A strong supply chain consisting of reliable sourcing partners accelerates the growth of successful enterprises. To build successful supplier relationships, each enterprise ensures to make fast payments for vendor invoices received. The vendor invoice can be divided primarily into PO invoices(having reference Purchase Order) and Non-PO Invoice(Vendor generated without any PO reference). To reduce average receipt-to-invoice cycle time, Accounts Payable teams use different digital tools such as ERP, A/P automation tools, and lately even ServiceNow to implement PO vs Non-PO invoice approval workflow. In this blog, we will learn the difference between PO and Non-PO invoices and understand the best practices to implement a successful invoice approval workflow process using the ServiceNow platform.
In a recent survey conducted for 170+ North American Accounts Payable teams, 23% of companies shared that non-PO invoice processing is one of their biggest pain areas. The remaining 70% are still figuring a way out to process PO-based invoices faster, as a part of their digital transformation.
What is a PO Invoice?
- A PO (Purchase Order) invoice is the invoice raised by the vendor based on the purchase order created by the buyer.
- Generally for processing an invoice, the accounts payable will match the PO invoice raised by the vendors against the purchase order to ensure all details (quantity, price, PO num.)
- In some cases, enterprises will do a 3-way invoice matching process to confirm if PO invoice details match with purchase order and the receipt number of the goods registered by the procurement system.
- PO invoices typically include invoices for purchases of direct goods or services.
PO Invoice Examples:
- Vendor Invoices with PO
- Invoice against Goods Receipt
- Vendor Contracts
- Normal Goods Invoice
What is a Non-PO Invoice?
- Non-PO invoices are those invoices raised by either the vendor that does not have a purchase order associated with the invoice
- Sometimes Non-PO invoices are also used to make supplier payment when an invoice is under direct spend budget/ limit.
- Non-PO invoices are often used for various indirect purchases or for spend below the tolerance limit.
- Non-PO Invoices might have a preparer and approver as two major stakeholders for managing invoices. An organization’s cost center or internal order might be used.
Non-PO Invoice :
- Travel Reimbursement
- Mileage Reimbursement
- Release Orders
- Service Invoices(from Service Sheets)
What is the difference between PO vs. Non-PO Invoices?
Now how can you differentiate PO vs. non-PO invoices? The underlying logic lies in the purchase that generated the invoice. Some of the key differences are:
|PO Invoice||Non-PO Invoice|
|A purchase order is associated with the invoice raised.||A purchase order is not associated with the invoice raised.|
|Primarily used for Direct Purchase or Procurement||Primarily used for Indirect Procurement or Purchase|
|The purchase order reference is pre-approved||The invoice approval process is not pre-approved and has been prepared by an Approver in some cases.|
|Faster Invoice Approval & Processing||Slower Invoice Approval & Processing|
|Greater transparency of the invoice payment process||Less transparency of the invoice payment process|
|All goods can be clubbed into a Single Invoice||Can have multiple invoices|
|Ideally used for normal procurement||Ideally, used during discretionary spending (below tolerance limits) or emergency procurement of goods or services|
Best Practices: PO vs Non-PO Invoice Approval Workflow
Below are some of the best practices that need to consider while processing the PO & Non-PO Invoices:
- It is the responsibility of the Preparer and Approver to ensure that transactions they submit are correct and compliant; read all warnings and errors for each transaction before submitting it.
- Ensure that payments are allowable, acceptable, and accurate and the original supplier payment request is on file within the department. Neither Procurement Services nor eProcurement will validate the reason for the payment.
- Be aware that Procurement Services performs spot audits on Non-PO Invoices to ensure transactions are compliant (i.e., items are not on the exceptions list).
- Determine within each department the workflow between Preparers and Approvers for Non-PO Invoice payments.
Aavenir Invoiceflow to Rescue
- Pre-configured metadata identification of invoice number based on previous invoices from the same supplier or cost center
- Automatic distribution to the relevant approver based on the organization’s approval hierarchy
- Automatic approval by matching recurring invoices (such as a lease) to the payment plan in a contract
- 100% visibility into procurement and tracking of Invoices via workflows
Aavenir Invoiceflow delivers faster invoice processing with fewer touchpoints, fewer errors, and more early payment discounts, thus improving the vendor invoice processing. Get a FREE trial of Invoiceflow accounts payable automation on ServiceNow
How to Automate PO & Non-PO Invoice Processing?
At the moment invoices are received by the Accounts Payable teams in the form of paper or email and processed either manually or with OCR (which requires manual effort in 62% of OCR invoices). Manual processing requires the most employees of any method, which is the processing approach used by companies with less than 10,000 invoices per month as well as companies greater than 10,000 per month. OCR is more efficient (requiring fewer employees) than manual processing.
How fast and efficiently the accounts team can process invoices can help the organization to save on late-payment penalties and also avail early-payment discounts. Enterprises need a digital workflow solution like ServiceNow, that enables all the departments to work collaboratively.
For automating invoice processing, your organization can leverage Invoiceflow that provides a unique touchless invoice processing solution covering intelligent invoice data extraction, AI-based 2-way/3-way invoice validation with flexible invoice processing workflows.