There are several general problems that can occur when designing and operating a purchase order system. Here’s what to avoid when designing your system.
Mistake # 1 – Not enough information stored
Care should be taken with the design of the system so that all relevant information is stored within the purchase order. However, forcing staff to fill out irrelevant data on a form is something that should be avoided, because it can lead to another mistake.
Simple questions should be asked during the design process, such as:
- Does your purchase order need a delivery date?
- Does your purchase order need an overall description or summary?
- Does our purchase order have all of the information necessary to allow the business to help to track and manage the cash flow and cash forecasting of the company?
Often a member of the accounts department has created a paper based purchase order, which is a copy from a completely different company where they used to work. These forms can be wholly inadequate for the company in which they are being used.
Mistake # 2 – Fraud and forgery
If purchase orders are wholly relied upon, and are not checked correctly on a regular basis then they could be created or altered to purchase items for a fraudster.
Obviously this would have to come from an ‘inside job’ but there are many thefts from companies where someone has found it easy to put purchase orders through for items not related to the business of the organisation.
Mistake # 3 – Approver shopping
If there are a multiple number of managers with the ability to approve purchase orders within your organisation, it stands to reason that one manager might be easier to get a purchase order signed than another one.
Staff members learn this quite quickly and partake in ‘Approver Shopping’ or choosing the manager who they think will sign off the purchase order with fewer questions and less fuss.
For a practical guide to setting up a purchase order system, download our free ebook here.