In a world where Artificial Intelligence (AI) is redefining industries across the board, procurement is no exception. The use of AI in procurement is rapidly advancing, offering innovative solutions to streamline processes and drive operational efficiency. One area where AI has increasingly been used is in the automation of purchase order management, transforming the way businesses handle their procurement transactions.

A purchase order (PO) is a critical document that formalises the agreement between a buyer and a seller for the purchase of goods or services at specified terms. It serves as a contract between the parties involved, detailing the items, quantities, and prices agreed upon. While traditionally a manual and time-consuming process, the reliance on AI technologies for automating purchase order management is on the rise, increasing efficiency, accuracy and speed of processing purchase orders.

According to Deloitte, Chief Procurement Officers are focusing on driving operational efficiency, enhancing ESG/CSR initiatives and digital transformation as key priorities in the near future. This demonstrates that the use of AI solutions in procurement, especially in data extraction from documents, will significantly impact the industry. By allowing the extraction of valuable data from procurement documents, such as purchase orders and invoices, AI technology enables organisations to make more informed decisions and streamline their processes.

In this guide, we will delve into the purchase order process, explore the challenges of manual data entry, and discuss how AI solutions, such as Affinda’s AI Purchase Order OCR data extractor, can be used for purchase order automation.  

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What is a purchase order?

A purchase order, as defined by HubSpot, is a legal document a buyer sends to a supplier or vendor to authorise a purchase. Purchase orders specify the items the buyer intends to purchase and the desired quantities, serving as a formal documentation of the transaction for both the buyer and seller.

There are many different types of purchase orders, however their main function always remains the same. By issuing purchase orders, businesses can easily specify what goods and services they need from a supplier and when they’re needed by, ensuring operational efficiency and maintaining organisation. Not only that, but purchase orders help with budget and cash flow, financial auditing and business transactions.  

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What is the purchase order process in procurement?

The PO process consists of four steps:

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1. The purchaser creates a purchase requisition  

If you need to purchase goods and/or services, the first step is to create a purchase requisition. If you’re a team member, you’ll likely need approval from your business’ accounting or management team before the purchase order is made. Receiving approval reduces the risk of any mistake or redundancy when the order is made, as well as ensuring that the goods and/or services requested are within the business’ available budget.

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2. The purchaser issues a purchase order

The second step, once you’ve received approval to request goods and/or services, is to issue a purchase order. If you don’t know what a purchase order looks like, you can do a quick Google search or create your own. The format of a purchase order is very simple, as long as it has the required fields: Purchase Order Number, Purchaser’s details, Vendor’s details, Order Date, Delivery Date and goods and/or services description, cost and total. If your business has a PO process in place already, you may send the purchase order through to the vendor via email, or any other informal communication channel, such as Slack.

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3. The vendor approves, rejects or negotiates on the PO

When the vendor receives your PO request, they have the option to approve, reject or renegotiate the purchase order. This third step is generally completed quickly as most purchase orders are only issued once they have been approved. However, if negotiations are needed or if the vendor rejects your purchase order for any reason, you’ll need to repeat steps 1 and 2.

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4. Once approved, the purchaser records the purchase order

Make sure that the purchase order is recorded after it has been approved. After the goods and/or services have been delivered or performed, the vendor will send an invoice that the accounting team will need to action which should exactly match the purchase order.

What are the challenges in manual data entry and processing?

For many years, it was common practice for employees to manually enter purchase order data into spreadsheets or record keeping systems. However, with the development of AI solutions designed to automate purchase order management, you can now save time and improve data accuracy and efficiency. Here are the three key challenges faced by businesses that still rely on manual data entry instead of implementing AI technology:

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1. Cost

Processing purchase orders manually is a time-consuming task that demands a large amount of employee time and resources. Many businesses cite cost as a reason for not integrating intelligent document automation into their processes, but this justification is misleading. If your business receives a high volume of purchase orders on a daily basis, this can lead to higher costs and may require the hiring of additional staff to handle the workload. According to a 2018 report by Goldman Sachs, the direct and indirect costs of manual, paper-based invoice processing total $2.7 trillion for global businesses. Therefore, sticking with manual data entry methods could be negatively impacting your business's financial performance. ‍

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2. Errors in data entry

Errors in manual data entry can be extremely harmful to businesses. They can impact internal operations, customer satisfaction, and supplier relationships. When money is involved, these errors can result in overpayment or underpayment to vendors, overcharging or undercharging clients, disruptions to accounting and auditing processes, and potential financial or legal troubles. According to a study conducted by the Journal of Accountancy, human error rates in manual data entry can range from 1% to 5%, depending on factors such as the complexity of the data and the experience of the data entry personnel, while automated data entry boasts an accuracy rate of around 99.99%. In terms of procurement, this means that a human processor handling 1,000 purchase orders may make at least 10 errors, whereas an automated system would likely only have 1 or 2 mistakes. ‍

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3. Slow turnaround time

Manual data entry is time-consuming. Humans are not machines and cannot work at the same speed consistently for long periods. According to iTech, the expected manual keystrokes for text documents data entry ranges from 10,000 to 15,000 strokes per hour. Thus, if a purchase order contains 250 units of data, it would take someone between 4 and 6 minutes to input a single purchase order. If your PO volume is high, this becomes an extremely inefficient process and can delay purchase order processing, causing business inefficiencies.

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How to automate purchase orders in the procurement process with Affinda

Automating purchase order management with Affinda’s AI data extraction solution is simple. Here’s how:

Step 1: Upload your documents to Affinda directly to our app, or by integrating with email or document management platforms
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Step 2: Our advanced AI purchase order data extraction technology will automatically scan, extract, label and categorise the data on any purchase order uploaded in seconds.
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Step 3: Export the data in a structured and usable format. Integrate our purchase order extractor with any downstream system or platform to use your data where you need it most
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Step 4: Need an AI data extractor customised to your specific business needs? Our expert team can build a model tailored to your business workflows that integrates seamlessly with existing processes. Talk to us.

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What makes Affinda different from other PO OCR solutions?

Affinda's document AI technology combines 10+ years of IP in document reconstruction, with the latest advancements in computer vision, natural language processing and deep learning. We process millions of documents every year with over 500 satisfied customers around the world. That’s why we’re specialists in purchase order data extraction and automation, with our AI Purchase Order extractor constantly learning and evolving to meet the specific needs of our customers. Our purchase order data extractor also:

• Has superior accuracy, with an accuracy rate of almost 100%
• Automatically scans and extracts from over 50+ purchase order fields
• Supports multiple file formats, including PDF, JPG and PNG
• Supports over 56 languages
• Allows for bulk purchase order data extraction
• Is highly flexible and customisable, with the ability to be tailored to suit your specific business use case
• Can be seamlessly integrated with your existing business processes, systems and platforms for ease of use

Get started with purchase order automation for your business

In this digital age, leveraging AI technology to simplify and automate your purchase order processes is no longer an option, but a necessity. From enhancing operational efficiency to reducing errors and cost, the benefits of AI automation in procurement are immense. Affinda’s AI Purchase Order OCR data extractor brings this transformative technology straight to your doorstep. Our tool is not just about streamlining procurement; it’s about giving your business the competitive edge it needs.  

With this guide, we hope you now understand how AI automation can transform your purchase order management, and why Affinda is the best choice for your business. Are you ready to get started? Try our PO data extractor for free or contact our team for a free demo to see how we can help streamline your business’ purchase order management.

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