The Challenge of Managing Non-PO Invoices

While automating the processing of invoices delivers many benefits, challenges may arise when it comes to non-PO invoices. Non-PO invoices result when a supplier has provided goods or services to a buyer without receiving a purchase order.

Because the lack of an associated PO, these invoices require far more work to process once they arrive at the buying organization, creating a host of problems along the way.

1- Difficulty identifying the purchaser – non-PO invoices

Deciding how to route non-PO invoices can be extremely challenging, especially since these invoices frequently fail to include information vital to routing.

For example, non-PO invoices must typically undergo a review and approval process after receipt by the person who ordered or approved the purchase of the item or service. If the invoice does not include some reference to the customer, business unit, or department that placed the order—or if it includes the wrong name—then someone in AP must follow up and identify who needs to approve the invoice.

This not only delays proper accrual of the liability, but also means the invoice could sit for weeks with no action taken—resulting in invoice status calls from the supplier or submission of a duplicate invoice and the chance of duplicate payment.

2- Lengthy approval processes and slow cycle times.

Once the purchaser has been identified, he or she must then verify, code, and approve the invoice, and hierarchy approval rules must be applied to ensure compliance to financial controls.

The need to have multiple people approve non-PO invoices can significantly lengthen the processing cycle. Non-PO invoices can also appear on blocked and hold reports because they exceed budgets or don’t match to an existing vendor, resulting in further exception-handling activity.

Only after all these difficulties have been resolved can the invoice be entered into the ERP or financial system for payment, but even here a new vendor setup could be required. This delays payment to suppliers and negatively impacts their cash flow while eliminating opportunities for the buying organization to capture early payment discounts.

3- Loss of valuable data.

When an invoice has been fully approved, AP most often performs header-level data entry with account coding, which means the details of the purchase are stripped away and lost forever.

This prevents the purchasing group from analyzing non-PO spending patterns in greater depth to drive more spend under management.