ITESOFT Insider View – Why Do You Still Receive Non PO Invoices?

Why do you still receive Non PO invoices?

Join Alan Brown, senior sales consultant @ ITESOFT as he talks through the top 5 things to understand about AP processing & matching.

Part 4, Alan will be delving into non PO invoices and PO invoices and asking why so many companies are still receiving so many of them.

For anyone involved in an Accounts Payable automation project, or is thinking about getting started these sessions will give you some actionable insights to help.

Watch the video, listen to the podcast or read the transcript below.

Part 4 of 5.

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Hello again and welcome to the next episode of ITESOFT Insider View, my name is Alan Brown.

We have been talking about the top 5 things to understand about AP processing and matching.

  • Week 1 we covered a little bit around how much time and money is spent on invoice matching.
  • Week 2 we went through how do you currently match supplier invoices and the impact that has
  • And in week 3 talked about, do you actually need line item matching, and why? Which was a really interesting topic.

This is week 4 / 5 of this series. This week we are going to be talking about why are you still receiving Non PO invoices?

Non PO invoices can cause serious headaches, not just within AP, but in the wider business.

Every single organisation that I go into has a combination of PO and Non PO invoices.

Depending on the organisation that I go into, most of them (generally) tend to have a reasonably high level of PO invoices.

There are a few, although they tend to be the exceptions these organisations, that have an incredibly low PO rate going on within the organisation.

Essentially in most of these cases Non PO 100% based.

There are these organisations that still receive PO invoices that have retrospective PO’s which are essentially exactly the same.

So why are we talking about this?

Well this is because Non PO invoices are a nightmare.

They cause real migraine level headaches within organisations. Not just within AP but within the wider business.

Why is that?

One of the reasons, and there are many reasons to this that I will come into as part of it, but there are delays in handling these invoices.

Non PO invoices hamper automation.

The level of automation that you can apply into this is difficult.

Outside of automation, why would you not have a PO for as many of your invoices as you can?

For instance, outside of invoices that you are going to have coming through from government organisation, which tend to be the bain if most organisations lives, where you will never get a purchase order out of them. But they demand one from you…

Then how do you deal with that?

Sometimes utility companies can be a little bit like that as well.

And occasionally phone providers, or communication providers, will be a little bit like that.

And there’s an element of, how do you code them up? Whos it going to go to? Do you need to have multiple approvals for these in place.

So, again, why do you still have them in place?

Why can you not get these suppliers to be able to provide you with some level of PO capability?

If we then come to things like, some external regulation that its in place, like duty to report.

There’s a requirement within that for purchase orders on invoices, to be able to move you forward and they can be a huge step towards ensuring that payment terms are being met.

And that you are able to be able to report on the payment times for these suppliers. Minimising your processing costs. Its relatively simple.

Have you actually thought about going back to the parts of the organisations that you have, where they are ordering goods that don’t have a purchase order on it.

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Enforcing PO policies.

Now I know lots of organisations, and actually if we speak with councils, they tend to be really good about trying to put a No Po No Pay policy in place.

Often for a lot of these organisations, especially with public sector, they tend to have limited success.

This invariably means that this is because the policy is not actually being enforced well enough with the suppliers they are working with.

Why is that the case?

Well, this means that you need to have some strong backing within your organisation. Both internally as well as externally to your suppliers about why you’ve put this policy in place.

What the benefit to your suppliers this is going to bring, about payment terms. Isn’t that the whole point of DTR for instance?

That we can tell you, on average, who are good suppliers, or who are good organisations to their suppliers, about when and how they are paying.

Don’t you want to know that you are going to be paid your money reasonably on time?

There may be a few days delays but going by a 50% delay or a 100% delay on the payment terms that you have in place is not really good.

A question for you.

As part of looking at some of the things that you need to know within AP, and why you are looking at this from an automation perspective is:

Why are you receiving Non PO invoices other than for expenses?

Why are purchases still being made without a purchase order that arent going through just purely as an expense?

An expense would be, you’ve been out to a meeting and you’ve had to buy a train ticket to get to your meeting. Or you’ve had to buy lunch as part of going to that meeting. That’s purely an expense.

But we are now talking about items that have been purchased that are going through without a purchase order, that should be going through with a purchase order.

How are you challenging that within your organisation? Why wouldn’t you want to challenge that within your organisation?

Would your Chief Financial Officer or your Finance Controller want that information to come through so that they understand what their liabilities are?

Because you are, essentially, duty bound to pay that invoice unless you can prove that its not for you, or its fraudulent in some way.

This is something to push back on so that you can then load it into a business case. This is an important element that you are going to be looking at.

The issues aren’t always outside of your business.

There is an element to this where it’s not all going to be external. In terms of your culprit in this case may not be external.

You may have a supplier that send through an invoice without a purchase order on it, were they actually supplied that by the business in the first place?

If the business isn’t creating the purchase orders, how do you enforce that internally?

Is that part of where the policy breakdown is?

Your supplier may not know, or because he’s not provided with that, he’s grateful for the business and is taking the business and is providing the goods or services that you’ve asked for.

But is then not providing a purchase order for what he’s sending into you because he’s not getting that from the business.

Being able to, look at that retrospectively.

Engage with suppliers to help avoid Non PO invoices.

If you are engaging with suppliers on this, about not accepting orders from your organisation unless they have purchase orders on them, is a really great way that you can get huge results. Relatively easily from these suppliers.

Fundamentally they want to be able to know that they are going to get paid.

They want to know that you have allocated the money for that invoice before the goods have even been delivered.

This is something that suppliers normally get on board with relatively easily when you are having meaningful conversations with them.

It also means that you are having more dialogue with them so having a better conversations and it helps mean that when it comes to potential problems with the supplier… Or renegotiation of a contract, things are much more simple because you know who you are speaking with and why.

How often have, you as the customer, who is receiving these goods, or the AP or Finance team actually spoken with your suppliers about the benefits of why you want to have as much as you can PO based?

Have you, as part of that conversation, or maybe as a separate conversation, even spoken with them about easier ways of being able to work together?

Supplier portals for visibility.

Now, I mentioned last week about supplier portals and line items.

Now, there are supplier portas that are out there that can help make it easier to work with whens its the benefits that you are looking to be able to get into.

We have a supplier portal as part of this that delivers huge value to organisations and it makes their life easier as a supplier to get the information that they want for their internal purposes.

So, one of the things i would like you to be able to take from this is.

Go back into the business, speak with them and ask, why don’t they do PO’s?

Is it down to laziness? Is it because no ones actually challenging them about the way they are doing things?

For instance, here’s a good one, how often do they go over on their budget?

A lot of that will be to do with the fact that there’s no accountability.

They’ve got Non PO invoices that you are duty bound to pay and they think that they can get away with it.

Now, that’s not about being responsible and accountable in the business.

Thank you for your time. Hopefully you’ve found this week very enjoyable on non po invoices and why its happening.

Looking forward to speaking with you next week in part 5.

Have a great day.

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Post by John Stovold,
Marketing Manager ITESOFT

John Stovold has worked at ITESOFT since 2012. Driven by a desire to learn and educate John has used this to set himself up as a true thought leader in digital transformation of Accounts Payable and Finance. John really isn't that keen on writing in the 3rd person... But will when he has to.

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