A Cost Evaluation Of Purchase Order Tools for Your Company in Richmond
Have you asked yourself the question, "How much does spending money cost us?" We know it sounds silly, but as you add up the costs, you might be stunned at the real cost of issuing purchase orders in your company.
There are the charges associated with creating the PO itself, which could involve purchase order solutions and hiring an accounts payable professional to perform purchase order management.
Next there’s also the cost associated with your purchase order operations which include any assessment or research, approvals, distributing, and payment processing. When you sum up the expenses across the supply chain, you might find that these costs have a substantial influence on your total expenditures.
Though, with the right solutions and distinguishing the processes that you can automate and expedite, you may find possibilities to acquire cost savings in your purchase order processing expenses. But first, we'll break down the expenditures related to POs.
The Cost of a Purchase Order
The Center for Advanced Procurement Strategy or CAPS research has stated that they believe that the typical cost for a purchase order ranges from $50 and $1000 contingent on the industry.
So as you can see, the typical cost of a purchase order may fluctuates considerably from organization to organization. In addition, operation fees could be tough to nail down if you don't know what to look for and how to measure it.
Thankfully, with this PO cost template breakdown, you can determine what fits you and start calculating these quantitative numbers.
Determine Your Fixed and Variable Costs
First and foremost, it's important to understand that purchase orders will have variable and fixed costs. Staff benefits and salaries are two examples of fixed costs, while a variable cost can include the amount of office supplies to facilitate the procedure.
Any variable expenditures should be limited since their unpredictability could make your calculations difficult. Begin by analyzing your complete purchase order process from purchasing to payment insurance to understand your fixed vs variable costs.
These include:
Selecting an asset to meet a need
Picking a supplier
Creating a purchase requisition
Getting validation
Filing a purchase order
Submitting the purchase order to the supplier
Any interactions with the merchants associated with payment terms or revisions to the PO
Monitoring the order: delivery, order quantity, alterations, status, and so on.
Handling receipt of the items - if there are issues, extra costs may apply to address the situation
Processing invoices
Calculate the Cost of Labor
An additional significant cost factor in the purchase order process is the labor cost to assist the supply chain management. Set aside the total of your fixed and variable costs before calculating staff expenses.
These include:
Salaries and benefits divided by the number of hours expended on all these workflows
The total number of purchase orders you handle each year
How frequently do errors arise and how long do they normally take to remediate?
The cost associated with each stage in the purchase order procedure must be multiplied by the hour or minute rate cost to perform it. The equation might resemble this:
Avg time spent per task * Rate = Benchmark Labor Cost
As an illustration, if you're paying your worker $0.85 per minute and a purchase order needs 10 minutes to create, you're spending $8.50 to develop a purchase order.
Calculate the Total Cost
But keep in mind that this is for just one aspect of the operation and merely one team member involved. You will need to perform this for each staff member concerned and for every single process.
When you’ve all the handling expenses for every phase of the operation, you can now determine the total estimated expenditure of your PO operation by dividing the grand total cost of a PO by the value of POs produced in a year, or whatever time frame you have to calculate for.
Apart from determining the actual cost of this aspect of your company, you can also start to calculate how much a purchase order platform that includes automation can save you.
Using Automation to Reduce Purchase Order Costs
Via automation, you can eliminate labor costs by allowing the purchase order program, utilizing artificial intelligence (AI) and Optical Character Recognition (OCR), to execute the tasks for you.
With a fundamental rules-based, if-then logic, most of the tedious purchasing procedures connected to your procure-to-pay procedures can be automated.
Benefits of eProcurement platforms include:
A more rapid purchase order process
Increased dexterity
Greater productivity from reorganized employees
Expedited workflows
Deeper insight into procedures
Performance KPI tracking
Less risk, higher compliance
Improved security
In addition, the benefits of automation can extend beyond your accounts payable processes to different elements of your organization including Data Entry, Human Resources, and Inventory Management.
Plus, most purchasing tools and software can integrate easily with your Enterprise Content Management (ECM), Customer Relationship Management (CRM), and Enterprise Resource Planning (ERP) systems.
Wave Can Help You Choose and Implement a PO Automation Tool in Richmond
At Wave, we know better than most that maintaining a competitive advantage and actualizing everlasting continuity for an organization requires back-office restoration and digital transformation.
While these are broad notions, we can illustrate how they add up to eliminating silos across business departments, augmenting collaboration, recognizing areas for productivity and cost savings, and utilizing automation as much as possible.
To accomplish so, you need the appropriate solutions that meet your demands, budgets, and expansion goals. We can come alongside your firm and examine your current systems and processes to identify the simplest sectors to mechanize or somehow improve with the proper solutions stack.
We have assisted countless companies do this in a range of industries including Education, Legal, Industrial Manufacturing, Professional Services, Finance, and more!
We use a combined solutions stack which we exercise on a case-by-case basis, contingent on your specific needs. We're comfortable working with more than 60 industry-accepted ECM and DMS platforms including OpenText, Azure, SharePoint, M-Files, and more.
If you are keen to learn more about how Wave can aid you in implementing an automation tool, let's schedule a time to chat.