Small and Medium-sized businesses from the old times have depended upon the Manual way of providing Purchase Orders to their Suppliers on paper. And in some occasions, there were observations like no written Purchase Order was present just, Verbal Communication over a phone call was enough.
This type of behavior in the organization created confusion for both sides of buyers and suppliers. So after incurring some losses in the business, SMEs tend to understand why making Purchase Order is essential for the proper functioning of their companies. And from then, the use of Purchase Orders is seen a lot in SMEs.
So now, if you have come to this article, you want to know about the problems small businesses face with Purchase Order. And before going to talk about let's understand what exactly a Purchase Order means.
What is Purchase Order?
Purchase Order (PO) is a commercial document made by a Buyer to present the first official offer to the Seller that they want to place an order with the vendors or suppliers of a product and services.
The PO contains a purchase request and the product-related details such as the types of goods, quantity, price, and other terms & conditions which are essential for the transaction. In the absence of a contract between the Buyer and Supplier, the Purchase Order serves as a valid contract when the Vendor gives a proper acceptance to the Purchase Order.
So after understanding what the PO or Purchase Order means. Let's find out the problems which SMEs face with regards to POs.
Problems which SMEs face with Purchase Orders?
Generally, SMEs and manufacturing concerns make their purchase orders manually on paper or sometimes use Excel. And this behavior of businesses of not automating themselves becomes the biggest problem for them. So the Problems which SMEs with Purchase Orders when prepared manually are as follows:-
1. No Streamlining of POs is possible
The PO's, if made manually on paper or Excel, it becomes a little hectic process to follow the Purchase Flow procedures within the organization. Taking the approvals of the person in charge for authorizing the PO within the company will require an extra effort from the person preparing it as he has to send it for approval through mails. And this is an example of an unnecessary step in the Purchase Flow.
2. Communication Gap problem
If SMEs make POs manually, they have to send the document to all the parties concerned in the department series of separate emails to inform them about it. And if one department may not get the intimation about it due to some mistake, then the whole business might suffer because of lack of communication among departments. To give a glimpse of what problem SMEs might face, let's take an example of the Finance department when it didn't receive any news about a new Purchase order. So then, the company will be ill-prepared for this purchase and may lack funds to pay for it. And this will create a crisis for the business. So due to this, there is a need to automate the core business activities.
3. No Tracking of POs is possible
If SMEs make their POs on Excel and paper, effortless Tracking becomes a big problem. As there is no mechanism to track the different POs with different PO numbers on Excel in one place. So SMEs cannot track and analyze the information of how many POs got sent and what products in how much quantity got ordered. And this directly affects the decision-making process of the management authorities of companies.
4. Reminder problems about Delivery dates
SMEs face the problem of not getting any updates regarding the delivery date mentioned in the POs when they use Excel for making POs. And this piece of information is helpful for them. As through it, they can coordinate with the suppliers if they have dispatched the products on time or not. And also, can make preparations for the delivery in their warehouses.
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The problems that SMEs are facing with Purchase orders are pretty much the same for every different type of business. And there is the best solution for it is that the SMEs should digitize themselves. Through digitalization, only the whole business process in the company will get automated. And by this, many things inside the business will become fast and simple to operate. And in turn, will make the Decision-making process for the Owners fact-based and efficient.
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So to help this process of digitization in the business there are many solutions available in the market. And companies should choose from the great pool of software their best option which will suit them in the best way. For SMEs, there is one solution, TranZact which can help them in their process of digitization. TranZact is a zero-effort digital transformation tool that digitizes your entire business process right from sales inquiry to dispatch. And SMEs should choose it and other software-based only if it can fulfill all their needs or not.