From Manual POs to Intelligent Procurement: The Role of Intelligent Document Processing 

Every company buys goods and services to support its operations. It may be raw materials for manufacturing or computers for the office. Some businesses also purchase maintenance supplies for their day-to-day operations. Such transactions are processed using purchase orders. Traditionally, processing a purchase order has required a company’s employees to print a paper form, manually enter data from the document, enter the information into a computer, and send an email to an approver. However, the manual purchase order process can lead to errors that waste the business’s time and money. 

Modern companies continue to transform their purchasing processes from paper-based methods to more efficient digital approaches. At the core of such digital transitions is intelligent document processing. In this context, intelligent document processing refers to the use of technology that understands and extracts vital information from business documents. This article will further discuss how the shift from manual to automated purchase order processing benefits a company.

The Inconveniences of the Manual Purchase Orders

A traditional purchase order process entails a lengthy series of approvals before actual business spending occurs. It also involves multiple paper documents during the transaction cycle. To begin with, a department identifies the need for goods or services. Then, the department fills out a request form or sends an email to the procurement team. After that, the finance manager reviews the request, determines whether the funds are available, and approves the purchase order. The procurement team then creates an actual purchase order and submits it to the vendor.

Once the purchase order is fulfilled, the receiving department issues a receiving slip upon inspecting the items. When the invoice arrives from the vendor, the finance manager compares the invoice to the purchase order and receiving slip. If any of the numbers do not match, the payment process is halted.

The described paper-based purchase order process creates several challenges for a business. 

• First, the process is highly time-consuming, as it involves multiple approvals and manual data entry. 
• Second, human errors during data entry can lead to incorrect information in documents, resulting in incorrect payments. 
• Third, paper documents are prone to getting lost, making tracking of the purchase order difficult. Finally, purchase order processing delays impede the overall purchasing cycle, thus delaying the delivery of goods and services.

Intelligent Document Processing Defined

Intelligent document processing (IDP) refers to a technology that reads and extracts key data from business documents as humans would do. Unlike the traditional approach to document processing, IDP software can instantly extract information from scanned paper documents, PDFs, and emails. The technology enables a business to digitize its purchase orders, invoices, and other relevant documents and store them in an accessible database. More importantly, modern IDP software uses artificial intelligence to track the location of vital information in a document. As a result, such software can read, interpret, and extract data from a paper or digital purchase order without manual intervention. The extracted information can be used to update a business’s accounting system or computerized purchase order log automatically.

How Purchase Order Automation Benefits a Company’s Workflow

A company that adopts automated processing of purchase orders streamlines its procurement process. As a general rule, an employee submits a purchase order request, and the system approves and fulfills the request instantly. However, businesses can reap a number of benefits from purchase order automation. First, the procurement process becomes exceptionally quick as the software automatically verifies if the purchase request fits within a budget. Second, the system notifies managers on their mobile devices or computers, enabling them to approve the request with a simple click.

Further, the purchase order generated by the software is forwarded to the vendor for fulfillment without the need for printing and manually sending an email. In addition, when the invoice is received from the vendor, the software matches the invoice to the purchase order and the receiving slip. Finally, if the invoice matches the purchase order quantity, cost, and receiving slip, the technology approves the payment automatically. Overall, the purchase order automation described above offers a range of benefits to a company.

The Benefits of Shifting from the Manual Paper Purchase Order Process

The transition from paper-based purchase order processing to the use of technology benefits a business in a number of ways. Some of these benefits include reduced errors, reduced processing costs, and faster processing.

Reduced Errors

A manual purchase order process involves multiple steps, including the copying of information from one document to another. Such a purchase order process results in numerous data entry errors. A single incorrect or misplaced decimal in the amount field in an invoice can cost a business thousands of dollars. On the other hand, purchase order automation eliminates such errors during the data entry process, reducing the likelihood of errors in the purchasing process.

Reduced Processing Costs

Processing paper purchase orders involves costs that result from printing, scanning, and storing physical documents. In addition, manual processing is time-consuming, which means that a business has to spend more on employing staff to handle purchase order processing. On the contrary, purchase order automation reduces operational costs by eliminating several steps in purchase order processing. The overall reduction in the number of steps required to process a purchase order reduces the processing costs incurred by a business.

Faster Processing

The use of IDP software in purchase order processing ensures that a business processes purchase orders faster. A faster purchase order processing cycle reduces the likelihood of production delays, which is essential for manufacturing companies. Further, a faster procurement process ensures that a business receives the much-needed goods and services in time to avoid production downtime.

Improved Negotiations with Vendors

A business that adopts faster purchase order processing eliminates processing delays and ensures that it pays its suppliers in a timely manner. As a result, the company is able to build better relationships with its vendors. Good buyer-seller relationships are essential for a business because they can help the company negotiate better prices. In addition, a company with good buyer-seller relationships may receive better service from its suppliers. 

Increased Insight and Control

A purchase order automation process ensures that finance managers can monitor the status of purchase orders in real-time. With the click of a button, a finance manager can access the details of a purchase order, including the approvers and the amount approved. Such insights and control over the purchase orders help a business to forecast its needs and expenses better.

The Need for a Smart Procurement Transition

A business that changes from the traditional and paper-based purchase order process to the use of technology for procurement improves its business decision-making processes. When a business uses a smart procurement approach, it does not have to dedicate its time and effort to monotonous data entry tasks. Instead, the finance managers can focus on negotiating better deals with the company’s suppliers. Similarly, the purchasing department can analyze the market to identify better products to buy for the company. As a business becomes more efficient in its procurement process, it can allocate its time and resources to activities that contribute toward increasing its revenue. A company’s transition to smart procurement is seamless, as it does not require the business to overhaul its entire procurement system immediately. Typically, a company will begin the transition by digitizing purchase orders and automating the invoice-matching process. Once the employees see how such a transition benefits the business, the company can proceed to digitize all its procurement activities.