What Is a Purchasing System? | Types, Features, & More
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Purchasing System: A Fresh Way to Manage Your Business’s Inventory

man reviewing inventory levels in a warehouse

As a business owner, you need an efficient way to monitor your inventory and determine how much to buy and when. One way to do this is by utilizing a purchasing system. Read on to learn about purchasing systems and how they work.

What is a purchasing system?

So, what is a purchasing system exactly? Good question! A purchasing system is a component of inventory management that can help businesses monitor and manage inventory. With a purchasing system, you track the goods and services you purchase as well as your company’s overall inventory levels.

Purchasing systems can help companies determine what inventory to purchase, how much to buy, and when it needs to be purchased.

A purchasing system is essentially a set of processes a business can use to acquire goods and services for the company. Purchasing system software can help streamline the following:

  • Placing purchase orders
  • Managing orders and invoices
  • Keeping a list of suppliers
  • Forecasting future spending
  • Finding purchase information (e.g., date of purchase and cost)
  • Updating inventory stock levels
  • Maintaining accurate records of purchases

More complex purchasing systems may even have the capability of automatically ordering needed inventory, managing supplier contracts, and integrating with your basic accounting software to record transactions.

definition of a purchasing system

Types of purchasing systems

The type of purchasing system you get for your business depends on the data you need to record and track. Here are some types of purchasing systems you may want to look into for your company:

  • Stockless purchase system: Supplier holds items ordered by a customer until the customer needs them.
  • Blanket order: Company places small orders on a day-to-day basis.
  • E-purchasing: Purchasing system used for the purchase and sale of supplies, goods, and services through the internet.
  • Rate contract method: System that helps a business establish parameters for purchasing goods and services.
  • Capital equipment purchase: Purchasing system that requires high capital.

Again, you may need to get a specific type of purchasing system depending on how your business handles inventory and your industry. For example, you may need to use a blanket order if your business needs to purchase items on a day-to-day basis.

Purpose of purchasing system

There are many perks of purchasing systems that small businesses can take advantage of. For starters, purchasing systems can make the purchasing process much easier and more efficient for businesses. Not to mention, purchasing systems can help reduce supply costs and prevent inventory shrinkage.

An online purchasing system can cut down costs, shorten the length of the purchase cycle, and help reduce human errors. Additionally, purchasing system reports can make it easier to manage your inventory budget and forecast what supplies you need for the future.

Overall, purchasing systems can play a huge role in controlling what your business spends on goods and services. Purchasing systems can help you:

  • Ensure that you only make necessary purchases
  • Make sure you’re paying reasonable prices on goods and services
  • Better budget for goods and services

Purchasing system vs. purchase order system

If you’ve heard of the purchase order system or process before, you may be wondering, What’s the difference between a purchasing system and purchase order system?

A purchase order is a document buyers use to place an order with a seller or supplier. It is a part of a purchasing system. One of the processes you manage with a purchasing system is placing and tracking purchase orders.

While a purchasing system handles a variety of inventory management tasks, a purchase order system focuses mainly on the process of purchase orders. With a purchase order system, you may track a number of things, including purchase order information (e.g., date, amount of purchase, etc.), when the order is received, and processed invoices.

What to look for in a purchasing system

If you plan on using a purchasing system for inventory management, do your homework beforehand. Research various purchasing systems and compare your options to find one that is the best fit for your business.

When you’re on the hunt for a purchasing system, consider the following:

  • Type of system you need (e.g., blanket order)
  • Features
  • Cost and fees
  • Contracts
  • Flexibility (e.g., can use on-the-go)
  • Ease-of-use
  • Software or system security

Looking for an easy way to record your business’s income and expenses? Patriot’s online accounting software lets you streamline your books and get back to business. Try it for free today!

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