Broken Purchase to Pay Processes
Your processes might be in place and the auditors have signed them off but if your users think and behave like they know better, then maverick spend will remain an issue. Requestors sometimes don’t understand the purchasing process. Others understand it fully yet believe that in the circumstances they find themselves, the need for expediency overrides the need to follow the proper process. Both scenarios are unacceptable and indicate a broken P2P process.
In the first case, if requestors do not understand the purchase to pay process then they need training. No one in an organization should be in a position to order goods and services without proper training and if they have received training and still don’t understand the process then the training is inadequate.
The second case is a little bit more subtle because it is true. Often the need for expediency does override the need to follow the standard process.
If there are men digging a tunnel that has begun to flood, it is absurd to insist on an approved purchase request before a pump is ordered. A field engineer in a remote location my not have access to systems in order to follow a standard purchasing process. There are many circumstance that do not fit the classical purchasing process but allowing exceptions is a mistake.
To have a documented purchasing process that includes the caveat “except in an emergency” or “wherever possible” or “unless otherwise approved by..” simply builds loopholes into the process. Specific actions to be taken in these circumstance need to be included in the process documentation. For example, in the case of a genuine emergency, recognize that goods or services may need to be ordered without the delay of a formal process but insist that justification is submitted with appropriate approval once the emergency situation is resolved and monitor the use of the emergency process to identify maverick behavior.
No P.O. No Pay
A No PO No Pay policy is designed to support the purchase to pay process by refusing payments to suppliers when there is no purchase order. When this policy works, it works very well. Suppliers learn not to accept orders without a PO and they will, over time, support the policy but many organizations have struggled to implement it successfully.
When goods and services have been delivered there is normally a legal obligation to make payment. Suppliers know this and so do requestors. They know that a No PO No Pay policy doesn’t have teeth. There are often exceptions allowed: Utilities for example and fuel – emergencies and unusual circumstances. But instead of allowing “exceptions” build the “exeptions” into the process and recognize them in the policy – just don’t call them exceptions. Build in retrospective processes to justify the “exceptions” and make these processes painful. It should never be easier to bypass the process than to follow it.
A No PO No Pay policy doesn’t work when its bark is worse than it’s bite. To make it work it needs to be “No PO – No Pay – No Exceptions” – and you need to say it like you mean it.