What is Purchase Order Cycle - Meaning, Steps, Why Automate It

August 28, 2022
Alok Suman
Procurement Management

In this digital world, automation is the key to staying relevant in the market. If you're still manually processing your purchase orders, now is the time to automate and stay ahead of the competition. 

Delayed payments and invoices, discrepancies in business expenses, inventory inconsistencies, etc., are the consequences of the paper-based purchase order process. 

To stay relevant in today's market, you must have a streamlined procurement cycle free of manual hassles. 

A purchase order cycle is a complex undertaking – but this doesn't mean you have to go through all the tedium to make it work. So, how do you fix it?

Simple – by automating your purchase order cycle using robust procurement software. Streamline your PO process, get real-time updates on your expenses, and effectively manage your inventory by automating your procurement cycle. 

Learn more about how to run seamless procurement operations and stay ahead of the curve in this detailed read. 

What is a Purchase Order Cycle? 

A purchase order cycle is a sequential process involved in verifying and processing a purchase order. In the purchase cycle, the first step is the purchase order process, followed by a budget check, negotiation, and closure. 

Managers can use purchase orders to track orders, delivery instructions, expenses, and other relevant information. Streamlining your procurement cycle can help minimize your business expenses.

Steps Involved in the Purchase Order Cycle

Let's discuss the six major steps involved in the procurement cycle:

1. Purchase Order Creation

A purchase order is placed only after the purchase request is approved. This is where you decide what will be purchased, the requisition's priority level, your spending plan, when you need the product, and who will be the vendors.

But what if there are multiple products in the pipeline? 

Then you must create individual purchase orders for all the items you need. 

Anyone in the organization can raise purchase requests, but only the procurement team is authorized to place the purchase order to avoid inconsistency. 

2. Budget Check and Approval

Once the purchase order is created, the next step is to analyze the required budget.

The finance team performs this check by considering the recent and existing purchase orders. If your organization has an existing contract with a vendor, you can proceed with them first. 

If an organization doesn't have an existing vendor, it must look for potential vendors and submit a request for proposal (RFP) for the required purchase order. 

3. Vendor Selection 

Selecting a vendor is similar to choosing a trustable business partner.

You must check all boxes in your vendor selection criteria. Your team should be meticulous during vendor selection. Here are a few vendor selection criteria to help you choose the right vendor for your organization: 

  • Have a clear understanding of your requirements 
  • Perform a thorough quality check before selecting a vendor
  • Run a complete background check on the vendor 
  • See if the vendor has robust customer service 
  • Ask your close circle about the vendor

Performing all these checks will help you choose the right vendor. Once the vendor issues their quote against your proposal, ask your procurement team to validate it against your requirements. Include your stakeholders and partners in this process.

Stakeholders will bring certain issues to light that you were unaware of. In addition, your stakeholders and partners might have trustworthy vendor sources, which can be helpful in this process. Overall, this increases transparency and enhances relationships. 

4. Negotiation 

Once you've selected a suitable vendor, you can start your negotiation process. You need to be meticulous in your negotiation to get the maximum value for the price from the vendor. Strong negotiation is key to a long-term business partnership. 

You can send your purchase order to your vendor once you are done with your negotiation. The procurement contract between you and your vendor will begin after the vendor has approved your purchase order. 

5. Product Delivery 

The next step is where the business waits for the vendor to produce, deliver the product and submit an invoice. Usually, the vendor sends the invoice along with the shipment notice, which includes delivery-related information. 

Once the product is received, the in-house team performs a detailed quality check to see if the products delivered match the requirement.

6. Three-Way Matching 

If the delivery is on time and the product quality matches the requirement, the buyer will send goods received note (GRN). This is followed by three-way matching where the GRN, the purchase order, and the vendor's invoice are compared to check for inconsistencies. 

A three-way match is a necessary step that helps eliminate disparities between what the business ordered, obtained, and paid for.

7. Closure 

If the three-way matching process doesn't reveal any discrepancies, the invoice can be forwarded to the finance department for the final payment. 

Once the payment is made, the order can be closed and saved for future audits. 

What is the Purchase Order Number?

A purchase order number (PO number) is a number given to the purchase order, which the buyer usually defines. The buyer and the seller will refer to the purchase order number throughout the process.

Buyers issue purchase orders to vendors to confirm their desire to buy products or services, and the document includes essential details such as the pricing and quantities desired. 

When a vendor receives and confirms the conditions of a purchase order, it effectively turns into a legally binding agreement. These documents help a business maintain a detailed report of its procurement process, which in turn helps in future auditing. 

This is where the PO number plays a vital role. It enables organizations on both sides of a transaction to track and quickly compare purchase orders and eases the auditing and taxation processes for the audit and finance teams.

How to Create a Purchase Order Number? 

Smaller organizations find it simple to create a PO number since their procurement procedure isn't very complex.

With each new transaction, these businesses construct their purchase order templates that manually assign purchase order numbers to every transaction.

It isn't the same for bigger organizations with larger purchase order demands. Manually keeping track of all the documents is complex and time-consuming.

These businesses use software like Hubler to automate their purchase order process. Such automated accounting solutions assign unique PO numbers to every transaction and keep a record of all the transactions to be easily retrieved.

Automating Your Purchase Order Cycle

The market is being digitalized as we speak, competition has skyrocketed, and most businesses have moved on from manual purchase order management. 

Though it was the norm back in the day, managing purchase orders manually now is complex and tedious.

Specifically, significant issues that occur in manual management are as follows: 

  • RFP delays
  • Processes are left out in the procurement cycle
  • Discrepancies in requirement 
  • Delays in sending the GRN
  • Long paperwork
  • Inventory inconsistencies

A business with these issues cannot stay relevant in the market for long. Further, let's not forget that manually processing your procurement cycle will result in poor productivity and eventually impact your revenue. 

Automating your procurement cycle is thus a feasible solution in today's digital world. 

Purchase order automation is the process of creating a procurement process that automatically delivers a purchase request to the procurement team for approval and then automatically sends an RFP to the vendor using a cloud-based centralized platform. 

Here are a few advantages of procurement process automation:

  • Minimizes human errors 
  • Increases team productivity 
  • Streamlines your procurement process 
  • Saves your time
  • Makes the process more flexible 

By automating your procurement cycle, you can get a 360-degree view of your procurement process and effectively manage your purchase order cycle from within a single dashboard. 

How Hubler Can Help You Automate Your Purchase Order Cycle

Hubler can automate your entire procurement system process, relieving you from tedious and repetitive manual work.

Hubler's Procure to Pay is a straightforward DIY no-code platform to create the ultimate purchase order cycle process for your business. 



From budgeting, purchase requests, approvals, RFPs, and POs, to GRN - everything can be managed efficiently using a single solution. 

Hubler can easily integrate with your existing database and give you a 360-degree view of your business process. 

Here's how Hubler makes your purchase order process better:

  • One-click documentation. Create RFPs and POs within seconds 
  • Automated three-way matching
  • Customizable dashboard and individual KPIs for better tracking and management 
  • Drag-and-drop builder to help you easily create workflows
  • 15+ pre-built templates for all your business flows. Go live within minutes.
  • Effective accounting and expense management 
  • Tracking and auditing functionalities 
  • Vendor performance management 

If you're looking for a one-stop solution to streamline your complex procurement process, Hubler is the perfect platform for your business. 


A purchase order cycle is vital for any business, but running it manually can lead to inaccuracies, productivity issues, poor expense management, human errors, etc.

The procurement cycle is a complex process where you must check all the right boxes to prevent bottlenecks and achieve success. This is where platforms like Hubler can perform the heavy lifting for you and streamline your procurement process.

Stay ahead in the market using Hubler.

Try a free demo to see how exactly you can achieve it!

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