more-arw search

Q&A Forum

Purchase Orders

We currently only use POs for merchandise and raw materials.  We are contemplating requiring POs for everything, goods and services over some dollar threshold, say $1,000.  We think it will save time for the accounting team who chase signatures and GL codes after the fact and of course speed up closing and accuracy of financials as we have all AP in or at least received goods and services for accruals. Eventually as we automate our on-line three way match it reduces work across the board.   It's been a  long time since I required this and am just curious if any of you are doing this.  If you are what has worked and what hasn't?  Thanks! 


Topic Expert
Wayne Spivak
Title: President & CFO
LinkedIn Profile
(President & CFO, |

Good idea if you sell it to your employees that purchase, your employees who will now have to check and validate the PO's that before this they didn't (ergo more work for them) your vendors (again more work and you then need to firm that no invoice will be paid without a prior PO).

If you do it correctly,yes it does. I have been successful and unsuccessful. It all depends on your Employees.

Topic Expert
Nicole Lucarelli
Title: Director
Company: Financial Services
LinkedIn Profile
(Director, Financial Services) |

Brenda, it sounds like you are right on. I have consulted with many clients on how to better control their spending and using purchase orders in this manner is key to that strategy.

In rolling this out to employees, there are some things to keep in mind:

1. How easy will the Requisition to Purchase Order process be? Do you have an online system or will it be done via paper/email? The easier the process is, the more likely people will want to use it.

2. It is just good practice to get necessary approval before spend and not after (when the invoice comes in). You will need to review your spend approval policy/process to ensure it is in line with this new requirement.

3. This will actually save time when the invoice comes in. Instead of getting approvals, which can sometimes be at a more senior level, you only need verification that the work was done (receiving). If spend is approved up front, multiple invoices against that PO can simply be verified against that initial approval.

4. Find other benefits for the employees requesting the PO. Unfortunately, helping accounting code and close isn't always a driver for employees outside of accounting.

5. I also agree with Wayne that you will then need to have a policy with suppliers that they will need a PO number to invoice.

This is definitely as much a change management issue as a process one. But with good communication, identifying the true business drivers, and getting key people within your organization on board, you are heading in the right direction.

As a company grows, you want to look at how you purchase and work with suppliers more strategically. Requiring POs in this manner is the first tactical step in that direction.

I would be happy to answer any additional questions you have.

Ruth Michel
Title: Internal Auditor
Company: Girl Scouts of Montana and Wyoming
(Internal Auditor, Girl Scouts of Montana and Wyoming) |

Having PO's for goods & services will add a good preventive internal control, by approving costs prior to money being spent, rather than having only the detective control of approving invoices after the purchase. You mention that your system has 3 way match PO's. Can your system also do a 2 way match PO? This is useful for service POs, since there is no physical receipt of goods. We have also used similar to a blanket PO using the 2 way match for certain vendors where we purchase the same thing or service throughout the year to streamline the process. Typically the blanket POs cover at least a quarter, for smaller purchases they may cover the entire year. There are some very good comments in previious posts regarding the requisition process - how easy or difficult the requisition process is will likely drive the success of your PO process.

Sara Voight
Title: Controller
Company: Critical Signal Technologies, Inc
(Controller, Critical Signal Technologies, Inc) |

I think this is an excellent idea, and to help move the process along send a note to your suppliers notifying them that no payments will be made without an approved PO. Suppliers deal with these enough that they can also be your advocate for following the process.

Topic Expert
Doug Thompson
Title: Director of Revenue
Company: Castlight Health
(Director of Revenue, Castlight Health) |

You might want to start at a higher threshold like 5K. This will reduce the number of POs and ease the implementation pain all around, give time to demonstrate the benefits etc.

One company I was at excluded services from POs since those require a contract anyway, it can be covered through monthly budget vs actual analysis, and it's more difficult to track a running balance against a PO.

Topic Expert
Marc Faerber
Title: CFO
Company: Amarantus
(CFO, Amarantus) |

I agree with what has been already mentioned. The more you can standardize and automate a process the better all around. That said how have people addressed the establishment of PO line items for none manufacturing items (ie office supplies, services, one off items, etc.) Who controls and maintains the item numbers data base that get listed on the PO as items are ordered? How timely is it done? What if the organization does not have the resources for a separate purchasing group, who ends up doing it? How do you address on-line orders for office supplies, parts, etc.? How do you address R&D functions who don't know what they will need or the specs, etc. but needed it yesterday? This highlights the need for clear, consistent, policies and procedures as well as how to address the one offs ad-hoc demands. Your system (software) vendor and be a great resource for solutions to a number of these issues, but what do you do if you do not have a sophisticated ERP system?

(Asisstant Controller) |

Has anyone used Traverse when establishing a PO system? What have your experiences been with it?

(Director Accounting Operations) |

In the past year, our organization has significantly increased the volume of PO’s. Vendors have been surprisingly good about including PO numbers on their invoices. Once they understand that including the PO number expedites processing of their invoice, they include the PO number!

Our biggest challenge has been receiving on 3-way matches. Goods coming across our central dock are always received but many items by-pass the dock (small items direct mailed or shipped electronically). These invoices require desk top receiving by a decentralized group of requesters. We also utilize PO’s for various services and in these cases we require receiving by the requester acknowledging that the service has been received.

We have discovered that 3-Way matching provides good controls but requires a significant commitment of AP time training receivers and following up on receiving exceptions. To address the issue we have begun utilizing 2-way matching for selected vendors and services.

Topic Expert
Patrick Dunne
Title: Chief Financial Officer
Company: Milk Source
(Chief Financial Officer, Milk Source) |

We require purchase orders on anything being purchased. For items that are required immediately (going to a store) we use purchasing cards. This improves the processing of items as no accountant gets involved with getting G/L accounts after the fact. The P-Card system (we use B of A) requires the user or manager to input/approve the account charged also. The power of accounting/finance is analysis of course so we limit non-value add activities.

Products and Companies

Get Free Membership

By signing up, you will receive emails from Proformative regarding Proformative programs, events, community news and activity. You can withdraw your consent at any time. Contact Us.

Business Exchange

Browse the Business Exchange to find information, resources and peer reviews to help you select the right solution for your business.

Learn more

Contribute to Community

If you’re interested in learning more about contributing to your Proformative community, we have many ways for you to get involved. Please email [email protected] to learn more about becoming a speaker or contributing to the blogs/Q&A Forum.