PO Budget: How Purchase Orders & Budgets Control Spending

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Purchase Orders vs Budgets: How a PO budget delivers tighter spend control

Keeping track of spending isn’t just about setting a budget – it’s about knowing exactly where your money is going and managing it as it happens

By Alex Keselman

8 min read •

July 26, 2024

In one of our webinars, we talked about how combining purchase orders (POs) with clear budgets helps businesses get a real-time view of their spending. It’s a simple way to take control of your finances and make decisions with confidence.

Missed the session? Watch the webinar here.

During the webinar, we were asked a very thought-provoking question and have dedicated this blog to answering it:

“If you have clear budgets for spending by departments, does the usefulness of POs lessen?"

This blog post takes a closer look at why PO budgets – combining purchase orders and budgets – help you build tighter financial controls. No matter the size of your business, this helps you stay on top of spending and make smarter financial decisions.

Budgets vs POs: Complementary roles in financial controls

Staying on top of business expenses requires planning, tracking, and controls. Here are three key ways to do this:

Allocate a budget
Use purchase orders (POs)
Combine both into a PO budget

To better understand the unique roles of budgets and purchase orders – and how combining them into a PO budget system provides comprehensive financial control – let’s take a closer look. The table below explores the benefits and differences of each, as well as their role in managing business spend.

Aspect

Budgets

Purchase Orders (POs)

PO Budget (Combined)

Purpose

Provides overall spending limits

Tracks individual purchases and approvals

Offers a comprehensive system for planning, tracking, and controlling spend

Level of Detail

High-level (e.g., total department budget)

Transaction-specific (e.g., vendor, amount or date)

Combines high-level oversight with granular visibility

Focus

Allocating resources

Ensuring accountability for every purchase

Aligns detailed spend tracking with overarching financial goals

Primary Benefit

Guides strategic financial decisions

Reduces errors, fraud, and overspending

Improves transparency, real-time visibility, and control

Frequency

Set periodically (e.g., annually, quarterly)

Raised per transaction

Continuously updated with real-time spend data

Use Case

Forecasting and planning

Day-to-day transaction management

Managing and monitoring spend within budget limits

Best For

Making sure there’s enough funds for objectives

Avoiding unauthorised or unnecessary expenses

Achieving full financial control and alignment

While budgets give a high level view, POs offer more granular accuracy y. Together, they form a PO budget system that delivers the best of both worlds.

Why businesses of all sizes need a PO budget

Small businesses with well-prepared budgets might think they don’t need purchase orders (POs). But this overlooks the bigger picture – a PO budget brings unique value to businesses of all sizes.

Accountability

POs make sure every purchase is properly approved and recording to keep a clear audit trail and simplify recording.

Control

Combining POs with budgets prevents overspending, reduces errors, and minimises financial risks like overpayments or duplicate invoices.

Flexibility

POs can be tailored to fit your business’s size and needs, offering scalable spend control that grows with you.

Strategic Insights

A PO budget provides real-time visibility into spending, helping you manage day-to-day operations while planning for the future.

Using purchase order software

All businesses benefit from using purchase orders as well as budgets, but where's best to start? By using software which allows for purchase order creation and approval outside of your accounting platform and establishes a robust PO budget system.

Efficient software is crucial to running a business in this day and age. Irrespective of the size of organisation, you can set up POs to suit your business needs and tailored to your company’s mission, stature, and structure.

Why choose ApprovalMax for your purchase order management?

ApprovalMax’s purchase order software helps you stay on top of your spend, especially when you use it with clear purchasing policies. Benefits include:

Employees can raise purchase orders without accessing accounting software
Granular settings are provided for creating PO, e.g. limits by amount, supplier, or tracking category
Requestor roles can be flexibly set up so POs are raised strictly in line with the authorisation level of the requestor

Add precision with PO Matching

Tracking and reconciling POs against invoices can quickly become a headache without the right tools. That’s where PO matching comes in. ApprovalMax automates this process to:

Automatically match invoices with corresponding POs, reducing the risk of errors and overpayments
Flag mismatched or duplicate invoices before they cause issues
Give you a complete audit trail for easier tracking and compliance

POs within your accounts payable workflow

Purchase orders and PO matching are crucial to creating an efficient accounts payable process. Together, they’re a valuable part of AP automation software, making it easy to track, approve, and reconcile every transaction. With ApprovalMax, you’re not just managing POs – you’re building a connected system that simplifies accounts payable workflows and strengthens financial controls.

In Conclusion

During the webinar, we ran a poll and asked attendees about their spend management priorities. Here’s what they said:

What are your “Spend Management” priorities?

Matching of Bills to Purchase Orders

23%

Purchase Order control

22%

Bill control

21%

Payment automation

12%

Supplier control

10%

Other

13%

It’s clear that POs are an important tool that all businesses should use with purchase order control taking one of the top spots. Without them, tracking expenses is more difficult and prone to errors, and validating delivery reports becomes much harder. For efficient control, you need both POs and budgets.

If your business struggles with staying on budget or tracking expenses, it’s time to embrace this approach. Start by integrating ApprovalMax to automate your Purchase Order process, align spending with budgets, and gain a clear picture of your finances.

Planning your spending in this way gives your business a competitive advantage.

Ready to take control of your spending? Learn more about ApprovalMax.

Missed the webinar? Watch now

If you missed the webinar, you can watch it on-demand here.

Alex Keselman, a Solutions Engineer at ApprovalMax, brings six years of experience and a solid IT background. He focuses on helping clients smoothly implement automation solutions by breaking down complex technologies.