Should you create retrospective purchase orders?

Should you create retrospective purchase orders when using Zahara?

Creating retrospective purchase orders is generally unnecessary if an invoice is received without an order, as the goods or services have already been acquired. Instead, focus on using Zahara to approve invoices efficiently by educating buyers to seek pre-approval and ensuring suppliers quote order numbers. Zahara's approval workflows can handle invoices with or without existing orders, streamlining the payment process.

Key Takeaways

Retrospective purchase orders are usually unnecessary once goods/services are received.
Educate buyers to seek approval before purchases using Zahara.
Ensure suppliers quote order numbers on invoices to streamline processing.
Zahara provides workflows for invoices with or without existing orders.
Focus on efficient invoice approval to detect fraud and process payments faster.

Editor's Notes:

One of the biggest problems we encounter with finance teams new to automated invoice processing is a lack of buy-in. Many teams struggle to adopt the new technology. Some even push back. A common symptom of this will be missing purchase orders or invoices that come in without a purchase order at all. Of course, it’s not always the case that your team are struggling with the new tech – sometimes manual processes are just hard to cast aside. With the aim of aiding you in either of those cases, I’ve put together this article on retrospective purchase orders, and what you should do if they crop up.

Jump to TL;DR

You are using Zahara to raise your orders, and an invoice comes into the business that doesn't relate to an order. What should you do?

Many of our customers automatically assume they need to create a corresponding purchase. I would suggest you think about that. The end point of a purchase is to send out a purchase order, right? Well, it looks like you've already got the goods or service, so that's like shutting the barn door after the horse has bolted! A purchase order is a document you send to a supplier, requesting that they supply goods or services at the price you specify. So, as I say, it's a bit late in the day if you already have the invoice.

So, how should you handle it, and how can you handle it in Zahara?

First, let's educate your buyers: everything they buy needs approval first, and they need to use Zahara for that approval.

Secondly, contact all your regular suppliers and tell them that you now use Zahara, and that every invoice they send you should quote your order number. You may not accept invoices that haven't been formally requested by way of a purchase order.

But there will still be times when an invoice comes into the business, and it definitely won't have a PO. Your annual office insurance, your electricity bill or your server hosting. In this circumstance, we urge you not to be bureaucratic and raise a corresponding purchase order. There will be bills, you will need to pay them, so let's focus on the business of approving that invoice for payment.

In Zahara, you can create two types of invoice approval. You can create an "Order Exists" approval and a "Order Doesn't Exist" approval. You can then trigger approval for the first type if the Order/Invoice difference breaches your agreed threshold, say 5% or £25.00. You decide. There is a video in the knowledge base explaining all of this.

If an order doesn't exist, then you can create an approval for that Division in exactly the same way as you would an Order approval - you can even copy an order approval - but the outcome is to export the invoice or to send an email to the finance team. It is not to send a PO to the supplier!

The only time you may need to create a corresponding order is if you are running budgets in Zahara with zero tolerance. Currently, invoices aren't applied to Divisional or Project budgets; you would need to create a corresponding purchase. In this circumstance, perhaps the invoice approval process would email someone in the Division telling them to create a purchase. You could even use a custom field for purchase type with a value of "retrospective".

In summary, every supplier invoice entering the business is evaluated and processed through a single question: "Should we pay this?" If an order exists, you can answer that question automatically using logic with a binary outcome of yes or no. You can get very close to hands-free processing.

If an order does not exist then the invoice has to be routed around the business to get the confirmation you need in finance. That is what Zahara is designed to do. It reduces the time required to make that decision so you can pay genuine invoices faster and detect fraudulent or incorrect invoices more easily.

Should you create retrospective purchase orders?