In a recent Purchase Order Practice Survey, conducted by The Accounts Payable Network, the word "best" would not describe the practices followed by many organizations.

Here's a sample of the findings:

  • 53 percent of respondents indicated some level of non-compliance.
  • If a buyer ignored policy and placed an order without a PO, 44 percent stated that they would pay the invoice without the PO, while nearly 60 percent would require the buyer to create a PO after-the-fact.
  • Average percent of invoices put on hold or blocked was 21, with 30 percent blocked or on hold for the lower quartile. That compares to 5 percent blocked or on hold for the upper quartile.
  • The most common exceptions involve the invoice price not matching the PO price.
  • 44 percent of organizations take 7 days or longer to resolve invoice exceptions.

There's quite a gap in the hold-blocked invoice rate differential between leaders and laggards: 25 percent more problem invoices for the lower quartile performers compared to the upper quartile. For every 100,000 invoices processed, the laggards deal with 30,000 problem invoices, the leaders only 5,000. If it takes $20 on average to resolve a hold or blocked invoice, the laggards spend an additional $600,000 to process these invoices vs. $100,000 for the leaders. At $30 per problem invoice, the numbers jump to $900,000 vs $150,000 respectively. And for the  organization processing 500,000 invoices annually? Multiply those estimates by 5.

 

These costs don't consider whether the purchase was from a preferred supplier, at a negotiated price. Hackett Group studies show that the savings leakage from non-compliance--or buying from a non-preferred supplier off the contracted rate--is over $9 million per billion dollars of spend for the average company. Then there are the lost savings from the inability to capture early payment discounts.

 

If you are having a difficult time building a business case for automating your invoice or procure-to-pay operations, run the numbers. You really can't afford not to.