ROLE OF INVENTORY MANAGEMENT IN PURCHASE ORDER
The beginning of a supply chain starts with a purchase order. Imprezz helps in automation and speeding up Purchase Order. The efficiency of the purchasing team plays a vital role in the Inventory Management for the entire supply chain. The mistakes causing the firm to incur drastic losses can be significantly reduced by optimising the purchase order and maintaining clarity throughout the process. Let us understand each point one-by-one.
WHAT IS A SALES ORDER?
A sales order is a commercial document, or a legally binding contract generated by the seller and issued to the customer, confirming the sale of goods, the necessary specifications and other criteria involved in the transaction. This generally includes the price, description, quantity, details of the buyer like shipping and billing address, mode of payment, and terms and conditions.
A sales order is an internal document containing information on the logistics generated by the vendor and kept on record for the proper tracking of charge till the loop of the supply chain process is completed. They are most commonly used by vendors, suppliers, retailers, manufacturers, and wholesale providers.
The following steps are generally followed in a business:
- The supplier sends an official quote to the buyer after the Request For Quote (RFQ) has been sent
- If the quote is accepted, the buyer sends a purchase order to the seller
- The seller drafts a sales order following the terms in the purchase order
- The customer verifies the details in the sales order, including the exact specifications, the price quoted, the shipping and billing address, mode of transaction, etc. Some businesses skip this step altogether
- After the consignment is shipped, an invoice is generated from the sales order
THE SUBTLE DIFFERENCE BETWEEN SALES ORDER AND PURCHASE ORDER
The only difference between sales order and purchase order lies in the fact that who issues the legally binded document and for whom.
- A Purchase Order is an official confirmation of a buyer to buy the inventory from the supplier. It is a buyer who creates this document, mentioning certain aspects of the transaction, such as specified quantity, mode of transaction, specified price, etc.
- Once the Purchase Order reaches the vendor, the vendor starts drafting the Sales Order according to the Purchase Order sent by the customer. This is created in adherence to the details specified in the Purchase Order.
PURCHASE ORDER VS INVOICE
After sending the details through the Purchase order, the vendor drafts the Sales Order using automated sales. After this document is completed, the Supplier sends an official invoice to the customer specifying the exact amount of money the customer owes the vendor in return for the exchange of goods and services agreed upon in the official documents of Sales and Purchase Orders.
It is easy to be confused between Sales Order and Invoice because both are generated by the Vendor and sent to the Buyer. The main point distinguishing both is the exact timing and their respective purposes.
- A purchase order specifies the details of the consignment, the price quantity, and other logistical stuff for purchase request confirming the sale of the inventory, prompting the vendor to start assembling and packaging the inventory for shipment.
- An invoice is an official document mentioning the payment details on when and how to pay for the goods and services for the amount agreed upon during the agreement. Read this blog: Latest Updates in GST Invoice Rules: COVID 19
WHAT IS THE CONNECTION BETWEEN PURCHASE ORDER AND INVENTORY MANAGEMENT?
The importance of purchase orders for Inventory Management and other Management systems cannot be overlooked. The importance is elucidated in the underlying points:
- Prevention from Under-stocking or Over-stocking: The purchasing process specifies the exact amount of Inventory being purchased and hence following the ordered quantity, a proper strategy can be devised using advanced software like Imprezz to use the analytics tool and prepare accordingly. This becomes the responsibility of the purchasing department to maintain the necessary flow in the supply chain.
- Application of Inventory Management Techniques: To specify the details of the inventory being bought, the proper application of Inventory management techniques like JIT and EOQ can be performed to optimise the orders and save the firm from incurring heavy losses due to mismanagement. Do read for reference: Inventory Management Techniques: 2021 Edition
- Warehouse Management: Having the details of the exact quantity with detailed dimensions help in making space in the warehouse and adjust the items according to the ABC categorising technique of Inventory Management. This can be seamlessly applied using advanced software like Imprezz, which collects the sales history of the inventories and automatically categorises it according to the profit yield.
- Accounting Accuracy: The purchase order lead to the creation of an Invoice, which gets fed into the database for ease of accounting. This greatly decreases the errors due to physical accounting, and using the Accounting Automation feature of Imprezz helps automate it and save time for other analytical stuff. This automation is only possible with an accurate sales order and invoice, elucidating the importance of Sales Order. Read the blog to know more: How to Leverage Accounting Automation? – Small Business Guide
WHAT ARE LEAD CONVERSION AND LEAD CONVERSION RATES?
Before we know how to optimize Purchase Order, it is important to know what exactly is lead conversion. Lead Conversion is the process of converting a lead or prospect into a customer. Lead Conversion rate is the percentage of leads turned into customers. This includes the customers who dived deeper into your sales funnel, interacted, and purchased your services or products. It also includes old customers renewing their services and the company’s contracts.
HOW TO SEAMLESSLY CREATE PURCHASE ORDERS?
The key to improving profits through lead generation lies in lead conversion. To optimize the purchase order process, it is crucial to converting customers, and there are many factors associated with it. Identifying and working on these factors facilitate the sales process work in a smooth and systematic manner. These factors are described below:
1. Knowing and understanding your customer: Knowing and understanding our prospective client is the first step to increase sales order. Leads reported by the sales team can be of different types; some are genuinely interested in the services you provide, others are the ones picked through word of mouth or some public conferences. Understanding your target market and purchase requisition of buyer and seller is very important for a successful business.
A target market is a particular group of prospective clients or customers towards whom a product or service is aimed. There are certain variations in customer behaviour based on the following criteria:
- Demographic Data: Gender, age, character and personality, education, business model, employment, etc., fall under this category.
- Geographical Data: Location, country, region, culture, etc.
- Purchase Behaviour: Brand Loyalty, Specific purchases, whimsical triggered buying.
With proper clarity of our target market, the next step is to focus on critical factors and strategies to make them dive deeper into our sales funnel. Imprezz Inventory Management software and automation techniques help strategise the sales order process by checking the history and providing valuable inputs regarding client-specific requirements. Customised analysis and charts offer us clear visibility of the customer’s exact demands, hence giving us an edge over our competitors.
2. Integration With Automation Software: Few businesses continue using the old unproductive methods just for the sake of being in their comfort zone. This way of thinking in this digital era causes drastic losses and going down in the cut-throat competition. To maintain a decent position, an informed way of dealing with advanced software like that of Imprezz is a must.
The benefits of Sales Automation are:
- Minimising Work time: Paperwork takes up most of the working time of a sales team, and the advent of automation software like Imprezz makes automation of such manual works so much simpler! This automation reduces eliminates the re-entry of data from purchase orders reducing time and effort considerably, and they can invest this time into more productive analytical work.
- Improve Customer Service: Instead of manual tasks of data entry, now the sales team can focus on knowing the customers and their demands better, making customer query redressal quick, efficient and smooth. Sales automation reduces unnecessary errors caused during data entry, causing no discrepancies in the supply chain, and improves customer relations by smooth functioning.
- Scaling the Business: Scaling a business becomes very easy with automation because Imprezz takes care of all the necessary changes; be it large and complex, everything is taken care of. This helps a business expand without worry.
- Real-time tracking and Processing: Cloud-based software like the SaaS software Imprezz helps you process data and track real-time from anywhere. During sales calls, all the information of the entire supply chain is accessible with just a click, making sales calls and meeting with clients extremely productive.
3. Standardise your order forms: Whether it be an online form or phone order, the best way to make ordering easier is to standardise the entire process and make it user-friendly. The online form may be different from the mail order form or the internal form in the business, which is filled while taking phone orders. These need to be standardised so that no information is left out while filling the different important pieces of information. Each missing information can lead to a lot of discrepancies.
4. Make Multi-Department Collaboration Easier: The final point to keep in mind is the establishment of a centralised communication system to maintain the smooth Supply Chain Management System. Imprezz helps you collaborate with various departments and levels of the business, making communication effective for delivery dates, and no data is missed by the sales team while creating the Sales Order.
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