Non-PO invoices are a considerable "Pain Point" for AP personnel. In most cases the invoice is sent directly to the client for approval. From my personal experience some 40 percent of late payments at AT&T were the result of receiving the invoice for payment from the client after the terms had expired. However, when the KPIs are published, we in AP are usually blamed for the percentage of late payments which had nothing to do with our cycle time process.

Our world is far from perfect, and thus every company will continue to have some number of transactions that are non-PO-based. There are several consequences to these types of transactions.

First, these transactions by their nature can consume an amount of processing time that is entirely disproportionate to their numbers, increasing our costs.

Secondly, the TAPN survey reflects that top quartile of companies that receive 20 percent more invoices electronically than fourth quartile companies. The cost to process a paper invoice is five times the amount of an electronic invoice.

Some of the other consequences of non-PO invoices are:

• Late payments and lost discounts - Terms have expired before the invoice approval is received.
• Lost invoices - Inability for AP to track invoices through the approval process.
• Duplicate payment - The supplier, assuming the first invoice was never received, sends a second.
• Contract bypass - Less compliance to preferred supplier contracts and pricing, resulting in increased spend.

The best method to reduce this problem is to have all invoices sent directly to AP, which then can control the routing and approval process. One way to accomplish this is AP should issue a "Welcome Letter" to the suppliers outlining the requirements for having all invoices sent directly to AP.

A TAPN benchmarking study reflected that the top industries for use of POs include construction and information/media publishing, followed by government, manufacturing and health care. On the low end were the hospitality and finance and insurance industries.

From the benchmarking study the general categories for which non-PO payments are made include, but are not limited to, are:

• Subscription dues
• Donations
• Conference event registration
• Employment candidate expense
• Catering services
• Cleaning services
• Repair services
• Investigated services

The overall objective should be to reduce the volume of non-PO invoices and, thus, reduce your processing cycle time and overall costs.