Last updated on Apr 24, 2024
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Why reconcile purchase order discrepancies and errors?
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How to identify purchase order discrepancies and errors?
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How to resolve purchase order discrepancies and errors?
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How to prevent purchase order discrepancies and errors?
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How to measure and improve the purchase order accounting performance?
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Hereβs what else to consider
Purchase order accounting is a process of recording and tracking the financial transactions related to the purchase of goods or services from a supplier. It involves matching the purchase order (PO), the invoice, and the receipt of goods or services, and resolving any discrepancies or errors that may arise. In this article, we will discuss some of the best practices for reconciling purchase order discrepancies and errors in the context of procurement.
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- Shyam Sundarπ
Procure to Pay #OperationsSpecialist #FinanceProfessional #InsuranceIndustry #DataAnalysis #Automationβ¦
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- Nadia Makahleh Procurement Supervisor | inventory-purchase data analysis | market analysis | logistics | PM | cost reductionβ¦
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- Peter Cholakis Improve facilities repair, renovation, maintenance, and new build outcomes and reduce costs
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1 Why reconcile purchase order discrepancies and errors?
Reconciling purchase order discrepancies and errors is important for several reasons. First, it ensures that the supplier is paid the correct amount and on time, which can improve the relationship and trust between the buyer and the supplier. Second, it prevents overpayments or underpayments, which can affect the cash flow and budget of the buyer. Third, it reduces the risk of fraud, errors, or misstatements in the financial records, which can lead to audit issues or compliance violations. Fourth, it improves the accuracy and efficiency of the procurement process, which can save time and resources.
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- KAZIM D. Construction | Hospitality | FFE | OSE | Procurement | Logistics | Warehouse | Project Management | Development
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clear skies come from chasing discrepancies like desert foxes. Trust with suppliers, fragile as desert glass, cracks under mismatched numbers. Imagine overpaying - your budget oasis shrinks! Underpaying? Bitterness brews, deals sour. Discrepancies? Shady vipers lurking in murky numbers, waiting to bite your financial records. But reconcile regularly, shine a light, expose errors before they strike. Efficiency, the desert wind at your back, loves a reconciled process - no more sandstorm of wasted time chasing ghosts. Embrace reconciliation! It's not just numbers, it's trust, budget protection, a purring, efficient engine driving your procurement caravan across the business desert.
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- Subhan Sahib MCA,MCTS,CIPS,(MCIPS),CPP,CPPM,CISCM Strategic Sourcing | Procurement | Category Management | Supply Chain Management | π‘ LinkedIn Top Procurement Contracts Voiceπ₯ π‘ LinkedIn Top Logistics Management Voice π₯ | π π―
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key practices for addressing purchase order discrepancies:Meticulous Comparison: Carefully compare purchase orders, packing slips, and invoices to identify any inconsistencies.Prompt Communication: Inform suppliers promptly of any discrepancies and work collaboratively towards a solution.Detailed Records: Maintain clear documentation of all communication and actions taken to resolve the issue.Root Cause Analysis: Investigate the underlying cause of the discrepancy to prevent similar occurrences in the future.Mutually Agreeable Resolution: Work with the supplier to find a solution that benefits both parties, such as price adjustments or product replacements.
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- Derrick Chevalier π΅ππππππππππ πΊπππππ β© π΄ππ ππππππ β© π¬ππππππππ π·πππ π·πππππππππππͺππππ β© π¨πππππ β© π»ππππππ β© πͺπππππππππ β© π²ππππππ
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The question assumes that customers want to pay suppliers in a timely and fair manner, and the underlying truth is most customers don't.Customers use e-invoicing for precisely opposite reasons, including what in the Comprehensive Negotiating Strategies (CNS) framework, is referred to as a "third party restrictive force, once removed".It's benefit to customers is that they are able to " blow air" into the process, allowing them to avoid or extend payment due dates and completion.Suppliers who want to curtail this will address it before they agree to e-invoicing, but they don't because they want sales, and lack the negotiating expertise to handle the issue effectively.
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- Mariam Yusuf Procurement at Chartered Institute of Purchasing and Supply Management of Nigeria
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Reconciling purchase order is vital in procurement process, it ensures the supplier supplys the exact specification of goods or services ordered, the quantity requested and also at the accurate delivery period. With these, the supply would be paid according to the terms on the purchase order.
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2 How to identify purchase order discrepancies and errors?
Purchase order discrepancies and errors can occur at any stage of the purchase order accounting process, from the creation of the PO to the payment of the invoice. Common types of discrepancies and errors include quantity discrepancies, price discrepancies, quality discrepancies, delivery discrepancies, and invoice discrepancies. To identify these discrepancies and errors, the buyer should perform a three-way match, which is a process of comparing the PO, the invoice, and the receipt of goods or services. Additionally, the buyer should review the supporting documents, such as the contract, the packing slip, the delivery note, or the quality report, to verify the accuracy and completeness of the information.
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- Nadia Makahleh Procurement Supervisor | inventory-purchase data analysis | market analysis | logistics | PM | cost reduction strategies | SRM
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Best practices for reconciling POs discrepancy and errors : - Document review, ex: 3 way matching ( PO= invoice= GRPO) - Communication with supplier; to discuss and clarify any discrepancies - keeping records- preventive measures; to prevent similar errors in future -Continuous improvement.- Training the staff.
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the simple and best methods are the 2-way, 3 way and 4 way matching. by comparing the PO, supplier invoices, GRN we can identify, minimize and utilize the discrepancies.
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- Mariam Yusuf Procurement at Chartered Institute of Purchasing and Supply Management of Nigeria
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At the point of delivery, all parties (user dept, supplier, audit etc) must check the supporting documents I.e the final invoice tallies with the PO, the goods received notes correspond with the PO, the packing slip etc. At the end of delivery all the parties must sign off, after carrying out due diligence.
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3 How to resolve purchase order discrepancies and errors?
To resolve purchase order discrepancies and errors, the buyer should contact the supplier as soon as possible to inform them of the discrepancy or error and request a correction or an explanation. The buyer should document the communication and the outcome in writing, such as an email, a letter, or a credit note. Depending on the nature and the cause of the discrepancy or error, the buyer may need to adjust the invoice or the PO to reflect the correct amount or terms. Once the discrepancy or error is resolved, the buyer should approve the payment or the receipt of the goods or services, and update the financial records accordingly. Additionally, the buyer should monitor the payment or the receipt status and confirm that the supplier has received or acknowledged the resolution.
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4 How to prevent purchase order discrepancies and errors?
To prevent purchase order discrepancies and errors, the buyer should implement some best practices, such as establishing clear and consistent policies and procedures for the purchase order accounting process, and training staff and suppliers on how to follow them. Automated tools and systems should be used for creating, issuing, receiving, and processing POs and invoices, and they should be integrated with the accounting and inventory systems. It is important to review and verify the PO and invoice details before sending or approving them, and to ensure that they match the contract and the order confirmation. Regular and open communication with the supplier should be maintained, and any doubts or issues should be clarified before they escalate. Additionally, periodic audits and reviews of the purchase order accounting process should be conducted to identify and correct any gaps or weaknesses.
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- Shyam Sundarπ Procure to Pay #OperationsSpecialist #FinanceProfessional #InsuranceIndustry #DataAnalysis #Automation #ContinuousImprovement. Helping Procurement department to find the process gaps and improve the process
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It is critical to keep a checklist and then adhere to it throughout the purchase requisition procedure. This must include all pertinent information such as price, quantity, vendor information, item description, and other crucial terms and conditions.To avoid problems, it is also necessary to review the Purchase Requisition before it is pushed for Purchase Order creation.The second step of verification must occur during the Purchase Order preparation process to confirm that all data are correct according to the quote provided.Ensure that the authorized person approves both the Purchase Requisition and the Purchase Orders.
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Best Way to avoid discrepancies error by doing a 3 step verification.Step 1 - Reviewing the whole Purchase RequisitionStep 2 - Validating the Purchase Orders during Approval.Step 3 - Informing Suppliers about the order and getting a "Acknowledgement" communication from Supplier.
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- SADDY BAKARI Procurement Assistant @ MEK-ONE GENERAL TRADE LIMITED | Efficient procurement with project management expertise
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In other ways to remove that discrepancy and error or after recognize that error1.you must to communicate with the supplier to check is details if have enough to supply2. To check the delivery and date address that for receive that item 3.to check the quality of that item 4. Quantity according to the order5.to review the items description it give you to understand each item
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5 How to measure and improve the purchase order accounting performance?
To measure and improve the purchase order accounting performance, the buyer should use some key performance indicators (KPIs) such as the PO cycle time, the PO accuracy rate, the PO exception rate, the PO payment compliance rate, and the PO cost savings. Monitoring and analyzing these KPIs regularly, and setting realistic and achievable goals and targets for improvement, is essential. Additionally, the buyer should seek feedback and suggestions from the staff and the suppliers, and implement best practices and continuous improvement initiatives.
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- Garry M. Technology, Systems, and Processes.
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I'm curious about how various organisations handle the reconciliation of purchase order discrepancies. For example, where you have a standing annual subscription for a service or product with a naturally varying quantity that is not known in advance. So, lets say you create a PO for a year's worth of service which is billed monthly, and the quantity varies each month - who reconciles the discrepancy? The Finance team or the procurer placing the order? I've seen this typically done by the finance team, quietly in the background, as part of the invoice approval process; however, I'd love to hear some other perspectives.
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6 Hereβs what else to consider
This is a space to share examples, stories, or insights that donβt fit into any of the previous sections. What else would you like to add?
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- Peter Cholakis Improve facilities repair, renovation, maintenance, and new build outcomes and reduce costs
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The procurement of facilities repair, renovation, maintenance, and new build services is particularly problematic.Most organizations have no verifiable cost baseline, or any concept of how to develop one. Furthermore, the lack of early and ongoing communication among planning, procurement, and project delivery teams further assures inefficient outcomes for all. 4bt.us
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- Saleh Al Ghunaim, CCMP Supply Chain Management I Procurement I Contracts Management
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Reconciling purchase order discrepancies and errors is crucial for accurate financial records and smooth business operations.Best practices include careful review of orders, prompt communication with suppliers, detailed documentation, implementation of controls, regular reconciliation, staff training, use of technology, and follow-up to avoid long-term issues.Regular reconciliations between purchase orders, invoices, and receipts catch discrepancies early, while technology can automate the process.These best practices lead to improved efficiency and accuracy in procurement processes.
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