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  4. PO AND NON PO INVOICE DIFFERENCE
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PO and Non-PO Invoice Difference: Automation & Process

  • Automating the PO invoice process saves businesses time and money, reduces risk and helps maintain relationships with vendors.
  • A PO invoice is pre-approved, whereas non-PO invoices for expenses like utilities or food and travel reimbursement are more time-consuming to process.
  • For an effective AP workflow, collecting the proper information and paying close attention to the approval procedure are vital.

November 23, 2022 | Accounts Payable Blogs

Accounts payable invoices must go through numerous processes before they are approved. One of the first steps is to establish whether the invoice includes a matching purchase order (PO). What exactly is a PO invoice, and what distinguishes it from a non-PO invoice? Here's all you need to know.

What Is a PO Invoice?

A PO invoice is one that the vendor issues in response to a PO the customer has submitted. In order to confirm that all information (quantity, price and PO number) is accurate, accounts payable often compares the PO invoice produced by the vendors against the PO.

Automating the PO Invoice Process

PO matching is the key to automating PO invoice processing.

AP automation systems, such as GEP SMART AP Automation , can help to simplify the PO invoice process by gathering invoice data, intelligently matching PO invoices and routing PO invoices for approval. GEP SMART AP Automation is an AI-powered software that scans invoices for essential information and verifies three-way matching using advanced optical character recognition (OCR) technology. Automation reduces paperwork, saves time, lowers operational and regulatory risks and optimizes payments while keeping vendors happy.

Advantages of the PO Purchase Process

  • Improves inventory and financial management accuracy
  • Enables better financial planning and budgeting as funds must be available before issuing a PO
  • Assists suppliers in scheduling production and/or delivery when the customer needs it, enabling faster delivery
  • Can be as stringent or flexible as necessary – a single PO can only cover a single transaction, but a blanket PO allows the client to acquire items or services continuously until a preset maximum limit is reached

Examples of PO Invoices

PO invoices are frequently used for direct purchase or procurement, which means that businesses know exactly what they are purchasing ahead of time.

POs are often used by businesses to procure required supplies or services, such as scheduled consultation sessions, cleaning services, stationery or even software. POs and associated PO invoices simplify the accounts payable team's task by precisely outlining what was meant to be purchased, what was really bought and what was received.

What Is a Non-PO Invoice?

A non-PO invoice does not have any attached PO, and it is frequently the outcome of expenditures that have occurred outside the usual procurement process. These are often referred to as expense invoices and are commonly used for indirect purchases.

Automating Non-PO Invoice Processing

Companies may use an AP automation solution to automate the processing of both PO and non-PO invoices, eliminating repetitive, error-prone operations and gaining enhanced efficiency and control of the accounts payable process.

Examples of Non-PO Invoices

  • Advertising expenditures
  • Utility expenses such as telephone, electricity or water.
  • Legal services
  • Food and travel reimbursements

Impact of Non-PO Invoices

Non-PO invoice processing might provide shortcuts within a business unit, but it can also be time-consuming. The effort for processing non-PO invoices grows dramatically in a manual system. This causes a delay in appropriate cost accounting, which means the invoice might sit for weeks without being paid.

Furthermore, a payment delay may prompt several calls from the vendor or the filing of a duplicate invoice, resulting in double payment.

What Is the PO and Non-PO Payment Process?

Since the purchase, vendor and amount were accepted as part of the requisition procedure before the purchase order, a PO invoice is a pre-approved invoice. Consequently, a PO invoice may be immediately processed for payment without the need for manual review and approval, provided that all data match those on the purchase order and goods receipt. If a discrepancy is found during the matching process, the buyer will get the invoice for inspection and decision-making.

Since non-PO invoices aren't pre-approved, accounts payable teams must determine and apply the proper accounting codes to non-PO invoices before attempting to trace invoice approvers. These two actions might seem easy, but without the supporting paperwork that PO invoices provide, they can be difficult. Additionally, most businesses have a multi-tiered approval procedure based on the type, value and location of non-PO bills. It can be time-consuming and has a large margin for mistakes.

The approval procedure for non-PO bills is more involved than PO invoices, but AP may confirm the booking and send the money once it is complete.

PO and Non-PO Invoice Differences

Key differences between PO And non-PO invoices include:

Criteria

PO Invoice

Non-PO Invoice

Approval

Pre-approved purchase order

Not pre-approved

Processing Time

Speedier invoice processing and approval

Invoice approval is often delayed

Clubbing

One invoice might club all of the goods

Can include several invoices

Transparency

Greater transparency

Less transparency in the process

Conclusion

For an effective AP workflow, collecting the proper information and paying close attention to the approval procedure are vital. The company's accounting department's productivity may increase, and cash flow can increase when everyone is on the same page.

However, manually managing aspects of PO and non-PO invoicing processes expose the AP department to avoidable and costly errors that automation can readily correct.

Frequently Asked Questions

What are the key differences between PO and Non-PO Invoices?

Non-PO invoices are generated outside of a formal purchase procedure, in contrast to PO invoices, which are the outcome of an established procurement process. Additionally, non-PO invoices are not pre-approved, whereas a PO invoice is.

How can businesses automate the processing of PO versus non-PO invoices?

By using a contemporary AP automation system, it is possible to significantly automate the processing of PO and non-PO invoices.

How can businesses modernize PO and non-PO processing?

Many businesses continue to rely on manual PO and non-PO processing, which can lead to a variety of problems. As a result, companies must rely on technology to address these difficulties. Invoice automation lowers mistakes and boosts efficiency.

 

Tags: Accounts Payable , Procurement

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