature allows viewing detailed audit trails in the system and extracts information as per the auditor's query.

• Global purchasing process: There are purchase management systems that support multiple languages and currencies that allow a business owner to source goods easily from anywhere in the world. 

• Automated purchasing: Most of the purchasing management software facilitate automated purchasing by routing documents to the right channel, and when the right approvals are made, the order is placed to the right vendor under the current contract terms.

• Supplier management
• Spend management
• Requisition management
• Mobile notifications alert
• Purchase order generation
• Generate Reports
• Track vendor contract
• Email orders to the suppliers directly
• Order approval
• Define access rights for user groups and roles
• Block unauthorized use
• Support charts, filters, and pivots for convenient analysis
• Check the status of purchasing requisitions
• Instant access to product catalog
• Integration with accounting software

Reports indicate that the market size of procurement software applications is likely to cross 6 billion U.S dollars by 2023. It means that more and more businesses are into automating the task related to purchasing, receiving, and paying for commercial goods. 

The purchasing software has speed up many complicated tasks for the organization, which initially demanded a lot of manpower and resources. It allows users to focus on an important task and transferring manual workload on the software. But that alone was not the reason why business owners are adopting the purchasing software. The purchase order management system has been upgraded to modern business trends; it is designed to improve the client-supplier relationship, track KPIs, visualize dynamic data, risk analysis, and mitigation. It provides users to tap on important metrics, which was not possible earlier. There are also web-based purchasing management tools or online purchasing software that gives the flexibility to process the purchasing on the go. 

The ability of purchasing software to cut unnecessary costs has attracted many business owners to invest in them for their organization. This adoption rate is likely to grow as the software is ready to embrace some ingenious technology for better performance. It is interesting to know what the future holds for purchasing software.

• Predictive analytics: The purchasing software with predictive analytics would enable the business enterprise to have a broad view of the cost fluctuation, market demand, supplier risk, and so on. The purchase order software capabilities would further enhance with machine learning and artificial intelligence.

• Improved Robotics Process Automation: Though automation is already used by some purchase order management software, there is immense scope in the purchasing process.  In the future, the RPA can be used for contract renewal, demand forecast, vendor selection, managing supplier’s risk, etc.

• Enhanced OCR:  Optical Character Recognition, along with learning algorithms, can read unstructured documents such as bills of material, contract PDFs, pricing tables, and termination clauses. It will make it possible to extract important information from the document, which may otherwise take days or weeks.

• Multi-functional 3D Printing: 3D printing enables rapid prototyping, and the organization can use them for producing low volume items.  It will eventually help them to eliminate some kinds of stocking items with on-demand productions.

• Effective Wearables and IoT: The sensors and wearable may play a critical role in detecting, capturing, and recording physical data. These devices also allow audit tracking during site visits.

• Blockchain:  There is a strong admiration for blockchain from supply chain management. Because the transaction occurs on a peer-to-peer network, the business owner can opt for automated payment without worrying about fraud.

The price of purchasing software depends on the number of users and how many purchase orders users want to generate.  The price also varies as some purchasing software comes bundled with other software solutions like CRM, warehouse management, supply chain management, procurement management, etc. Companies with a strict budget can choose purchasing software like Order MS with $0.75/month or Tradogram at $15/month.  Both tools also offer a free version and clearly qualifies as the Purchasing Software for Small Business.  For those who want slightly better features than basic versions, mid-range software like Precoro with a price range of $29/month, is an ideal option.  Businesses dealing with complex transactions can choose premium tools like Knowify with a price range of $54/month and Zahara with a price range of $65/month.

Interestingly, for a startup company or a beginner, the better option is to explore free and open source purchasing software.  

GoodFirms is rated as one of the best review and rating sites for IT solutions that help various organizations streamline their business processes. It strengthens its associates by suggesting them with the best software system filtered through stringent review guidelines.  The platform has maintained transparency in sorting the software solutions in order to fulfill the consumer’s quest for a genuine product.

Do not miss to check the list of best purchasing software prepared by GoodFirms to fine-tune the purchasing process and minimize the product delivery time.