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What Is Purchase Order and What is Its Format

Introduction

From elaborating what a purchase order is to describing its process, this page has got it all!

What are purchase orders?

A purchase order, often known as a ‘PO’, is an official document issued by a buyer that commits to paying the seller for the sale of certain items or services to be supplied in the future.

The buyer benefits from the ability to make an order without having to pay right away. A PO is a tool for a seller to extend credit to buyers without taking any risks because the buyer is required to pay once the items or services are delivered.

Each PO has a unique number that both the buyer and the seller may use to track delivery and payment. A blanket purchase order is a promise to buy things or services on a continuous basis, up to a particular limit.

Although purchase orders add a few more segments to the buying process, they serve to guarantee that the buyer and seller have a smoother transaction. They also serve to minimise the risk of completing an order that is incomplete or incorrect. In a nutshell, these agreements allow the buyer to convey their demand to the seller in a simple and clear manner. Furthermore, if the customer refuses to pay for a product or service after it is delivered, the seller is protected since the purchase order serves as a binding contract between the two parties.

Finally, some commercial lenders will utilise purchase orders as a reference when lending money to a company.

How many types of Purchase Orders exist?

The following are the four main types of purchase orders:

Standard Purchase Orders

A standard purchase order is often used for procurement that is irregular, infrequent, or one-time. As previously said, it comprises a detailed description of the transaction, including the price, quantity, and payment and delivery schedules.

When to use a Standard Purchase Order?

  • When there is a one-time request for products or services.
  • The order’s details are available (delivery date, quantity, description, price.).
  • If in a legal agreement, both parties are obligated to make the payment and send/receive the goods/services.

Planned Purchase Orders

A planned purchase order, like standard purchase order, is fairly detailed. The products and services to be acquired, as well as their costs need to be described in a planned purchase order. It also includes payment and delivery dates, but they are viewed as estimates. Individual orders are placed when a release is issued against a planned purchase order.

When to use a Planned Purchase Order?

  • The goods/services are expected in the future.
  • For ongoing orders, suppliers and buyers are putting together a temporary agreement.
  • Based on when the organization anticipates reaching the reorder point, there is a loosely defined delivery timetable.

Blanket Purchase Orders

A blanket purchase order is when a buyer agrees to buy specified items or services from a specific seller, but not in any definite amount. In a blanket purchase order, prices may or may not be confirmed. This sort of order is often used to purchase a group of things from a provider on a regular basis, such as basic materials and supplies. 

When to use a Blanket Purchase Order?

  • The type of service or product required is known, but the amount and timing of the goods are unknown.
  • A corporation predicts its demand for services or products over a certain period of time.
  • The vendor and buyer have agreed on expenditure limits and other terms and conditions.
  • To get a better deal under the secured contract, which will entail recurring purchases.

Contract Purchase Orders

A contract purchase order specifies the vendor’s information, as well as payment and delivery terms, if applicable. The items to be purchased are not mentioned. A contract purchase order is used to establish a contract and terms of supply between a buyer and a seller as the foundation for a long-term business relationship. When raising a standard purchase order to place an order for a product, the purchaser might refer to the contract purchase order.

Companies use CPOs to form a contract with a vendor when they know they want to do business with them but have not yet concluded the transaction.

It establishes the parameters by which the transactional relationship will function in the future, including the SPOs that will be issued. CPOs are normally issued for a specific period of time and have an expiration date, which is commonly one year.

When to use a Contract Purchase Order?

  • Between the supplier and the buyer, there is a formal long-term agreement.
  • To establish legally enforceable terms and conditions for any future dealings.
  • They serve as a foundation upon which SPOs can be created later.
  • They are used to accelerate and secure the purchase transaction process between the two parties as they do not have an expiration date.

How do Purchase Orders work?

A purchase order must observe a specific step-by-step method termed the Purchase Order Process in order to simplify the procurement of products and services that an organisation requires to function effectively. The path a purchase order takes from creation to closing, including everything in between, is referred to as the purchase order process. It can be modified to include extra necessary steps such as quality checks, budget approval, contractual approval, and more, depending on the nature of a company (size, industry, human resources, organisational structure, the goods and services it is acquiring, and so on).

Steps involved in a Purchase Order Process

  1. Creation of a PO

When an organization (the buyer) agrees to purchase a product or service, it prepares a purchase order that outlines the product or service being bought, as well as pricing and payment arrangements.

  1. Approval of a PO

A PO must be approved before it can be sent. The approval procedure for an organization will determine who inside it should approve a PO before it is transmitted to the supplier. Modern businesses often make this process easier by demanding (and approving) purchase requisitions first. This method deletes the requirement for PO approval and streamlines the buying team’s process.

  1. Sending of the PO to the vendor

The PO is issued to the vendor once it has been approved. This step may appear unnecessary for software businesses that buy online. POs nonetheless act as an internal document that helps the accounting staff with reconciliation after the invoice is received. While sending the PO to the vendor isn’t compulsory, it is still a smart thought to maintain it for internal uses.

  1. Vendor receiving the PO

Now the order is received by the vendor/seller. The purchase order becomes a legally binding contract after the seller confirms that it can fulfil the order. E-procurement technologies help you to submit POs using an online procurement system, making it easy to track if the organization sent and received emails containing POs.

  1. Receipt

The order is shipped, with the PO number attached to the packing list. The buyer will be able to identify which order has arrived as a result of this.

  1. Invoicing

The seller also generates an invoice for the order, making sure to include the PO number.

  1. Three-way matching

The organisation employs 3-way matching to ensure that the PO number and order data (quantities and prices of products and services bought) on the Purchase Order, Invoice, and Packing Slip are all the same.

  1. Payment

If everything checks out and the organization is pleased with the order, the invoice is approved and payment to the vendor is arranged (as per the agreed-upon payment terms).

  1. Closure

The PO is marked as closed once all of the aforementioned processes have been performed.

Who issues a purchase order?

A purchase order must be created and issued by the buyer. The purchase order is usually issued by a procurement or purchasing department in larger corporations. In smaller businesses, the purchase order may be issued by the owner, operations manager, or financial manager.

It’s also worth noting that the duty of drafting and issuing a purchase order for a certain team might be assigned to a central purchaser. An office manager, for example, at a software firm, can create purchase orders.

In the end, how an organization chooses to set up its purchasing process determines who issues the purchase order.

Who authorises a purchase order?

Depending on the purchasing process in place, one or more persons can authorise purchase orders. Purchase order approvals are often structured around locations and departments in bigger firms with structured purchasing processes, with precise cost criteria attached.

For instance, if a software company’s digital marketing manager requests a new ad budget, the purchase order approval route may include a marketing director and a CFO (or another role in charge of the company budget).

In smaller businesses, the CFO or CEO may be the final approver for any expenditure, resulting in approval delays.

What is the format of a Purchase Order?

Generally, a Purchase Order contents look like the following:

  • Products or services being purchased
  • Quantity of products/services purchased
  • Specific brand names, SKUs, or model numbers
  • Price per unit
  • Date of delivery 
  • Delivery location
  • Company billing address
  • Agreed payment terms 

Depending on an organization’s procurement and purchasing operations, these things may be a mandatory prerequisite or optional. Purchase orders can also be adjusted to meet a company’s specific needs, so this list isn’t absolute.

You may add account codes to requisitions using e-procurement software. By including this information, you will be able to speed up the reconciliation process and send data to your accounting system.

What is the difference between a Purchase Order and an Invoice?

If you’re unfamiliar with POs, you may be curious about how they are different from invoices. To begin with, these documents are created by several members of the team.

The PO is prepared by the buyer and sent to the vendor. As a result, the vendor accepts the PO and provides an invoice to the buyer.

It is not uncommon for the PO and the invoice to include the same information. The invoice usually includes a reference to the PO number as well as an invoice number to ensure that both documents are consistent and match one another.

PURCHASE ORDERINVOICE
Who creates it?Buyers are in charge of generating POsInvoices are the responsibility of the vendors
When is it sent?Prior to purchase, approve and give to the vendor, or keep for internal records.Once payment has been accepted, generate and send an invoice.
What does it include?Details about what is being bought SKUs, model numbers, and brand namesPriceDate of deliveryThe location of the deliveryAddress for billingTerms of paymentPO numberInvoice numberListed compartmentalisation of the order with the cost

Can we say that a Purchase Order is a Contract?

A purchase order is a legally enforceable contract once it is accepted by a seller.

Vendors ‘accept’ a purchase order by informing the buyer that they are capable of filling it. Vendors can “refuse” a purchase order by informing the buyer that they are unable to fulfil it.

If the process includes a Request for Quotation (RFQ), the vendor can simply refuse the RFQ to signal that they are unable to fulfil the order.

What are the advantages of using a PO?

POs are significant because they may assist businesses in the following ways:

  • Avoiding orders that are duplicated 
  • Avoiding getting taken by surprise by unexpected invoices
  • Keeping track of incoming orders
  • Taking advantage of unexpected price hikes
  • Increasing the accuracy of a company’s inventory and finances
  • Obeying all auditing standards
  • Smarter budgeting: procurement teams can only buy using finances that have been approved
  • POs help to plan a delivery for whenever the buyer wants it, which helps to improve (and even speed up) delivery times.
  • Maintaining clear communication with vendors.
  • Acts as a legally binding document

Are there any disadvantages of using a PO?

  • POs add extra paperwork to the process, which may be inconvenient for transactions that are small or not as big and are therefore time-consuming for small teams.
  • Credit cards can be used in place of POs to aid with record keeping and documentation of transactions, even though they are not a formal contract between the vendor and the supplier. (Keep in mind that if an organization uses credit cards for purchases, POs can help the accounting staff with credit card reconciliation).

Should you use Purchase Orders at your company?

Utilizing purchase order forms can support an organization in transforming from a reactive to a proactive spending culture. So, should your company be using purchase orders or not?

To answer this question and develop a purchasing strategy that works for a company, business owners should take a step back and look at how their company generally handles purchasing.

POs make business owners cognizant of their company’s spending. They assist team members in making quick purchases and streamlining the purchasing process. They also facilitate accounting teams in reconciling expenditures.

Things company owners should analyse before implementing Purchase Orders

Purchase Requisitions

If your company doesn’t employ purchase orders, it is also probable that you are not keeping track of the requests your employees make when they want to buy something. Most businesses simply ask their employees to email their requests to a manager, who will subsequently make the appropriate purchases.

If your firm is small and team spending does not exceed your budget, an informal purchase approval procedure is unlikely to be an issue. However, when your firm expands and new teams begin to purchase products and services, you will need to tighten up your spending rules. Purchase requisitions will prove of assistance in this situation.

Requisitions are purchase order requests made by members of your team for supplies or goods they require to complete their tasks. When a team member makes a request to their manager or directly to the procurement team, the request is then approved or denied. You may avoid wasteful and needless expenditures and bring your company’s spending under control by formalising the process of requesting a purchase.

Keep in mind that incorporating purchase requisitions into the purchasing process adds an additional step to the process. So, before moving further, assess whether the benefits exceed the disadvantages.

Budgets

If bringing your business’s budgets under control is a concern of top priority, you should know that incorporating PO requests brings two key advantages: the ability to monitor a budget for team spending and the ability to take advantage of volume discounts on large purchases.

You’ll be able to calculate an average monthly spend and watch what your teams are buying as soon as team members start drafting purchase requisitions. This means you may start studying how they use goods and see where you can save money. The person in charge of the budget will be an approver. If a team exceeds the set budget, the approver may not approve all purchase requisitions that are not urgent.

Volume Discounts

Could there be a possibility that buying in bulk will bring you higher vendor discounts? If that is the case, POs and purchase requisitions will most certainly come in handy.

The approver can simply spot purchasing patterns once your teams start submitting purchase requisitions. The approver can then place large orders and negotiate vendor discounts. Because teams may add commonly requested goods to a catalogue from the best source at the best price if the requests are digital, it can dramatically save processing time.

Purchase Orders

Setting up a purchase order process is likely as easy as contacting suppliers and notifying them that you would be submitting a PO before providing payment for items from now on. This will most likely delight the supplier because it will greatly benefit both parties.

When an authorised request is ready for purchase, the purchaser will fill out a PO form and submit it to the vendor. A seller will convey any problems or difficulties with the transaction in a transparent and concise manner. They will deliver the goods and provide an invoice after they have received payment.

When you employ e-procurement software, introducing a PO process is significantly easier for you, your departments, and your vendors.

How can Lio help?

Lio helps companies and business owners in automating their Purchase Order Process. The automation of the whole purchase order process is known as purchase order automation. The primary benefit of Purchase Order Automation is the time and effort savings. The automation platform facilitates team members in big organisations to forward purchase requests to the team leader for review and approval. The PO would then be generated automatically, removing the need for paperwork, repetition of data entry at various levels of approval, and other issues such as:

  • inefficiency and lack of accountability
  • Inadequate process control
  • threats to privacy and security

Automation with Lio guarantees that rules and controls are followed, while also increasing your team’s process efficiency and reducing human error. Furthermore, it gives a complete audit trail, which eliminates the effort of looking for misplaced paper files. Flexibility, control, and insight into the processes come with a simplified process and cost and time savings. Furthermore, in an automated AP department, an automated purchase platform allows for smooth invoice matching.

Conclusion

Many businesses avoid issuing purchase orders because they don’t want to engage in more paperwork or slow down their ongoing operations. However, unless your company is small and only makes a few purchases from a few vendors each month, you’re probably not taking advantage of the many perks that a purchase order system has to offer to your organisation.

Purchase orders provide vendors with clear legal regulations and purchase instructions. They provide an audit trail for an organisation. When things go wrong in the financial world, finance executives can resort to this document.

Frequently Asked Questions (FAQs)

  1. What is the difference between a purchase order and a sales order?

A purchase order is a document that a buyer generates and delivers to a seller for signature, whereas a sales order is a document that a seller creates once a buyer’s purchase order has been approved.

  1. What are the various purchase order types?
  • Standard PO
  • Contract PO
  • Planned PO
  • Blanket PO
  1. What to include in a Purchase Order?
  • Product details
  • Quantities
  • Price 
  • Date of the purchase order.
  • Payment terms.
  • Business information
  • Shipping address.
  • Purchase order number
  1. Why should I implement a Purchase Order Process for my business?

Purchase Orders guarantee that an order’s specifics are not misplaced, payments are not missed, and the same order is not repeated. They save time and create a paper trail. Purchase Orders that are properly logged provide a visible history of what things were purchased by your company, who purchased them and when, who are the typical vendors, and how much spending money is available at any given moment.

  1. Purchase Orders vs Invoice

A Purchase Order:

  • is established by the buyer before making a purchase
  • contains information on the items or services to be purchased
  • includes a suggested payment schedule.

An Invoice:

  • is raised after the sale by the seller (purchase)
  • verifies the supplied products/services with an itemised pricing list
  • Specifies a payment schedule with dates 
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How To Create Eway bill?

Introduction

This article will provide all the information related to E-way bills and how to make an E-way bill. But first of all, you will have to know what an E-way bill is.

What is the E-way Bill?

An e-Way Bill or Electronic way is a new system under the Goods and Services Tax (GST) that is compulsorily required to be generated by a person to transport goods exceeding more than Rs. 50,000 across State Lines by vehicle. At the time of supply or transportation of goods, an e-way bill is issued. 

Documents required for the e-way bill:

The documents required are:

  1. An invoice, challan or a bill or supply,
  2. Transporter ID of the vehicle, 
  3. Transporter document number when movement is by air, rail or ship. 

Who has to generate an e-way bill?

Every person registered or unregistered has to generate the bill. If an unregistered supplier is dealing with a registered party the latter has to make sure all the formalities have been done. Also, unregistered transporters can first generate a Transporter ID on the e-way portal online. Usually, a supplier generates the e-way bill or if not so a transporter has to complete some formalities via PART A of FORM GST EWB-01. A combined e-way bill can also be generated for multiple consignments in a single conveyance through Form GST EWB-02.

What is the validity of an e-way bill?

The validity varies from dimension to dimension. If a vehicle comes under an “over-dimensional cargo” exceeding rule 93 of the Central Motor Vehicle Rules, 1989, an e-way bill is generated to be valid for 1 day for less than 20 km, with an increase of an additional day for every 20 km thereafter. But if the cargo meets the dimensions prescribed under rule 93, the validity is 1 day for less than 100 Kms with an additional day every 20kms thereafter.

Benefits of generating the e-way bill

  • The bill helps in the smooth movement of goods
  • Convenient as it can be generated online without any hassle
  • The cost of the transport industry decreases because of more turnaround time for trucks
  • Tax evasion can also be checked 

When is the e-way bill not needed?

Some situations exist under which it is not necessarily generated. They are:

  1. Using a non-motor vehicle for transportation.
  2. Transportation to or from some specified countries.
  3. Empty containers.
  4. Goods are transported under custom seals.
  5. Transported by rails where the transporter is the central government
  6. Goods exempted under state/UT GST rules or Annexure to Rule 138 (14) of the GST Rules.
  7. Goods transported under Customs Bond from Inland Container Depot(ICD) to Customs port.

How to make the e-way bill?

Here is the step-by-step procedure for generating an e-way bill:

  1. Go to the online portal of the e-way bill generation on the official website.
  2. Log in by entering details like name, password and captcha.
  3. On the left side, you will see “e-way bill” and click on “generate new”.
  4. You will see options like:
  • Transportation type: ‘outward’ when you are a supplier, ‘inward’ when you are a recipient
  • Sub-type: when transportation type is selected certain subtypes will appear from which you have to select. If outward is selected, the following will appear:
  • Supply
  • Export
  • Job work
  • SKD/CKD
  • Recipient not known
  • For own use
  • Exhibition or fairs
  • Line sales 
  • Others

If inward is selected, the options appearing are:

  • Supply
  • Import
  • SKD/CKD
  • Job work returns
  • Sales return
  • Exhibition or fairs
  • For own use 
  • Others
  • Document type: select any of the mentioned; invoice/Bill/challan/credit note/ bill of entry 
  • Document number: enter the invoice number
  • Document date: select the mentioned date in the document, not the future one
  • from/to; select according to who you are, supplier or recipient
  • In the case of supplier/buyer being unregistered enter URP in GSTIN
  • Item details: enter all the details asked about the consignment
  • Transporter details: all the details related to the transporter have to be entered

      4.  Click on submit when all the above steps have been done.

When dealing with regular clients you can update the “my masters” option for easy proceedings.

How can Lio help?

Lio helps in organizing your personal and business data on the mobile phone so that it is easily accessible for finding the information you need. It can help you to find the details about goods in transportation by clearly maintaining the records in the form of tables with details of customer/stock/payment data for business and all other information that you need while generating the e-way bill.

Conclusion

E-way bills are mandatory documents when the goods are transported. These can be generated online through portals for easy proceedings and do not consume much time. The steps to make one are mentioned above and every detail is provided in understandable language so it is clear to you how to make the e-way bill. 

Frequently Asked Questions(FAQs)

Q1. When both goods and services are in an invoice, what should be the consignment value?

A1. Consignment value is always according to the goods which are in movement, so the details should be entered accordingly. 

Q2. Is the e-way bill required when goods are transported through Railways?

A2. There’s no demand to carry e-way bills along with the goods, but railroads have to carry tab or delivery challan or bill of force as the case may be along with goods. Further, the e-way bill generated for the movement needs to be produced at the time of delivery of the goods. Railways shall not deliver goods unless the e-way bill needed under rules is produced at the time of delivery. But for the e-way bill, the expression‘ transported by railroads doesn’t include the leasing of parcel space by Railroads’.

Q3. Can the vehicle number be changed?

A3. Yes, the user can update the vehicle number as many times as required but under the validity period only.

Q4. What happens when the validity of the e-way bill expires?

A4. The movement of the goods is to be stopped, however, under circumstances of exceptional nature and trans-shipment, the transporter may extend the validity period after updating the reason and the details in FORM GST EWB-01.

Q5. What to do if there is a mistake in the e-way bill?

A5. The mistake done can not be corrected, the person will have to generate a new bill by cancelling the old one. 

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Free Inventory Management Software

Introduction

Are you looking for free inventory management software? We are here to help you with all the relevant information you need to know.

What is inventory?

To know how to manage inventory, first of all, you must know what inventory is. 

Inventory is the amount of stock to be ordered or held for sale. The term is often associated with the sale or purchase of goods, but a company can have inventory even if they do not sell anything. If a company has goods that are not immediately consumable, it is necessary to hold them for sale in the future. In an inventory-based business, the stock is tracked and managed based on the time left to sell each product.  The inventory is the stock of materials, equipment, items and components. Demand, economic scale, uncertainty, inflation are some reasons companies need to maintain inventory.

Types of inventory

There are 12 types of inventory 

  1. Raw material
  2. Finished goods
  3. Work in progress
  4. MRO goods
  5. Packing materials
  6. Safety stock
  7. Decoupled inventory
  8. Cycle inventory
  9. Service inventory
  10. Anticipated inventory
  11. Transit inventory 
  12. Book inventory

What is inventory management?

Inventory management is essential for the managers to know the inventory of the organization, so they can manage it effectively. Inventory management is a form of business process management (BPM) that focuses on the storage and control of assets and resources. Inventory management is about efficiently storing assets and resources, including goods, services, materials, information, money, and people. An inventory system is a database with the data stored. The inventory data is typically maintained to help control and optimize the use of resources, control costs, comply with standards, and ensure the availability and quality of the goods and services. 

Inventory Management- its importance

The importance of inventory management is to control the distribution and purchasing of materials. Without management, the company will be unable to keep track of how much materials are used and purchased and how much of the materials are unused. The company must be able to track how much each item costs, how long it takes to obtain the material, how much the company has spent on each item, where the material is stored, how much the amount of material can hold, how much of the materials are currently being used and when and how the materials will be used. Inventory management also requires the company to be able to store the materials.

How does Inventory management work?

Inventory management is a type of inventory control. This implies that the aim of the inventory management system is to ensure that the right products are available at the right time in the right place. It also involves the monitoring of the physical and financial status of an organization. This allows managers to make accurate projections about the future inventory requirements of the company and adjust the current inventory level in an effort to minimize financial risk.

Techniques of Inventory Management

There are various techniques followed to maintain good inventory management:

  1. Highest In First Out (HIFO)system
  2. First In First Out (FIFO) system 
  3. Last In First Out (LIFO) system
  4. ABC analysis
  5. Economic Order Quantity(EOQ)
  6. Just-In-Time Inventory
  7. Dropshipping
  8. Demand Forecasting
  9. Perpetual inventory Management
  10. Safety Stock
  11. Reorder Point Formula
  12. Bulk shipments

Types of Inventory management

It might appear to the un-expert that inventories are a simple process that can be easily managed. This is a myth. In reality, it is a complex process that should be treated with the same seriousness that the management of a large firm would be treated. It is for this reason that the development of an inventory management system is such a critical process. For this some methods have been introduced:

  1. Perpetual Inventory Management- it means maintaining up to date data of the inventory in real-time. The item is recorded every time at every stage of the process.
  2. Periodic Inventory Management- in this the changes in the inventory are calculated on the number of sales and items recorded in the given period.
  3. Maintenance, Repair and Operations Management- it is used to track the business assets and their condition.
  4. Manual Inventory Management- in this the data is recorded physically on spreadsheets and then the items are counted. 

Advantage of Inventory Management

  • Maximizes gain and minimizes cost incurred
  • Satisfactory results to customers
  • Smooth flow of goods
  • Productive changes in employees

What is the Inventory Management Process?

The inventory management process means managing the inventory of a business. It includes the processes of planning, buying, storing, ordering, receiving, processing, shipping, invoicing, accounting and controlling all these processes. The inventory management process is used to manage the inventory of a business to make sure that the inventory is sufficient to meet the business needs. It is often known as inventory control or inventory accounting. 

Inventory management is the efficient and cost-effective purchase, storage, and distribution of a firm’s finished goods and raw materials. The Inventory Management Process consists of three main components:

  1. Inventory Forecast Analytics

Inventory Forecast Analytics is a statistical process for predicting future inventory levels of goods and services. It is important to correctly predict and analyse the need for inventory. Without a powerful analysis, it may cost the business as decisions are merely based on instincts. 

  1. Optimized Purchase Orders

Managing the need of inventory may be hectic work to do and for this, it is important that a proper system may be followed which contains all related data of your business, so it is easier to order for future needs, an app like LIO can be very helpful in this context.

  1. Inventory Control 

Inventory control is a process that involves the identification, quantification and monitoring of all components, raw materials and finished goods in a company’s inventory. It is one of the most important functions of an inventory management system, and the systems that perform this function vary in complexity and sophistication based on the specific needs of the enterprise. 

Inventory Management Softwares and systems

Inventory management systems were first used for commercial purposes in the 1970s. In those days, companies were trying to maximize their stock inventory in order to minimize the amount of money they had to spend and/or wait for. Later, they started to use the same inventory management systems to manage their customer’s inventories, which in turn gave them the idea of implementing an inventory management software for their customer’s inventories. 

Inventory management software is used to help keep track of and organize inventory in a business. This software can be used to help manage both physical and virtual inventory in a business. Inventory management software can be applied to all types of businesses but is most commonly used in the retail and wholesale industry. In these industries, inventory management software is used to manage the physical stock of products and the demand for products.

Purpose of Inventory Management Software

The purpose of inventory management software is to help the organization manage all its stock items and be able to keep track of how much of each one is held. Many businesses are making use of technology to simplify the way they manage their stock and reduce the carrying cost of the products of the business. Some of the purposes of inventory management software are:

  • Balancing the inventory required
  • Tracking the order of the inventory and the locations
  • Receiving items in the warehouse
  • Tracking sales of the products
  • Alerts about the stock decreasing in the warehouse

What to consider when selecting an inventory management software?

Before going for inventory management software consider the following points so that it helps in the growth of the business:

  1. Number of users 
  2. Devices it is accessible on
  3. Online and offline availability
  4. Specifications
  5. Complexity
  6. Monitoring of orders

How to select the best Inventory Management Software for your business?

To select the best software for the business you must consider the following:

  • Analyse the need for the software- it is important to check why you need software for managing inventory. There are several things which are replaced by it like manual management, availability of products, forecasting the order, etc. 
  • Look for the specifications- software must be selected only when it provides features that help in minimizing the extra cost involved in inventory management. For this look for the features like mobile inventory count, voice search activation, re-order management, alerts for orders, product categorization
  • Consider practical factors- some factors have to be looked upon as the cost of the software, simple to use, integrations

Advantages of Inventory management software

You have to manage the inventory efficiently to get the most out of it, and you need to be able to track your inventory to know when to order, how much of it to order, and how much you have left. At the same time, you need to be able to predict what inventory to order so that you can plan for the future and know when you’re going to need to order more. Many software provides tools that help in the suitable management of the inventory of a business. Some of the advantages of the same are:

  • Increase in efficiency and time management
  • Automatically updates accounts
  • Reduces the double data entry system
  • Easy tracking of inventory
  • Establishes access rights to user

What is some free inventory management software in India?

Inventory management softwares manufacturers tracking products and assets for all kinds of businesses. Most of the free inventory management software has limits in their features but they offer paid versions if you need a more advanced software system. Many small businesses, however, choose the free versions as they are sufficient for their needs.

Some of the free inventory management software are: 

  1. Lio- specifically designed as a mobile app, it is used to manage all the business-related data in one place, quick and easily accessible it helps small businesses to track their orders and make lists.
  2. Vyapar – available in Hindi and English language, the vapour is one of the most successful free inventory management software in India. This app is completely free for mobile access and desktop use. A 30-day free trial is given with a subscription of ₹1,999 for a year.
  3. Oracle NetSuite ERP- it is the cloud ERP software that helps in reducing manual control up to 70% and uses all back-office processes like financing, management, etc. It is a mobile app and API.
  4. Captain Biz- is the most affordable software for GST and non-GST companies using inventory management. It helps in generating invoices, tracking inventory, listing suppliers and customers, etc. it is endorsed by the GST Government of India.
  5. Busy Accounting software- an easy-to-use software for quality inventory management, it helps in managing the business efficiently by providing them simple features. A free trial is available and a subscription of ₹7,200 is required thereafter.
  6. Zoho inventory- a mobile app and API usage makes it one of the best in the list of the software, it helps in managing various things in one app like packaging, shipping, warehouse, etc. The yearly subscription is ₹14,999 after the free trial.
  7. Odoo: it is an user friendly management software that is ideal for warehouse stock management and dropshipping businesses
  8. Square: It is one of the best free software management system specifically designed for tracking unlimited products
  9. Boxstorm: Boxstrom is a very compatible and user friendly app best for the small SKU counts and other QuickBooks connectivity
  10. SalesBinder: it is the best software app designed for full-featured programs for all the limited inventory items
  11. ABC inventory: this free software management system is best for manufacturers and volume sellers needing the advanced stock and workflow management
  12. Stockpile: it is the best standalone solution for every simple tracking of item
  13. Sortly: it is the best inventory management software app as it is very easy to use
  14. Right Control: it is ideal for barcode generation and pick-and-pack system for online order management
  15.  TallyPrime: it is one of the most leading business management software in India for GST, inventory, accounting, banking, and payroll. It is quite affordable and one of the most popular business management software, used by almost 20 lakh businesses worldwide. 

Inventory Management In Excel

Excel is a cost-effective program that can be used by startups or businesses at a low cost. It helps in creating templates for easy management of inventory and other business-related categories. You can set up your templates or you can download any template online. Many templates are available to work on free inventory management software in excel. Excel is already a computer-based program with spreadsheets. These templates make it affordable for the users to clearly find what they are required to do. They contain columns with different headings from which it is easy to access and record. It works as a substitute for other inventory management software and is helpful in managing the inventory of new businesses in the market. It may not be useful for large scale businesses but for small businesses, it can work as a wonder.

Excel comes with a few features that can help in sorting a template for your business but you mustn’t make mistakes while setting it up. A businessman or manager can simply make a template using the spreadsheet form of excel. In the templates, you can include columns for inventory list, order quantity, stock, sales, purchase, etc. As you successfully create a template with the different columns you can use various formulas in it. These formulas can reduce your worries about manual checking of the data. Some of the useful formulas are:

  • Sum helps in adding the values you have written in the column so that it is easy for you to select all these values at once and your added value is formulated. But first, you will have to use the formula if there is a need to find some of the two cells. The formula to be used is cell*cell and is to be inserted in each line
  • Another formula for you to be used is Sort. It helps in sorting the cells and maintaining the order of the columns accordingly so that you know how much you have to order, how much quantity is left and other information about the same. If you use subtraction for two cells it will easily sort out stock in use. You can find the sort formula from the drop-down menu that appears by right-clicking the mouse. You can choose from its option whichever you prefer
  • The rank option is also very useful, it helps in ranking the stock which has to be reordered. It is different from the sort because it automatically allows the order and inventory quantity to be stocked accordingly while the sort only organizes it in order. The formula for rank is =Rank(Cell, Cell: Cell)

Tips For Managing Inventory On Excel

It is important to keep in mind that excel is not an easy program to use, many professionals even make mistakes and for undoing that it takes double the time you spent on making one template. Below are some tips that can help you to manage easily:

  • Always update the sheet as soon as some changes occur in the inventory such as order quantity, sales or purchases
  • Take time to maintain the data monthly or quarterly for easy access to the historical data. Maintaining the sheets will also help in evaluating how many sales or orders or purchases have been made in the month
  • Do the data review from time to time, check if formulas that are used are right and add any cell if required
  • Use an auditor for tracking the documents for valuing your profits or losses

How does Lio help?

Lio is a useful application that helps in maintaining records in the form of tables and spreadsheets. It helps the business to record the activities which are easily accessible 24/7. Various templates are provided for specified purposes which are handy to use for anyone. The mobile integrated app is convenient and the users find it not so difficult to use. It is one of the best for managing inventory, ordering and holding it to be available for the right time. It can be used by small businesses without any headache or problem because of its valuable features. 

Conclusion

Inventory Management plays a major role in any organization. It provides customers with products and services that meet their needs and the needs of the organization. With Inventory Management a business can ensure that the appropriate amount of inventory and the right quantity of inventory is available at the right price and time to satisfy customers and the organization as a whole. An online inventory management software free of cost is more useful in maintaining records and order details because of its accurate calculations. The apps and software provide different features that help businesses to improve and maximize profits.  

Frequently Asked Questions(FAQs)

Q1. Why is ERP important during inventory management?

A1. Enterprise Resource Planning(ERP) helps in providing insights to supply chain operation, accounting and combining the information in one place.

Q2. Why is inventory management useful?

A2. Inventory management helps managers to know when any item is required for ordering and to be kept in stock for future use so that there is no impact on the production process.

Q3. What is the impact of inventory management on working capital?

A3. When not in use inventory affects the working capital directly. The proper use of the inventory keeps away the holding of too many items and inventory management can be very useful.

Q4. How is online software for inventory management better than using spreadsheets?

A4. Online software is better than spreadsheets as it promotes reducing human efforts and maximizing productivity in other processes.

Q5. How to improve Inventory management in business?

A5.  To improve this type of management, it is more suitable to use online software rather than manually doing it because it will help in maintaining suitable and timely records.

Q6. How to choose the best inventory management software?

A6. Choose the one which you find simple and helpful for your business, get all the knowledge required first and then make the decision. 

Q7. Does inventory management software have any disadvantages?

A7. Inventory management software is of great use and provides a suitable management option but it is local software and works only on the system it is enabled on. Also, some of the free software stops working after limiting the order, purchases, etc, so that you subscribe to them to use it further.