The true cost of not using your Purchase Order system.
What is the true cost to your organization if barely anyone uses the po system you’ve spend time, money and resources on implementing? One online travel retailer was shocked to find out.
Organizations implement a procurement system for a variety of reasons but in essence it can all be boiled down to three key factors:
- They have visibility of what they are spending money on and can see the demand for items from suppliers. This visibility allows them to negotiate effective terms of trade from suppliers based on the “forecasted” spend.
- Efficiencies in processing (time-saving) – every purchase order (PO) made, approved, placed, and paid by a company costs money to process. Added up across the supply chain, these PO processing costs can have a surprising impact on the bottom line and also divert staff effort away from other more valuable tasks.
- Savings when purchasing – terms of trade often mean discounts with suppliers and by purchasing goods from non approved suppliers these discounts are not applied – goods cost the organization more than they should.
The bottomline is impacted and this affects the organizations profitability. Read more about this in More4apps CEO John O’Keeffe’s blog about this here.
A well recognized global travel company that focuses on bringing all of the travel experience together in one place online. It’s websites are primarily travel fare aggregators and travel metasearch engines, but staff and bricks and mortar assets are scattered across the globe, and the business is grouped together in regions.
The problem that became a huge opportunity
One region was tasked with improving their PO processing system. They knew from other customer success stories that the More4apps PO Wizard would remove the data bottlenecks they were facing, cut down on processing time or admin and improve the quality of data. But as they streamlined the process using the More4apps PO Wizard they uncovered the true cost to the organization of not using a PO.
With only 8% of purchasing matching a Purchase Order out of a spend of $10 billion, alarm bells started ringing.
They were purchasing items at non-discounted prices – paying more than they needed. Staff were spending valuable time shuffling paper – chasing receipts, getting approvals for individual invoices, matching POs, and manually processing data.
Most importantly, they were losing valuable leverage with suppliers as they were not delivering on transaction volumes.
The Finance team could see that they needed to increase the ratio of PO matched purchasing coming through, but they knew they couldn’t do it manually as they would need to increase the PO team 10 fold and potentially blow the personnel budget for the entire AP team.
They needed to a solution, fast, one that could eventually roll out across the wider organisation quickly with minimum fuss, cost or staff training expenses.
The initial wins:
- Find something easy to use and all one in one environment
Entering data into the Oracle database, updating it and downloading it was complicated with many different stand alone functions that meant different systems, and work-arounds. With the software solutions from More4apps data could then be manipulated, loaded and checked using the familiar excel environment – making the workflow seamless, intuitive and more efficient.The current system had multiple data sources. For example when invoices were submitted by third parties they were sent as WEBADI file to Accounts Payable but because WEBADI didn’t load the files as an attachments they were stored on a separate file system. This was an issue because unless you had access to that filing system you could not view the invoice. With the More4apps AP Invoice Wizard an invoice image could be attached to the upload – information would be all in one place accessible to those that need it.
- Improve the PO process
An area that immediately offered efficiencies was the loading of multiple POs line by line for each supplier and then manually receipting in the invoices to each PO. This involved hours of manual checking office codes, cross checking GL codes and loading that information against each receipt as they came in. With software solutions from More4apps processing time would be slashed – instead one PO could created for each supplier, this then downloaded into receipt wizard, the GL code and office code automatically entered against each line charge into the PO and then vlookup that table in the receipt wizard to populate the receipt amount.
- Maximise the value of time spend for best results for the organization
They also found that they could improve their “general” housekeeping using More4apps software solutions, staff would be freed up to focus on better organizational outcomes.It would be easier to find and identify all invoices currently on hold and manage those holds to speed up payments and cut down on length of time for debtors recovery. They could identify all invoices past due date, simply and easy so they can be triaged to see why the invoice wasn’t paid. Could it be waiting approval? Could it be on hold? Could some further validation be needed?
- Change internal thinking and automate where possible.
The PO team work on an “action as they come into the inbox” process flow due to the current system’s limitations. They process one transaction at a time manually inputting information – checking if the requisition had been approved.
By automating the process with bulk autocreate, all the requisitions for a time period could be done at once, in seconds (either every couple of hours, daily or monthly) the team would then be freed up from just paper shuffling to being able to get out and the best deal from their suppliers and save the organization money.
- Choose a proven software solution – fast testing, installation and implementation and proven ROI.
Like any organization investing in software solutions they needed to know that whatever they chose needed to be able to be implemented quickly with minimum fuss. They could see from past history that this was a reality with More4apps. Customers like GoAhead Group, the American Red Cross and Toyota all reported similar themes of testing and implementation time being slashed with no need for complex upskilling of staff and IT involvement. Software solutions worked almost straight out of the box.
So what now?
They could already see that these changes using “out of the box” easy to implement solutions from More4apps will improve internal efficiencies and processes, and this in turn will help staff time to be better utilized. They could also see the time to test, train and run out the solution will be minimal and the support they receive will be second to none. They knew this based on the feedback by other More4apps customers.
However identifying the true cost to the organization for not utilizing their PO system was invaluable. They can now work on gaining traction with staff to use POs and make greater organizational savings.
PO Receiving Wizard
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