5 Hidden challenges with purchase order processing (POP) and how to overcome them

Purchase orders (POs) are a fundamental part of procurement and financial operations for businesses of all sizes. They provide a structured way to request, approve, and track purchases, ensuring that goods and services are acquired with the correct approval and oversight. But while the concept of a PO is straightforward, the reality of processing them is often anything but.

From manual errors to approval bottlenecks, inefficient PO processes can create significant operational headaches for businesses. Let’s dive into the common challenges businesses face in PO processing and explore strategies to address them.

1. Manual data entry and human error
One of the most common issues with PO processing is the reliance on manual data entry and with manual data entry comes a high risk of human error. A recent survey revealed that more than 27% of finance professionals claim data is input incorrectly in their company. Whether it's inputting PO details into spreadsheets or copying data between systems, every manual step increases the risk of typing errors, incorrect pricing, or mismatched vendor information which can lead to inaccurate records, delays and supplier disputes.

Solution: Invest in automated PO systems that integrate with your ERP or accounting software. Optical Character Recognition (OCR) and data validation tools can also reduce the chance of errors. OCR automatically coverts text into a machine-readable format.

2. Inefficient approval workflows
It can take large companies up to 9 days to manually approve a PO as approvals often involve multiple stakeholders, from department heads to finance managers, and can get stuck in inboxes or routed to the wrong person leading to costly delays, damaged supplier relationships and missed deadlines. 

Solution: The good news is, you can speed up PO approval times by 75-80% by implementing clear processes and digital automated approval workflows with role-based permissions and automated notifications. 

3. Lack of visibility
Once a PO has been submitted it can get lost in the system so the employee who submitted it can often struggle to track it and have no clear visibility into the status of the PO and whether it’s been approved or fulfilled. This can often result in overrun budgets, duplicate orders and difficulty in reconciling invoices.

Solution: Use centralised procurement software with dashboards and status updates offer real-time tracking from PO creation to receipt of goods giving full visibility into the entire process.

4. Non-compliance with procurement policies
When employees bypass formal PO processes known as “maverick spending” (unapproved spending) it undermines procurement controls and can lead to lack of budget control and unexpected costs, internal compliance issues and poor supplier performance and ability to obtain better deals.

Solution: Training staff on procurement policies and enforcing the use of POs through policy is pivotal here. You can do this by making the PO process as simple and easily accessible as possible and fostering a culture of good practice within your company. 

5. Poor Supplier Communication
Even with the very best internal PO processes, sometimes communication with suppliers can be the sticking point. Miscommunication around PO details, delivery dates, or pricing can result in wrong or late deliveries and strained relationships.

Solution: Establishing a clear, consistent communication channel from the start with suppliers is critical. Share POs electronically and confirm receipt and acceptance and choose your suppliers carefully.

Conclusion
While purchase orders are essential to the procurement process, they often come with operational challenges such as those outlined above. The good news is most PO-related difficulties can be mitigated with robust automated software, employee training and having clear policies in place. 

By addressing these common issues proactively head-on, companies can improve efficiency, reduce costs, and build stronger supplier relationships to make the procurement process run smoothly.

We are delighted that we will soon be bringing Purchase Order Processing to our popular Accounts Payable (AP) automation feature with Opera 3 SE. To register your interest and to be among the first to hear the release information, please get in touch today.