Before technology and credit cards ruled our lives, cash was king. It was simple to not spend more than you had because if it wasn't in your wallet, you couldn’t...
Most businesses have a disjointed process for submitting, reviewing, and approving purchase requests. Many don’t have a process at all. If you’ve spent anytime using a spreadsheet to track purchase requests, you know firsthand how difficult, time consuming, and frustrating this process can be. A poor functioning purchasing system leads to a disconnect between your company’s financial goals and what actually gets spent. There is a solution though and it functions within the wagon wheel of your automated bookkeeping system! A simple purchase request system that is integrated with your accounting software will bring enhanced financial controls to your business, align your actual spending with your budget, and improve communication between accounting and operations.
Here is how the integrated purchasing system works in practice:
- Employees submit purchase request into the purchase request application with a form that matches your accounting software’s vendor names, chart of accounts, and tracking categories (i.e. departments)
- Approval workflows are set up to direct requests to approvers based on pre-set criteria. This allows for multiple tiers of approvals based on dollar amount, department, or the type of request.
- It also allows your leadership team to approve requests on your behalf if they are lower than a certain dollar value or fit another criterion. If the request exceeds a set value, you will be added to the approval before purchasing can occur
- Once approved, the purchase request is sent into your accounting system as a purchase order.
- If the purchase order is for materials, the PO can be sent directly to the supplier by email.
- If the purchase will be made in store or online by an employee, you will wait to see the purchase come into your accounting software either by a bill or credit card receipt.
- Purchase Order and Expense Matching – Once the invoice is produced by the supplier or your employee makes the purchase on a company card, you match the purchase order with the receipt in your accounting software (i.e. Xero or QuickBooks Online)
- The purchase order is archived in your accounting software after the matching occurs. This leaves you with an accurate list of approved requests that have yet to be paid for. This allows you to plan ahead for the upcoming cash outflows of your business.
This integrated purchase process will give your business greater control over what is spent but also streamline your process by centralizing the place where requests are received and delegating approval responsibility to your leadership team. This is the definition of a win-win as it saves you time, saves you money, and aligns your business goals with your daily operations.