What dollar amount threshold is needed before a PO is required to be generated? If my AP person got her wish there would be a requirement for a PO for every purchase but that would be not practical and a huge drain on labor to generate especially for $25 order. Our expenses after removing labor run about $10M - $12M a year. What thresholds do you have? When do your require a PO and when do you not? Any comments on why your reasoning?
When To Require A Purchase Order?
Answers
We currently operate a shared service center within Kantar for all operating units within North America. Our PO process is to require a PO for anything $250 and over. Exceptions are utilities, legal invoices, freight/shipping (FedEx, UPS), temporary staffing agencies and others.
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I agree with Aaron. The threshold might be different for different organizations, and regardless of threshold, all invoices should be approved by someone who is not entering them into the A/P system.
As
I will approach this from the other end.......
1. What other systems or processes do you have in purchasing items? (Petty Cash, online purchases, etc)
2. What types of expenses do you have (manufacturing/production, office supplies, etc) ?
Although not the usual approach I take and not answering your question directly, I think that one option is to look at it from the other end. What other ways does the company have in purchasing items.....and work back from there. What ever items are left out of the process(es) either through dollar amount or classification/type, should be P.O.
Some great suggestions by Wayne and Emerson. There are many benefits of having purchase orders including compliance, granular visibility and fraud prevention.But if you have high volume then manual process could be a burden for the employees. I have detailed some related points in the following blog post.
http://www.procuredesk.com/automate-purchasing-process/
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