When buying medical supplies and equipment, many healthcare providers rely on standard means of consolidated buying. Methods like group purchasing organizations (GPOs) and volume buying agreements may save a little money, but they often leave total value considerations and sourcing flexibility on the table. Software solutions in healthcare procurement make it easier for buyers to get high-quality, compliant consumable items and medical equipment at competitive prices, distribute it more effectively, and track spending to uncover more opportunities.

This article covers the information you’ll need to understand traditional versus modern forms of healthcare procurement: 

Download the free ebook: Choose the Right Procurement Technology With This Decision Matrix

What is a healthcare procurement strategy?

Healthcare providers such as hospitals, doctor’s offices, dentists, and other health-focused businesses use large volumes of consumables and single-use medical equipment. Keeping supplies in stock and getting the best prices presents a considerable challenge. These healthcare businesses use procurement strategies to secure the medical goods and services they need for patient care. 

Healthcare procurement activities include tasks like: 

With an effective healthcare procurement strategy, organizations maximize spend efficiency while maintaining a high standard of care. 

Healthcare procurement strategy refers to the practices and tactics healthcare providers use to achieve the most cost-effective purchases of medical supplies and services. It includes practices such as: 

procurement tech guide
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Choose the Right Procurement Technology With This Decision Matrix

There are A LOT of procurement softwares out there. Make sure you're choosing the right one for your business.

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Why is healthcare procurement important?

Cost reduction is a major driver of procurement strategy. But beyond the dollar cost, practicing strategic procurement in the healthcare industry provides a wide range of benefits, from quality to organizational improvements. 

Healthcare buyers focus on these seven benefits to ensure the best outcomes:

Better quality control: High-quality products are essential for the integrity of patient care. In strategic buying, buyers research the marketplace, identify potential opportunities, review delivered goods’ quality and damage rates, and create vendor scoring. Technology is sometimes used to automate and track supplier performance management. These strategies ensure strong pricing while maintaining quality standards.

Lower operational costs: Healthcare procurement lowers operational costs by reducing waste and inefficiencies. This includes streamlining processes, controlling inventory levels, negotiating better prices and terms with suppliers, and utilizing technology for automation. By taking steps to reduce costs while maintaining quality standards, healthcare providers can achieve greater savings over time. Additionally, healthcare providers can use data analytics to gain insights into their spending patterns and streamline spending further.

Improved patient outcomes: Cost is irrelevant if patient care lags. Strategic procurement improves access to quality, cost-effective consumables and equipment. Using buying groups or procurement platforms, healthcare providers take advantage of economies of scale to negotiate better terms and pricing. This gives practitioners and healthcare providers more time to focus on their most important mandate: patient care.

Stronger vendor relationships: Healthcare procurement strategies set buyers up to collaborate closely with vendor partners and identify opportunities for cost savings. In this way, proactive procurement is mutually beneficial, with buyers and vendors developing stronger relationships through better communication and planning. Buyers who use vendor data and industry benchmarking can also improve decision-making regarding pricing and terms. 

Streamlined logistics: Using procurement tools for healthcare buying enhances operational efficiency and delivery tracking. These software solutions also help buyers and administrators improve demand forecasting for consumable purchases to create consistent availability of critical items without oversupply, storage issues, or expiry concerns.

Better resource allocation: The pricing and control aspects of procurement strategy improve budget management. By leveraging data-driven insights, buyers pinpoint the type and volume of goods needed to run departments effectively. This reduces unnecessary spend without compromising patient care. Analytics tools help assess total healthcare supply chain costs and free up resources for other areas.

Reduced risk: Healthcare organizations practice risk management through selective, well-vetted procurement relationships. Buyers who conduct due diligence when seeking suppliers (by verifying reliable quality, fair pricing, and regulatory compliance) see their risk profile decrease. Vetting vendors helps buyers avoid unexpected costs due to poor customer service, quality issues, or fraud. Setting clear expectations and performing background research on vendors minimizes the likelihood of litigation and disputes.

How does the healthcare procurement process work?

Unlike standalone businesses, many healthcare organizations procure goods through a traditional GPO — a 100-year-old model for consolidating buying activities among member organizations. Depending on the parameters of the GPO, buyers may have access to certain in-contract goods to save money and keep quality consistent. 

These are the general steps for a healthcare organization purchasing goods through a GPO: 

Needs identification

The business or organization conducts a needs assessment to determine which supplies and equipment they need. The assessment looks at the types of products or services, quantities, quality requirements, and delivery deadlines necessary.

Contract review

Based on the needs assessment, the business reaches out to its GPO for help securing goods. Often, a GPO’s administrator or procurement rep will research options through multiple negotiated contracts to find what they need. 

Purchase order

The healthcare organization then puts in an order for the requested goods. The vendor processes the purchase at the negotiated rate and fulfills the order. Quality review checks ensure that the correct items arrived per the purchase order. The GPO deals with any issues or concerns regarding the order. 

Payment

Finally, the buyer pays for purchased goods. Depending on the specifics of the GPO agreement, the buyer might pay the vendor directly. The GPO often receives compensation through either a flat fee paid by the buyer or a percentage of the contract value ordered through the vendor. 

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Top 5 healthcare procurement challenges

While the benefits of healthcare procurement strategy are many, the practice isn’t without challenges. In many cases, leaders should carefully consider whether procurement strategies like a GPO membership will alleviate procurement obstacles while remaining competitive. 

Inconsistent quality: Healthcare organizations often face variability in product quality when sourcing supplies from a GPO contract or a new, unvetted vendor. These fluctuations may seriously impact patient safety and quality of care. Quality issues also increase costs by replacing medical supplies that don't meet expectations, rushing replacement items to maintain supply, and resolving contract issues over defective items. 

Unknown vendors may not always provide accurate product information, which increases the risk of receiving low-quality items. GPOs aren’t immune to these fluctuations, as they may lack visibility into the quality of their vendor's goods. This makes it difficult for buyers to ensure they’re purchasing the appropriate high-quality supplies. 

Unclear contract terms: GPOs and vendors sometimes have vague contract parameters that make it difficult for buyers to find in-contract goods. The buying contracts that govern most GPO purchasing are meant to serve a majority of its members. While this may work for general consumable goods (such as bandages, linens, or other common items), specialty items may be out of the scope of buying contracts. This lack of clarity and availability causes friction in the order and fulfillment process, such as pricing issues, miscommunications about in-contract goods, or lack of supply. 

Without accurate information on supply availability or pricing, hospitals may not be able to secure their desired products in time. It can lead to poor pricing outcomes (spending more for specialty items) and spur out-of-contract buying that reduces the effectiveness of GPO membership.

Out-of-contract buying: Though participating in a GPO can save money, those procurement savings only materialize if the vendor supplies needed goods within the contract and if those goods are easily available. Frustration, friction, or lack of availability greatly increase the chance that internal stakeholders will circumvent the process and buy goods outside the expected procurement channels. 

Vague fee structures: The fee structures supporting a GPO can be vague or, in the worst case, misleading. Before signing with a GPO, be sure you understand the intended fee structure and expected order cadence for participation. Ask if the fees come in the form of buyers’ membership fees or if the GPO earns money through a percentage of vendor sales. There are multiple ways for a GPO to monetize their business, so ask up front what business model they use.

No in-contract options: Sometimes, there are no good options for purchasing what you need within a GPO contract. If the GPO doesn’t secure contracts for high-quality goods from reputable vendors, a GPO membership may not be worth it. Before entering into an agreement, be sure you know the vendors within the GPO will be able to serve your needs. Estimate the amount of in-contract versus tactical procurement your business will need to do, and evaluate whether the relationship will be beneficial enough for partnership. 

Best practices for the healthcare procurement process

Healthcare procurement is rife with potential pitfalls. One of the most important keys to success is employing established best practices. By staying up-to-date on industry developments, you ensure your procurement efforts yield the best results. 

  1. Estimate expected in-contract versus tactical procurement. Looking at expected in-contract versus tactical procurement with a GPO requires careful analysis of the contract terms and conditions. This includes evaluating the quality and reputation of vendors already contracted with the GPO and researching whether or not the vendors involved can supply the goods essential to your business. Potential members should also evaluate volume expectations to determine whether or not the savings from making purchases within a contracted price outweigh membership costs. 
  1. Research the savings of a GPO membership before signing up. Although some GPOs may offer ten to 25 percent savings, those estimates are often inconsistent with real-life results. Take time to understand the percentage of savings the GPO reports, the conditions members must meet to realize that level of savings, and whether your organization meets those minimums at the time of evaluation. Spending more to secure savings is rarely a winning formula for cost control. 
  1. Educate team members on the purchasing policies. Team members must understand the method and importance of in-contract buying when joining a GPO. This education should help them understand expected savings from using the membership, the restrictions or limitations on usage, and the consequences of off-contract buying. It’s important to set expectations for contract compliance within the organization.

Educating stakeholders on these policies helps create an internal culture that values cost control and understands its importance. A well-used GPO can create a more efficient organization where everyone understands their role in realizing targeted savings goals and quality requirements.

  1. Take a look at the numbers to keep costs down. Data analytics provide a more accurate picture of where an organization spends money and whether it’s saving on purchases with its GPO membership. Organizations should be able to effectively measure their savings from the GPO by comparing cost data before and after joining the group purchasing organization. This enables organizations to identify missed savings opportunities, costly procedures, and areas for improvement to justify membership use.
  1. Consider alternatives to traditional healthcare procurement models. GPOs aren’t the only viable option for healthcare buying. Other solutions, such as procurement management software, allow organizations to automate processes to purchase the products and services they need while helping them save time and money. Software often provides powerful analytics and reporting capabilities that make it easier to understand purchasing habits and trends and can give insight into which channels offer the best savings opportunities. 

How Order.co improves healthcare procurement

GPOs have always been the most recognizable solution to the challenges of healthcare buying, but in many ways, technology has surpassed the GPO model. Order.co’s spend efficiency platform offers better options for healthcare procurement.

Using the platform, healthcare buyers realize the benefits of healthcare procurement strategy with better pricing, service, and flexibility through features such as: 

To learn more about using the power of spend efficiency to improve healthcare procurement outcomes, schedule a demo of Order.co.

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For decades, healthcare providers like clinics and hospitals have struggled with ineffective and expensive procurement barriers that can drive up patient costs and affect healthcare outcomes. Healthcare procurement faces specific challenges that, until recently, have been almost universally answered by group purchasing organizations (GPOs). 

These purchasing programs offer some benefits in cost savings, contract management, and access to supplies. But healthcare procurement is long overdue for alternative options that specifically address its unique challenges. 

Today we’ll discuss the challenges healthcare organizations face in procuring needed goods and equipment and the solutions technology provides to the millions of healthcare organizations buying items every day. 

Read on to learn more about healthcare procurement and its challenges, including: 

Download the free ebook: Choose the Right Procurement Technology With This Decision Matrix

What is healthcare procurement?

Healthcare procurement is the process of sourcing goods and equipment for clinicians, hospitals, and other healthcare settings. It involves identifying the right suppliers, negotiating pricing and terms, tracking procurement activities, and managing the supply chain. Healthcare procurement professionals also ensure vendors comply with all laws and regulations for purchasing goods and services. Procurement in the healthcare setting is an essential part of running a successful organization.

How is healthcare procurement different?

While procurement in most companies is an independent, self-directed activity, healthcare buying is somewhat more complex. Healthcare procurement differs from other types of procurement management in the following ways:

Regulatory environment: Healthcare products and purchasing activity are subject to different standards than most types of procurement. Purchases made on behalf of healthcare organizations must meet certain standards and follow regulatory rules and guidelines applied to healthcare finance. Vendors, therefore, must be able to work within these requirements. 

Decision-making: Clinical staff is instrumental in the decision-making process for healthcare procurement contracts. Buyers must have the expertise to discuss requirements, vet potential suppliers, and negotiate acceptable rates and contract terms. This type of procurement requires special oversight to ensure compliance and optimal pricing outcomes. 

Product requirements: The products and equipment used in the healthcare setting must meet the specific needs of a healthcare organization, including quality thresholds, volume needs, shipping and logistical requirements, and safety standards. Vendors must be able to certify product quality and availability to fulfill the demands of the procurement contracts they sign.

Procurement structure: Supply chain management requires coordination among various stakeholders and departments, as many healthcare organizations use collective procurement methods. This means vendors must be able to route bulk orders to the appropriate places, track shipment and inventory levels across multiple locations, and serve the common needs of buying groups (called group purchasing organizations). 

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There are A LOT of procurement softwares out there. Make sure you're choosing the right one for your business.

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Top 10 challenges of healthcare procurement (and how to solve them)

Buyers and suppliers face many challenges specific to the healthcare industry. These challenges can create time and access obstacles, especially for smaller healthcare providers like local clinics. But there are ways to overcome these issues and make healthcare buying faster, more efficient, and less costly. 

1. Manual procurement management

Managing healthcare procurement manually is costly, time-consuming, and resource-intensive. A common example of manual procurement management is the entry of purchase orders.  When administrators or floor staff enter and transmit individual orders manually, it creates a delay between ordering and fulfillment, potentially costing healthcare organizations additional money.

Procurement automation eliminates manual tasks, saving clinic staff and administrators money, time, and frustration. 

2. Inventory fluctuations

Logistics issues and manual procurement management may also lead to mismanaged inventory levels, shortages, and inaccurate shipment tracking — all of which cause further fulfillment delays or wasted resources. Floor staff must scramble to find necessary supplies or make do with insufficient resources during times of high need. 

Stabilizing inventory levels within the healthcare setting results in better patient care and lower stress for clinical staff. It gives workers the confidence that the items they need will be there when they reach for them. 

3. Procurement waste

Poor inventory management can also lead to excess stock of certain items. While access to plentiful supplies doesn’t seem negative, many consumable items in the healthcare setting have storage requirements or expiry dates. When these items sit on shelves unused, they present the potential for wasted procurement dollars or, worse, expired goods that aren’t usable when needed.

Trying to put these items to use through trade creates an internal logistical issue and draws staff attention away from patient care. Procurement software brings visibility to spending and inventory to reduce waste.

4. Individual, decentralized buying

Group purchasing and leveraged buying help healthcare organizations save money by creating access to volume discounts. When organizations leverage buying this way, they benefit from better prices and increased buying power. Large orders of high-use items also enable faster delivery times and enhanced ordering accuracy.

Individual buying, however, reduces the ability of a hospital or health system to access these price and volume discounts. When each department buys separately, the organization loses its purchasing power due to smaller order sizes. The result is higher prices and longer delivery times for vital items. Organizations that go it alone in traditional healthcare procurement face increased costs and reduced flexibility when responding to change. Procurement software eliminates buying barriers that make individual buying less competitive.

5. Poor delivery logistics

When healthcare organizations buy in bulk, they face different delivery challenges. Large orders can overwhelm hospitals with too much inventory and overstock on particular items or create situations where staff must spend resources tracking and placing inventory where it’s needed. 

Additionally, products may not be shipped in the right quantities or arrive at their destination on time, leading to further headaches for staff. All these logistical issues create additional costs for the organization and reduce procurement efficiency. Automated order tracking and fulfillment reports improve logistics and delivery times to keep staff well-supplied and focused on higher-priority tasks. 

6. Productivity losses

In addition to the increased costs of manual tracking and placing of inventory, healthcare workers can also spend too much time looking for what they need — up to 40 hours a month, by some estimates. All this time getting the right items to individual clinicians, searching for needed supplies, or shuffling items between different healthcare locations or departments costs money and productivity. These lengthy manual processes pull staff members away from important work. If procurement is delayed, it puts stress on the entire system. 

Issues in procurement also reduce efficiencies in treatment and prevent workers from providing optimal patient care. These productivity and quality losses can lead to an overall decrease in performance for the organization. Automation and tracking create visibility for staff while reducing their time spent managing inventory.

7. Fraud risk

Manual procurement processes are vulnerable to fraud and misconduct since it can be difficult to detect errors or wrongdoing if procedures are not standardized and documented. The lack of oversight makes it easier for internal actors to engage in fraudulent activities and abuse their access to medical supplies.

Improved procurement software ensures more transparency because procured inventory is tracked and monitored. This reduces the risk of mismanagement that costs healthcare organizations millions due to unintentional errors, internal bad actors, and third-party fraud activities. Software creates visibility that makes fraud and errors far less likely to occur. 

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8. Regulatory management

Healthcare organizations face significant regulatory management challenges in their procurement practices. Manual procurement makes it difficult to comply with changing requirements for patient safety and quality standards. Manually maintaining accurate records is especially challenging, as providers must document the origin of each item they procure and ensure they meet the necessary regulations. 

Errors in documentation can lead to costly fines or sanctions from regulatory bodies, meaning healthcare organizations must always have complete oversight of their procurement activities. They must keep up with changing regulations and laws to remain compliant and protect against financial losses. Software makes it easier to administer purchasing and ensure it remains compliant.

9. Supplier restrictions

Supplier restrictions further complicate healthcare procurement. Many healthcare organizations are limited to a select group of suppliers who may not offer the best prices or terms, leading to more expensive purchases. Additionally, some regulations require organizations to source particular supplies from pre-approved vendors, driving up internal costs and potentially affecting patient premiums. This forces healthcare organizations to carefully assess and manage supplier relationships to verify they meet all necessary regulations. Procurement software makes vendor management easier, enabling compliance management and benchmarking efforts while keeping costs as low as possible.

10. Poor procurement visibility

Poor visibility into procurement practices affects healthcare organizations in multiple ways. Without a comprehensive view of procurement operations, organizations cannot accurately benchmark prices, measure profitability, or optimize cash flow. This leads to higher costs and less successful negotiations with suppliers. It also limits the ability to see and access savings opportunities.

In some cases, this lack of effective visibility into the organization’s procurement activities may result in non-compliance with external regulations and laws. By implementing better approaches to data management and analytics, healthcare organizations gain greater transparency in their procurement practices, pricing, and cash flow management.

How spend efficiency software solves healthcare procurement’s biggest challenges

Procurement technology is one of the most effective tools for reducing costs and complications related to healthcare procurement. A platform that works effectively with regulated procurement environments will greatly improve procurement outcomes, compliance, visibility, and patient care. 

Spend efficiency software provides the following key benefits to healthcare buyers in need of more effective solutions:

Get Order.co to modernize your healthcare procurement strategy

Spend efficiency specifically designed for high-regulatory settings combines flexibility with full support for the needs of healthcare. Order.co offers all the procurement and security features needed to streamline pricing and practices for clinical buyers of all kinds, including: 

If you need procurement solutions that keep the needs of healthcare organizations in mind, request a demo of Order.co today

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Entrepreneurs from every industry need cash flow to drive business growth. Cannabis business owners are no different, but the obstacles they face in securing business funding vary significantly from typical businesses. Higher perceived risk, regulatory restrictions, and federal laws against cannabis make it difficult for cannabusinesses to secure funds. 

Today we’ll cover the basic financing issues for cannabis companies leading the way in medical and recreational use of cannabis. 

Download the free ebook: Grow Your Cannabis Business–Overcome These Three Finance Challenges

What is cannabis financing?

Cannabis financing is the process of obtaining business capital through various financial resources to cover the costs associated with running a cannabis-related enterprise. When hearing about a cannabis business, cannabis dispensaries often come to mind. But cannabis cultivators, medical marijuana clinics, and other related cannabis businesses also require funding to drive operations. 

While traditional financial institutions and lenders can provide cannabis business loans, financing is often obtained from private investors or venture capitalists due to the stigma attached to cannabis products. The various options typically available to a startup looking for cannabis financing can include:

Regardless of which form of financing they choose, cannabis businesses must carefully examine legal considerations, interests, and risks to ensure they receive sufficient working capital while protecting their assets.

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What types of businesses need cannabis financing?

There are two types of businesses within the cannabis industry: direct and indirect. Direct cannabis businesses are those that “touch the plant,” such as cultivators, dispensaries, distributors, and laboratories. Indirect businesses offer services that support the direct industry, such as packaging companies, technology providers, and equipment manufacturers. 

Cultivators: Cannabis cultivators produce cannabis plants and components like CBD for both medicinal and recreational purposes. They grow and process plants to create standardized products sold at dispensaries. Cultivators use techniques like adjusting nutrient levels and controlling temperature and humidity to create new strains with desirable characteristics. They must adhere to government regulations and product standards when creating strains and cultivating plants. 

Laboratories: Cannabis quality control labs analyze product samples for potency, terpenes, and contaminants. They provide reliable analytical results to the industry, ensuring all products meet regulatory requirements and industry standards. Labs also offer services such as genetic profiling to trace the plant's origin and authenticate the product. They play a critical role in consumer trust and cultivators' informed decision-making.

Distributors: Cannabis distributors help ensure a safe and secure supply chain for the cannabis industry by handling all steps in the distribution process. They are the link between cultivators and retailers, ensuring that cannabis goods reach the right place at the right time while meeting all government regulations related to compliance and taxation. They also often provide additional services such as inventory management, security, and product tracking. 

Packaging: Cannabis packaging companies provide solutions for both recreational and medicinal products. They offer printing services, including logos, branding, and warning labels that use innovative and custom designs to help differentiate products from competitors. Essential for protecting integrity, they provide an extra layer of security to guarantee quality products by ensuring compliance with health and safety regulations, like child-resistant or tamper-proof packaging. 

Equipment: Cannabis equipment providers are responsible for the production and maintenance of specialized and general equipment used in the industry. This includes a wide range of items, from grow tents and trimming machines to commercial plant driers, extractors, and decarboxylators. They also provide the technology necessary to ensure that cannabis production is safe and efficient, like HVAC systems or water chillers. Cannabis equipment providers help with installation, maintenance, and repair services so that growers have access to reliable tools when they need them. They enable cannabis producers to meet safety standards and ensure quality control throughout the entire process.

Technology: Cannabis-related tech and SaaS software companies design software solutions for the cannabis industry, including inventory management and compliance tracking, plus mobile applications for real-time operations. A suite of analytical tools is also available, optimizing production by gathering data on cultivation and greenhouse environments. These technologies help growers maximize efficiency and profitability while remaining compliant with local regulations.

What are the obstacles to cannabis financing?

Cannabis businesses, particularly those operating in the US, face several obstacles when trying to obtain financing. Cannabis and its derivatives are a schedule I controlled substance in the United States. This means that, despite the recent move by individual states to relax their rules on medicinal or recreational cannabis use, THC remains illegal at the federal level. 

The federal prohibition of cannabis makes it difficult for banks and other lenders to provide funding. Specifically, federal prohibition means that cannabis businesses are ineligible for favorable loans from the Small Business Administration (SBA)

Two sets of restrictions dissuade banks from financing cannabis-related businesses (CRBs): the Anti-Money Laundering Act (AML) and the Bank Secrecy Act (BSA)

The requirements for both these regulations make it difficult for lenders to confidently offer financing to cannabis-related industries. Lenders that do offer options to cannabis-related businesses often limit their services to ancillary businesses such as general suppliers, labeling and packaging designers, and technology companies like cannabis-specific point-of-sale providers. These businesses, while they support direct cannabis sales, offer a more favorable risk profile to banks since they fall under less stringent legal requirements. 

Though traditional investors may be wary of investing in the cannabis industry due to its uncertain legal standing and liability concerns, options for obtaining funding for a cannabis-related business are improving, providing owners meet the prerequisites for securing credit, loans, or grants. 

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What are the requirements for obtaining cannabis financing?

Although requirements vary by state, most cannabis-related entrepreneurs must meet the following requirements: 

Strong personal credit rating: A strong credit rating is vital for securing financing for your business. Sufficiently high credit ratings from the “big three” credit bureaus make it easier to convince lenders to take on the risk. A high credit score gives potential investors confidence regarding timely loan payments. For the major three credit bureaus, a score of 670 or above is in the “good” category.

Adequate credit history: A long history of good credit is essential when applying for financing, so lenders look for those with experience borrowing money and paying it back on time. As part of this, they review the borrower’s credit history, checking for recent activity and missed payments. A strong credit score coupled with a long history of timely payments makes lenders more likely to take on the risk of providing capital and financing for your business.

Bankruptcy-free credit history: Lenders are often risk-averse, especially when handling a higher-risk loan like cannabis funding. Any indication that debt might not be repaid based on past performance is a major roadblock. Bankruptcy stays on a credit report for up to 10 years and might be used as a factor in approving your application. 

Business account: A separate business bank account is required for cannabis lending, as it meets the increased reporting and regulatory requirements of applying for financing. Establish a separate business account under your business taxpayer identification number (TIN) along with any state filing requirements or permits.

US citizenship or resident status: US citizenship or residency is a requirement for borrowing funds to run a cannabis business. Regulations concerning lending and business permits for cannabis businesses may vary. Consult an attorney knowledgeable in this area for specific requirements. 

Business plan: When seeking financing of any kind, a documented business plan with projected revenues, a mission statement, a SWOT analysis, and marketing plans form an important part of your financing application. 

Uses for cannabis financing 

Like many other retail or medical businesses, brick-and-mortar cannabis businesses like marijuana dispensaries and cultivators must source real estate, supplies, inventory, technology, and services to keep the business running. 

Financing for the business often goes toward establishing locations and buying supplies and equipment for production and sales, including: 

However, risk and cash flow issues particular to the cannabis industry make it difficult or impossible for these businesses to get equipment and get off the ground. 

Alternatives to cannabis financing

For companies seeking flexible, cost-effective ways to procure supplies for running a cannibals business, there are some alternatives. However, access to these avenues of financing isn’t universal. Businesses that have cash on hand most often source goods and equipment through group buying or online ecommerce resources: 

How Order.co approaches cannabis financing

Order.co takes a new approach to cannabis financing, providing risk reduction and reliable access to capital in a way that works for both buyers and vendors. This removes many of the obstacles that keep cannabis companies from reaching their full potential. With vendor and working capital access through Order.co, cannabis businesses can get up and running, source equipment, expand into new locations, and explore wider markets. This is how it works: 

Order.co gives cannabis startups the capital and vendor access they need to perform in new markets, providing a competitive advantage as cannabis access expands into new states and territories. 

Ready to “grow”? Get Order.co

In addition to leading-edge advantages for cannabis businesses, Order.co provides an easy-to-use interface that simplifies the process of researching prospective suppliers, finding the best pricing and terms, and using data-informed insights to grow a thriving business:

To see how Order.co helps businesses of all types grow their operations effectively, request a demo

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Good documentation is a major player in preventing chaos in the accounting department. This is especially true when it comes to accounting’s involvement in purchasing, as even small businesses generate dozens or hundreds of purchase orders each month. A strong purchase order system is essential for keeping the details associated with purchasing, invoicing, and inventory management on track. 

Relying on a great purchase order form template is a real life-saver for busy stakeholders trying to source the things their business needs. Today, we’ll cover many of the top questions about the purchase order process, including: 

Download the free tool: Purchase Order Template

What is a purchase order?

A purchase order (PO) is a formal document issued by a buyer to a seller that outlines the products, services, pricing, and terms of a purchase. It serves as an agreement between both parties when placing orders and acts as a legal contract for the transaction. 

Purchase orders contain item descriptions, quantities, payment terms, and delivery dates. They also include other important information, such as taxes or shipping fees that may need to be paid by either party. A purchase order is typically generated using software and is usually signed off on by both parties before any goods or services are delivered or invoiced. 

Most purchase orders use a template to ensure all order information is complete and accurate. Many businesses use Google Sheets, a Microsoft Excel template, or a proprietary system to create a form for general use.

Is a purchase order the same as an order form?

A purchase order is not the same as an order form because a purchase order is legally binding and serves as a contract between two parties. An order form, on the other hand, is simply an itemized list of goods or services requested. It does not have any legal power or contractual obligations attached to it. Additionally, a purchase order typically includes payment terms and delivery details not usually found in an order form.

A purchase order includes several specific elements for tracking the order, such as a PO number, payment info, terms and conditions, order details, shipping method, shipping terms, and other information vital to processing the transaction. 

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What is the difference between an invoice and a purchase order?

An invoice is a document a seller issues to a buyer that serves as a bill for goods or services. It typically lists each item's price, applicable taxes, and the grand total of all items purchased. The purchase order, once completed, prompts the processing of the invoice for payment.

Benefits of a strong purchase order process

Purchase orders are an important source of information and documentation for your procurement process. They outline vital information for every purchase, create a paper trail for order research, and ensure that the items you purchase are the same as those you receive. 

Legality: Purchase orders serve as a legally binding agreement between two parties and provide protection in the case of a dispute about the goods. They establish the parameters of a sale and outline the responsibilities of each party in the transaction.

Accuracy: The body of a purchase order provides an itemized list of goods or services requested. This ensures orders are fulfilled correctly, the goods match those agreed upon, and the pricing of those goods is consistent with the items you receive. Accurate purchase orders also eliminate costly cash leaks from your procurement process.

Payment: Purchase orders outline the payment terms and conditions of the supplier. They list the repayment terms for orders with net terms and itemize any fees, delivery charges, or late charges that may apply to the purchase. 

Documentation: Purchase orders ensure accuracy and efficiency in the procurement process by providing detailed information for each transaction. This enables matching between the purchase requisition, purchase order, bill of lading or packing slip, and invoice.

Visibility: The information on the purchase order informs many other finance and accounting processes, including order tracking, payments, spend analysis, price benchmarking, and vendor performance management. 

What are the important components of a purchase order?

Although the template for purchase orders may vary between companies, every purchase order should feature several key components for completeness and order tracking.

Internal stakeholder information: Purchase orders should have the company's name and the person or department submitting the purchase order (in case of any questions or communication needs during processing). It should also have contact information for the AP department. 

Vendor information: Each purchase order should include the vendor’s name, business address, phone number, fax number, and sales representative or AR contact’s information.

Order details: Include the order date, purchase order number, and an itemized list of products and services on each PO to prevent discrepancies between orders and receipts, unauthorized payments, and vendor fraud.  POs offer clear records of all items and costs for effective budgeting. 

Payment details: Including vendor payment information is part of arranging proper payments. It’s also integral to document payment terms and methods to ensure timely payment, which can cut down on the over 20 percent of invoice exceptions businesses face when processing payments. Acceptable forms of payment or preference for electronic payment should be noted, as should any early payment discounts negotiated during the sale. 
Terms and conditions: The general terms and conditions of the purchase should appear on the PO for reference. In the event of issues or discrepancies, the PO serves as the final legal word on the terms agreed upon by the parties.

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Purchase Order Template Download

A purchase order template creates a repeatable, reliable process for processing and tracking your orders. Take advantage of our easy PO template here.

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What are the steps to create a purchase order process?

Creating a purchase order should be a documented, repeatable process. This ensures the PO is accurate and complete each time. 

Use these steps to ensure strong purchase order management for your organization. By relying on a template, you highlight all necessary information to guarantee it’s included in every transaction:

1. Terms negotiation

Vendor management includes negotiating terms and conditions for purchases, such as payment details and delivery dates. The cost of goods or services should also be documented in detail, along with any agreed-upon discounts. 

2. Submit the purchase requisition or intake form

Once all information is settled, the buyer generates a purchase requisition or purchase order document that includes all negotiated details. They then submit the document for approval from internal departments, including their direct manager and any legal, IT, security, or finance team reviewers. Once approved, the accounting team creates the purchase order. 

3. Issue purchase order to the vendor

Once internal approval is complete, the accounting team produces and submits the purchase order to the vendor. The vendor then reviews and accepts the purchase order before preparing to fulfill the order. The vendor’s review process also ensures that they understand what is in the order and verifies that the correct items and quantities are available. 

4. Fulfillment and review

The vendor fulfills the order according to the details in the PO and delivers the order to the buyer. The buyer verifies the shipped goods against the data in the PO and invoice. This review process allows the buyer’s receiving team time to check for incorrect, damaged, or poor-quality products, all of which cost companies big, with an average of 8 percent of inventory getting wasted annually. Once approved, accounting pays the invoice and completes the transaction according to the terms outlined in the agreement. 

5. Documentation

Once the transaction is complete, a strong procurement process also includes centralizing the purchase data into a platform for future use. This allows teams to review historical purchase data, compare prices year-over-year, and evaluate vendor performance. Purchase order software tools and procurement platforms make this process significantly easier and more accurate.

Make purchase orders easier with a procurement platform

A procurement platform like Order.co enables automation throughout the purchasing process. With a few clicks, users can generate a single purchase request across multiple vendors, get the necessary approvals, and submit their POs to the vendors electronically. Received goods are easily tied back to the PO and invoice data, saving hours of manual reconciliation. A platform also makes it easier for accounting teams to review transactions, research issues, and account for every purchase at month-end. 

Order.co offers robust features to automate and streamline purchasing while maintaining optimal spend controls: 

To see the power of purchase order automation, request a demo of Order.co.

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Managing processes in an organization is a complex and ever-evolving task that takes time and effort to complete and document correctly. Without proper oversight, managing processes like tracking financials and reviewing employee requests can quickly become overwhelming. Even so, fewer than half of organizations formalize their business process management to streamline and administer these tasks. 

The unspoken truth behind that fact? Automating processes is a competitive advantage for companies that commit to it. It creates happier workers, lowers costs, and even allows smaller companies to compete with the leaders in their industry.

One of the easiest and most beneficial processes to formalize? Your approvals process. 

Today we’ll share the essential information and steps in creating better approval processes: 

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Top elements of any approval process

In general, every approval process — whether for a petty cash purchase or an annual budget — requires some common approval elements.

Documentation: Documentation of your purchase or request provides a detailed history of the approval process, from initiation to completion. It also serves as evidence of due diligence and a record of compliance with internal policies and external regulations.

Documents may include purchase orders, invoices, contracts, payment authorizations, records of communication between stakeholders, and more. By properly documenting each step in the approval process, organizations gain greater control over their accounting processes and maintain the accuracy of their data.

Approvers: Approvers are essential to the approval process because they provide a necessary review and validation of every aspect of the purchase or budget request. Common approvers include the person’s direct manager, department head, finance personnel, legal personnel, and security personnel. For high-ticket or sensitive purchases, it may be necessary to involve executives from the C-suite who provide additional oversight and review.

Involving multiple approvers ensures that all aspects of a purchase have been properly vetted before being approved. Multi-step approval also reduces wasted spending and instances of fraud, as each request receives scrutiny from multiple layers of the organization. 

Permissions policy: The criteria for an effective approval process must also include a permissions policy that outlines roles and responsibilities. This ensures that only authorized personnel can approve invoices and helps reduce the risk of fraud or misuse. The permissions policy should determine who has access to the accounts payable system, as well as define the type of information each user can access and edit.

A permissions policy also allows for proper authentication when approving requests, ensuring that all requests have been adequately reviewed before payment. By having clear permission levels in place, companies protect their financial data while still maintaining an efficient approval process. 

Performance dates: Having due dates in an approval process keeps everyone on track and prevents delays in completion. Deadlines also help maintain efficient workflows, as each step of the approval process is anchored to a timeline. This ensures approval requests are processed promptly and reduces the risk of bottlenecks that slow down the entire process.

Performance dates are especially important when approvals are tied to larger project management milestones, RFP (request for proposal) deadlines, or other impactful circumstances. Setting deadlines helps prioritize internal tasks and imposes accountability for meeting them to further encourage efficiency.

Approval reporting: Approval reporting means tracking and recording all approvals during an approval process. Approvers provide visible feedback and insight into why certain decisions were made. This provides valuable transparency that stakeholders need for quality control purposes and, if necessary, to ensure compliance with regulations. Approval reporting during the process helps the original requestor keep track of their request and sets expectations about completion times. 

Additionally, approval reports reveal trends in decision-making processes over time, giving organizations a better idea of how to streamline their approval processes in the future.