#po processing

Of all the statuses a purchase order may be assigned – waiting for approval, approved, pending revision, cancelled – the very worst is ‘Not my Problem’. That unofficial (but very real) designation puts POs into a dangerous state of limbo that may be hard to resolve, leading to discontented suppliers and wasted time. This is especially true when the PO process is manual, tied to physical sheets (or stacks) of paper that must be shuffled from desk to desk in search of resolution. When a supplier calls looking for information about their overdue payment, potentially jeopardizing service or delivery continuity, tracking down paper invoices becomes an inefficient scavenger hunt.

The PO process connects many different enterprise functions – and not always in a good way. Discrepancies need to be resolved, approvals need to be secured, and payments need to be issued in a timely fashion. The fact that so many internal groups are involved in manually processing POs increases the risk that open issues will be passed from desk to desk, or worse – that they will fall between the cracks and be lost.

Automated PO management eliminates the dust, paper cuts, and clutter of manual processing. By keeping POs in digital form, their status and assignment can be centrally tracked and reported on over time. Everyone with access to the system will be looking at the same information in real time.

The fact of the matter is, manually processed POs are everyone’s problem. They prevent multiple functions from making the most of committed enterprise resources through reports that can be instantly available with automated PO management. For example:

Accounts Payable: They are often considered the ‘end of the road’ for Not my Problem POs. If anyone is going to be forced to wade through pending transactions and payments, it is AP. With real time visibility and status tracking, AP can ensure that no POs are left to languish in dark corners of the enterprise.

Procurement: Although the management of POs is often viewed as taking place after procurement’s traditional hand-off point, this break in continuity has a downstream impact on the organization and its suppliers. It also denies procurement an important opportunity to extract maximum value from each contract. With easy access to PO status, procurement can include it in supplier performance reviews and risk assessments.

Legal: Are suppliers living up to the terms and conditions of their contracts? The best way to get this information is by conducting a historical ‘audit’ looking for timeliness and evidence of communication between buyers and suppliers. Manual PO processes require legal to walk the same path POs travel looking for feedback. Automated PO processes allow legal to quickly access actual facts about PO history by supplier.

Operations: The most critical piece of information to operations is when their goods are due to arrive. When everyone is connected centrally and in real time, they can easily request updates from suppliers about the status of open orders or set automated alerts so they don’t have to stop and think about POs at all. Staying on top of stock levels and delivery timelines can avert the need for costly rush shipments.

Finance: Depending on the working capital strategy of the company, the timing of supplier payments may be more of an art than a science. Monitoring POs by date gives Finance the greatest degree of control possible over cash flows without violating the terms of supplier agreements.