When a business department needs to make a purchase, they usually opt for a well-defined purchase process by creating a purchase order. Some purchases are unique which require an alternate route through a non PO invoice.
A non-PO invoice doesn’t have any associated Purchase Orders (PO), and these are usually the result of spending outside of the usual procurement process. These are also known as expense invoices and are typically used for indirect purchases. Some of the expenses which require non PO invoice includes:
Urgency – When something is required urgently, the staff cannot afford to waste time looking for approvals from various parties.
Immaterial Value – A PO purchase is a best practice. However, a purchase order doesn’t make sense for smaller purchases. A small purchase doesn’t justify the efforts that are involved in the PO process.
Business and travel-related expenses – These charges, along with proper authentication, are also routed for payment through non-PO invoicing.
A request for purchase via PO would require every stakeholder’s approval; the same would circulate across departments and several corners of the organisation. This process would be even more cumbersome and time-consuming if many stakeholders are large and work in different departments.
Some of the other benefits to using this system include:
Some of the other problems with non-PO invoices include:
The non-PO invoice processing can offer shortcuts and be convenient for some within a business unit but laborious and painstaking for others. In a manual setup, the workload increases intensely for processing the non-PO invoices. This delays proper accounting for the cost and means that the invoice might be sitting for weeks without resulting in a delay in payment.
Also, the delay in payment might invite several calls from the vendor or submission of a duplicate invoice, leading to duplicate payment.
A non-PO invoice, as opposed to a PO-based invoice, hasn’t been pre-approved and, therefore, needs to go through the invoice approval process within the purchasing department.
A non-PO invoice typically undergoes a review and approval after the receipt by the business department who ordered such a purchase. Usually, the accounts payable department applies the coding and identifies the approver based on the information available on the invoice and to the best of their knowledge.
In case the invoice details are limited, this could become a tricky situation. If the invoice doesn’t include some references of the customer, department, or business unit which placed such order or if the invoice consists of the wrong name, then someone from the accounts payable team has to follow up and identify the approver of the invoice.
Usually, there are internal approval guidelines that specify invoice amounts that require multiple approvals. Once all the required invoice approvals are obtained, the invoice moves to the accounts payable team for its final booking and, consequently, the payment.
Even the large and well-established companies process both the PO invoices and non-PO invoices day in, day out. But they’re fundamentally different and need different workflows. Though companies develop various policies and processes preferring PO-based purchases over non-PO, non-PO spending still cannot be eliminated. Non-PO invoices could only be limited but cannot be stopped completely.