PO System Software With Automated Purchase Order Matching

November 10, 2021 / in AP AutomationPalette

What is PO system software?

Organizations that want to manage and control their indirect spend more efficiently are turning to PO system software to reduce unauthorized purchases and reduce administrative costs. The benefits of using PO approval software also includes having better collaboration with suppliers and optimized cash flow management.

When employees have access to funds and are able to make indirect purchases, the spending is hard to control if no requisitioning process has been set up. PO management software designed for this purpose gives you control in this area, one that many organizations find they don’t have a handle on.

The PO software is designed to take control of:

  • who is authorized to order
  • approved commodities
  • approved suppliers
  • the correct price
  • approval before ordering
  • invoice amount according to the agreement

What are the different types of PO system softwares?

There is a distinction between systems that are designed for procurement, and solutions that automate the purchase process for indirect spending. This article is about purchasing control for the finance department, which usually revolves around goods and services that are not in the procurement budget.

To get an idea of what that looks like, let’s take a look at what an indirect PO system looks like.

  • Finance administrators can set up rules to direct purchases only from preferred suppliers, an approval workflow routed to the right manager or supervisor, and purchasing limits.
  • As well, they can determine who’s got the authority to approve requisitions and convert them into purchase orders, and who has the ability to make budget adjustments.
  • Users can select from a long list of search criteria that can be used to generate and save custom reports. Tracking supplier performance, commodity purchases, matching statistics, vendor spend and more can all be facilitated in the PO system software.
  • Reports can be named, saved and reused when needed. Reports provide a summary result set which can be drilled into to see specific details and actual images, and can be exported to Excel for further analysis.

Once an order has been completed and fulfilled, PO matching can consume a lot for resources for most accounts payable departments. The reason is many organizations are still using a paper-based process, even though it is augmented by spreadsheets and email.

AP Automation | Palette Software

Matching purchase orders to invoices and goods receipts can take up a lot of time. A purchase order with hundreds of lines and several pages has to be manually matched to an invoice that may be just as detailed, along with a goods receipt if there is one.

PO management software for indirect spending should be able to match POs to invoices automatically. Some vendors do promote PO matching in their system but often the user is just comparing the PO and the invoice on different screens – which is still a manual process!

So given all the work that has to be done to control indirect spending and automate the process, it’s a good idea to look for a solution that can do both.

What is the PO approval process?

Once a purchase requisition is created for a certain purchase, the finance department approves the spend and creates a purchase order. The purchase order is sent to a supplier to fulfill as per the quantities and costs dictated in the document. Once the goods and services are received, accounts payable examines the purchase order, the invoice received from the supplier, and the goods receipt. If everything matches the invoice is ready for payment.

If there is an exception, as when items on the invoice are not matching terms on the purchase order, the invoice is sent to the approver to reconcile. Once the issue has been cleared up the invoice can be sent to the organization’s ERP for recording and payment.

Palette AP automation has a PO approval module that allows you to digitally create and submit purchase orders, track them, and pay all your invoices from one centralized location. This makes it easier to see who’s spending what and where, and how well your company is sticking to your budget. 

PO system software like Palette has a matching engine that compares the purchase order to the invoice, and passes the invoice to the ERP if there is a match. To understand the process of how it works, you start with invoice data capture.

Invoice data capture software extracts the invoice data and makes it available in a central dashboard. The invoice is matched to the PO in the background, and happens within minutes of receipt. This is called “touchless” because finance administrators do not have to handle the invoice or manually process it.

If there is no match the invoice is flagged and it is sent, along with the PO and any other information like the goods receipt, in a workflow to the approver for reconciliation.

“Touchless invoice” means that the invoice is received electronically and automatically matched against an order or contract. If the invoice meets all regulatory requirements, it is automatically sent on for payment. With AP automation like Palette, this process just takes a few minutes – saving the organization processing costs and the time lost managing the purchasing and matching process manually.

Benefits of using a PO management software  

  • Control indirect spending in the organization
  • Have a complete requisitioning system that gives finance control
  • Automatically match POs to invoices and goods receipts
  • Have an automated approval workflow that reduces approval cycle times

Palette AP automation has both an automated requisitioning system and PO matching capability. That means you can get all the functionality and automation needed to control maverick spending and have a workflow that reduces repetitive manual work. 

For more information on Palette requisitioning and PO matching, visit our PO Workflow page

Are you ready to take the next step?

Let us know what problem are you looking to solve.