The purchase order system is broken. A bold statement perhaps, but one that we agreed summed up the situation in many small to medium-sized businesses (SMBs). However this was merely our interpretation of the market based on our day-to-day experience, we had nothing to support this notion. To investigate our belief in more depth, we embarked on a piece of independent industry analysis that involved surveying 200 UK finance professionals working in SMBs.
The results have confirmed that our ideas are not far off the mark, but they have also thrown up some surprising insights that we did not expect.
The full and detailed analysis is being drawn up into a report that will shine a light on how different size organisations manage the purchase order process and the comparable impact purchase order processing has across the business.
However, as a snap shot of what the report holds, we have picked a few of the headline results and provided a summary of our analysis. The full report is being released later this month – follow this link and sign up to receive the report in full. For now though, below are a few results to whet your appetite.
“83% of UK Finance workers in SMEs working in businesses with 50+ employees admitted they use MS Office or separate purchasing system to raise a purchase order. This indicates a high risk of loss of purchase orders and a lengthy approval process.
How purchase orders are raised provided the widest range of response to any question included in our survey – with a fragmented approach (26%) being the most popular option. The fragmented approach includes using a module of the ERP to raise a purchase order; creating a purchase order automatically based on approval of a purchase requisition; and/or using an MS Office application or a manual process. Just 9% create a complete end to end purchasing process using an ERP system.
This fragmented approach to purchase order processing risks the acquisition of goods and services being agreed without the approval or awareness of the finance department. It also supports our original fears that the purchase order processing system in many SMBs is broken.
When this realisation hits, those that sit at the executive level of SMBs typically react one of two ways:
- Get finance to implement strict control over the purchase order process so that no-one can purchase goods or services on behalf of the company without their approval.
- Let’s get it fixed immediately by spending money on a costly piece of accounting software and re-training all employees on how to use a new system.
The idea in the first scenario being that the greater control would make the whole process run smoother and more efficiently. However the results of our study showed otherwise, with finance workers spending up to nine hours a month (more than a full working day) dealing just with follow up questions about purchase requests from employees wondering how far the purchasing request has progressed.
The second scenario is one that most SMBs would eventually withdraw from after further consideration, because throwing money at problems very rarely results in a suitable solution. This is supported in the results, with only 16% actively considering making an investment into a software solution to improve their current purchase order system.
Thankfully, there is a third option. That is to use a Purchasing solution to enhance the purchase order process and give control – and more importantly visibility – back to the Finance department. Leveraging a Purchasing solution will allow all users to see the essentials of an orders progress without needing to be a user of the Finance system, improving visibility within the whole business.
Interestingly there is a still a lot of work to be done to convince finance workers within SMBs that software can have a positive impact on their purchase order processing. Less than half (45%) of SMBs that have an existing software solution already in place to produce purchase orders, said that ‘the current purchasing process works just fine’.
Combine this with the fact that 75% of those SMBs manually producing purchase orders reply positively about their current purchase order process, and it is clear that many organisations face an uphill battle to change the mindset of finance workers.