How I Saved £10,000 Per Year By Effectively Managing My Purchase Orders
In 2014, I lost over £10,000 through my supplier without knowing about it. Here is how I fixed it, and why you need to as well!
We had some decent sized jobs on in 2014 and my engineers and I were making purchase orders many times per week. We’d come back to a letterbox stuffed with supplier invoices and would try to allocate them to each job, then tally up the cost and use that total to charge our clients.
It was boring, time-consuming and we knew it wasn’t perfect. But we’d been doing it for years and it seemed to work well enough.
It wasn’t until our office admin was looking through our returns, when she noticed something. We had lost over £10,000 … somewhere.
It’s not easy to track down £10,000 when you’re stressed and buried in piles of paperwork. But finally, after hours searching with the office admin, we found several issues with our system - and they’d been going on for a lot longer than we even realised.
My laziness prevented me from finding a better solution. Our terrible system was really holding our business back.
Off the back of this, we decided there had to be a better way to manage our purchase orders. The following year, we finally switched to software. In the time since, we haven’t lost a single penny.
So how did adopting software make such a drastic difference?
Why your purchase orders are holding back your business
Traditional methods of keeping track of purchase orders are guaranteed to lose you money. And if you’re wondering whether your method is traditional, then it is.
Consider these two major reasons why you are losing thousands
1) You have unknown communication errors
In 2014, if an engineer needed a part, they would ask me whether they could buy it. I told my engineers that, when they get to the suppliers, they need to give me a call asking for a purchase order code.
Now, my engineers are usually quite disciplined, but like everyone they can be lazy and impatient. If they had called me several times with no answer, they didn’t bother trying again.
“Let me get you a reference for that purchase”
“Just use 12345”
This scenario played out all too often, and because I wouldn't know which jobs these orders were for, I'm sure it ended up costing me greatly.
This really is not an issue with your engineers in the field, it is an issue with the system being used.
It was a big problem.
And even when PO codes were correct, my system back then meant I couldn’t see who made each order, so it was difficult to correct mistakes.
- When a wrong code was used, I couldn’t ask my staff to correct the mistake.
- If something was ordered without permission, I wouldn’t know who did it.
- When stock for on the van was bought, I didn’t know whose van it was for.
2) High value invoices had gone missing
This manual purchase order system has another issue.
How would you know when all invoices for the job were received?
Well, you wouldn’t.
And when ordering parts worth thousands of pounds, this can be a costly mistake – as I found out.
On our larger jobs in 2014, my engineers and I often made purchases as we went along; tallying them up and billing for them at the end; using the invoices we received from our supplier as a record of each order.
This worked for us, but we eventually found out that our suppliers were sending the invoices 1 month, 2 months, and sometimes, even 3 months late! This was a long time after we had invoiced our customer and there was no chance we were putting a second invoice in because of a mistake with our systems.
That’s money you can’t get back.
But this wasn’t just me having these issues. Even if unrealised, these problems are all too commonplace for contractors that haven't implemented software to do the work for them. And if you aren’t letting software do all this thinking for you, you really are holding yourself back.
So how exactly does it help?
What is job management software?
In a nutshell, job management software helps trade businesses track and manage everything about every job from quote to invoice.
From booking in jobs to getting directions to jobs, from tracking labour to materials used, from making notes to getting client signatures; it’s all here, all in one place.
It is! And the great thing about a specialised system is that they handle all of your purchase orders for you, automatically. Unlike Excel and self-built software systems, job management software is the right tool for the job and will give you an advantage over competitors.
Advantages of job management software
Now, I use Orthinc. (you can start your free trial here)
Every time we need extra materials, we head into our wholesaler, open the Orthinc mobile app and generate a purchase order code for the job.
Each time we generate an order code, it is automatically tied to the job for us in real time. On my computer, our office admin (or myself when I get home) can see exactly what orders have been made; which job they are for and for who.
When I receive an invoice from my supplier, I simply tick that order is correct and there we go! I have a perfect record of my orders for each job.
- If someone makes an order, I know for which job.
- If an invoice for an order goes missing, I know about it.
- If someone makes an order I don’t recognise, I know who did it.
- If I’m charged for an order I didn’t make, I have proof it wasn’t me.
- If I haven’t added some orders to my own invoice, I told I’m undercharging.
It proves itself useful and valuable time and time again. Ever since adopting software, I haven’t lost a penny to purchase orders. And in my books, that’s saving me £10000.00 each year.
Conclusion? Go ahead.
Implementing software into your business will save you a significant amount of money; helping you keep on top of your purchases and dramatically reducing your losses, most of which, you don’t even know about. It’s one of the easiest ways to instantly boost your profitability.
Orthinc is an easy to use tool that gives you all the ammunition you need to successfully track your purchase orders for each job. So why not check out Orthinc?