Xero User News

Save Time, Save Money: Simplify and Automate the Purchasing Workflow

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Purchasing is a fundamental aspect of any successful business. Without a clear structure in place, spending can spiral out of control, bills can go unpaid, and cash can stop flowing.

In the past, many businesses were reliant upon manual solutions such as unwieldy email chains and error-strewn spreadsheets in order to monitor purchasing. And it shouldn’t come as a surprise that this led to mistakes being made, and deadlines being missed.

Today, however, businesses have access to smart and sophisticated cloud-based software, allowing them to simplify and automate purchasing to such an extent that they’ll not only avoid the errors of the past, but they’ll also save a significant amount of time and money.

In this article, we’ll discuss the main challenges associated with purchasing, the ideal workflow to overcome those challenges, and introduce the solution to your purchasing needs.

Main Purchasing Challenges

For a busy and growing business, implementing the correct purchasing procedure represents a major challenge. Operating without a clearly defined workflow leaves your business open to making costly mistakes, which in turn takes precious time to resolve.

The key challenges associated with a poorly constructed purchasing workflow are:

  • A vague understanding of the spending and purchasing roles within the organisation, and the associated authorisation limits.
  • Difficulties reconciling Bills and Purchase Orders.
  • A lack of audit trails for Purchase Order and Bill approval decisions.

Beyond this, many businesses will have concerns with allowing Requesters and Approvers access to the core accounting system. This can be difficult to manage and – above all else – a major security concern. There subsequently exists a logistical challenge in having these employees work effectively outside of the accounting system, while still being able to access the necessary information in a timely fashion.

The Ideal Purchasing Workflow

You might think that by removing Requesters and Approvers from the accounting system the workflow will become more complicated, but in actual fact it’s quite the opposite.

The ideal purchasing workflow becomes simplified, with fewer steps and less reliance on manual intervention.

Here’s what an end-to-end purchasing solution should look like:

Purchase Order (PO) is created > PO is approved > PO is submitted to supplier > Bill is matched with corresponding PO > Bill is authorised

And for this workflow to be truly effective, there needs to be a few key capabilities introduced into the mix.

4 key capabilities required for an effective purchasing workflow

 

  1. Approval Workflows for Bills and Purchase Orders

    The cloud accounting platform needs to be extended with sophisticated review and approval workflows, both of which enable conditional, sequential, and parallel approvals, as well as a flexible definition of authorisation levels, e.g. spending limits or cost centres.ApprovalMax - 1

  1. Matching of Bills and Purchase Orders

    Bills need to be manually matched with the corresponding Purchase Order(s), and reviewed and approved based on the matching. There also needs to be verification that the total Bill amount does not exceed the amount of the initial Purchase Order(s).ApprovalMax - 2

  1. Notifications and Reporting

    Ideally, there should be automatic notifications for Approvers, as well as real-time report views of the approval progress and the received invoices. This would help identify any bottlenecks, discrepancies, and delays in the review and approval process.ApprovalMax - 3

  1. Complete Audit Trail

    Finally, there should be a detailed and precise history of all approval decisions for audit and compliance control purposes. Upon the final approval, an audit report based on the audit trail logs should be created to enable tracking of all key approval decisions; ensuring audit readiness at any given time.ApprovalMax - 4

So, if this solution can’t exist within the core accounting platform – and employees need to operate outside of the accounting system due to security concerns – where can this workflow take place?

Read on to learn the answer.

Introducing ApprovalMax

ApprovalMax is a cloud-based approval workflow system. It’s pre-integrated with Xero and further complements it with role-based and multi-step approvals, admin-level controls, and full accountability and audit reports.

It has also been created with purchasing in mind, incorporating the 4 key capabilities discussed above to deliver the ideal purchasing workflow solution.

Here’s how it works:

  • Purchase Orders are created and approved in ApprovalMax and then sent to the supplier automatically. A copy is then created in Xero.
  • On receipt of the supplier’s invoice, a Bill is generated in Xero, either manually or via an OCR system.
  • The Bill is routed according to the workflow settings and assigned to the appropriate manager holding the appropriate authorisation level.
  • Manual matching of the Bill with the corresponding Purchase Order(s) is done. The amount check is performed to make sure that the total amount of the Bill does not exceed the amount of the initial Purchase Order(s).
  • Once approved via the web or native mobile app, the Bill is assigned the status “Awaiting payment” and the accountant is notified about its approval
  • Finally, an audit report for the approved Bill is generated, including the names of the Approvers, dates, etc.

Why use ApprovalMax for Purchasing?

With its easy-to-set-up workflows and clearly defined purchasing steps, roles, and authorisation limits, ApprovalMax can help you make sense of your internal purchasing workflow.

You’ll enjoy tighter control over spending with the Bill to Purchase Order Matching capability, while all review and approval decisions are tracked, ensuring full compliance and audit-readiness.

And by removing access to the core accounting software, sensitive financial information remains available only to those who need to see it, therefore improving data security and uncomplicating the overall process.

Get Your First 30 Days Free

If the above reasons have piqued your interest, then we have more good news – you don’t need to be an IT whizz to set it up and get started!

With a few taps and clicks, you’ll be ready to implement simple, automated purchasing workflows that will transform your business into an efficient and organised machine.

Ready to get started? Visit www.approvalmax.com for your no-risk 30 day free trial.

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About the author

Helmut Heptner, ApprovalMax