Inventory management is a crucial part of running your small retail store. After all, if you don’t have the products your customers want, why would they come back?
Inventory management isn’t all about keeping track of the items in your stock room, though. Another critical element of your inventory management process is purchase order tracking.
Purchase order (PO) tracking gives you a real-time view of the products you need on your shelf and where they stand with your supplier. Purchase orders also help you keep track of spending, forecast future spending, and track consumer demand.
In this blog, we’ll share seven tips for mastering purchase order tracking for small retailers. We’ll cover everything from what information your POs should include to creating a standardized process and automating it with the right point of sale (POS) software.
Let’s get started.
How To Master Purchase Order Tracking
A purchase order is a legally binding contract between the buyer and the supplier confirming all your order details. Purchase order tracking is the step-by-step process of tracking a PO from your supplier from purchase to delivery.
Managing purchase orders effectively helps your store run smoother and saves you money. When you have a good system for tracking orders, you know exactly what's coming in, how much you're spending, and can make better decisions about what to buy next.
However, small retailers often face several challenges in managing purchase orders, including:
- Human error, such as incorrect item descriptions, quantities, prices, or delivery dates
- Increased complexity in orders as you scale
- Inflexibility when market conditions change, which might require adjustments that are difficult to make after locking in PO conditions like price and quantity
- Manual processes and lack of automation
- Communication gaps
- Order mismanagement
- Vendor management issues
- Lack of visibility and tracking
- Delivery and fulfillment issues
Here are a few tips for overcoming these challenges and mastering purchase order tracking at your retail store.
Tip 1: Implement a Centralized System for Tracking
A centralized system for tracking POs will improve your operations by providing clarity, accessibility, accuracy, and ease of use. When all your purchase orders are stored in one location, they are easier to access and manage.
This system also allows you to set and communicate precise guidelines on where and how supplies should be bought, who can authorize purchases, vendor requirements for consideration, spending limits, and more.
Related Read: Best Inventory Management Software Solutions for This Year
While some retailers might rely on spreadsheets, specialized PO software offers greater accuracy and efficiency. In contrast, spreadsheets can lead to errors and aren’t optimized to handle complex order management as your business scales.
Tip 2: Standardize Your Purchase Order Process
Creating a standardized purchase order process should include clear guidelines and a detailed structure for creating and processing orders.
A well-defined purchase order template should include:
- Purchase order number
- Date and time of purchase order
- Requestor name and department information
- Vendor information, including name, address, and contact information
- Description of goods or services being purchased
- Quantity of goods or services being purchased
- Unit price per item
- Total price
- Taxes and fees
- Shipping and delivery information (including cost if applicable)
- Billing instructions to the vendor
- Payment information and net terms
- Additional notes from stakeholders or the finance team
Creating a template that includes these fields will ensure your POs are completed correctly every time.
Tip 3: Train Your Team on Purchase Order Management
Training your staff on the purchase order process and tracking systems will ensure smooth operations. An effective training program will cover the entire PO lifecycle, from creation to tracking and reconciliation.
Implementing a point of sale (POS) system that automatically generates POs when reorder thresholds are met can simplify the process.
POS Nation is an all-in-one solution that offers features that automate and streamline purchase order management. You'll make fewer mistakes and spend less time dealing with paperwork. How? Our POS makes inventory management easy, and you’ll have a clear picture of what’s in stock at all times.
Related read: 8 Inventory KPIs Every Grocery Store Owner Should Track
Tip 4: Use Purchase Order Numbers Effectively
Purchase order numbers play an essential role in tracking and auditing. Develop a numbering system that is logical and easy to understand, ensuring that each PO is organized, identifiable, and can be found quickly. This numbering system will also help streamline tracking and auditing.
Here are a few examples of PO numbers:
PO-2023-06-50T: This number is for a business that purchased 50 custom T-shirts. 2023-06 is the order date, and 50T is the unique order identifier.
PO-123-01102022: In this example, PO is the prefix, 123 is the sequential number, and 01102022 is the date in the format of MMDDYYYY.
PO-XYZ-1234: In this format, XYZ can represent the buyer's initials, a specific department, or product category, and 1234 represents quantity or sequence.
PO-11-2023-003: In this example, 11 signifies the month, 2023 the year, and 003 is a sequential identifier.
Related read: What Is Perpetual Inventory? (+ Tips and Tools To Implement)
Tip 5: Monitor and Update Purchase Orders Regularly
Monitor purchase orders throughout the fulfillment process to stay updated on order statuses and potential delays. This will help you address issues before they escalate and relay any pertinent information to your staff.
Establish strategies for tracking orders and communicating effectively with suppliers to get timely updates.
Tip 6: Implement Checks and Balances
If you don’t inspect every delivery, how will you know it’s correct? Implementing checks and balances will help verify the accuracy and completeness of the order and maintain accurate inventory counts.
Reconcile received orders with purchase orders to prevent discrepancies. Inspect the received items to ensure they are in good condition. If there are any issues, contact your supplier to find a remedy.
Related read: Inventory Reconciliation 101: How To Reconcile Inventory in 5 Steps
Tip 7: Leverage Reporting and Analytics
Reports on your POS system provide insights into purchasing trends and supplier performance. Are customers buying a certain product? Can you rely on the supplier to get them to you on time and in good condition?
The right tool will make this reporting easy. Find a POS system that provides reports that track key performance indicators you can actually use, such as order accuracy, supplier delivery times, purchasing patterns, forecasting, and more.
POS Nation includes over 55 pre-built reports to simplify daily operations.
Related read: Retail Store Performance Dashboard: 6 KPIs and How To Track Them
Improve Purchase Order Tracking With POS Nation
Never lose sight of another purchase order when you implement these seven tips for mastering purchase order tracking — your bottom line and customer satisfaction scores depend on it.
Once you create a PO template, implement a numbering convention, and train your staff, you’ll always know what to order and when.
To make it easier, invest in a POS system that can automatically reorder products at a pre-determined threshold to prevent stockouts, dead stock, and overstocking.
Schedule a demo with POS Nation today to see how we can help.
