Best practices for closing purchase orders

Find out interesting insights with Shaun Walker, Co-Founder & Strategic Advisor

Moderated by Sherry, Digital Transformation Consultant at Hyperbots

Don’t want to watch a video? Read the interview transcript below.

Sherry: Hello and welcome to all of our viewers on CFO Insights. I am Sherry, a financial technology consultant at Hyperbots, and I’m very excited to have Shaun Walker here with me, who is a seasoned internal audit leader, with a wealth of experience in driving risk management, compliance, and governance initiatives across diverse industries. Thank you so much for joining us today, Shaun. We’re going to discuss some important aspects of closing purchase orders and how organizations can improve this process. Now let’s dive right in. Before we talk about the best practices, I wanted to first start by asking you about some of the most common challenges you encounter when closing purchase orders.

Shaun Walker: Sure. So in my experience, some of the main things would be invoices not being matched, there being partial deliveries, items being returned, sometimes discrepancies between goods not received, purchase orders, and often there may be difficult workflows. Depending on the amount or the dollar value of the invoice, there may be several different people that have to approve before getting to the final.

Sherry: Adding on to this challenge, how do unmatched invoices contribute to POs remaining open for extended periods, and what strategies can be used to address this issue?

Shaun Walker: One thing is being able to automatically match those invoices. Having a system implemented that does it where it’s not a manual process and speeds it up. Also, performing regular audits or reconciliations will also make the process more efficient.

Sherry: As we are already talking about strategies, what best practices can be adopted to manage blanket POs and ensure they do not remain open longer than necessary?

Shaun Walker: Being able to track receipts is one thing. Also, having clear end dates for blanket POs would be really good for closing them out in a timely manner.

Sherry: One of the most commonly faced problems in the industry is regarding service POs, which often face challenges in the receipt process. How can organizations effectively manage and close service POs?

Shaun Walker: One thing they can do is integrate a service receipt process within their ERP system. Depending on the company, they’ll have different ERP systems and functionality. However aligning those systems will allow for PO closure, and that will help with the process.

Sherry: About yet another obstacle, how can a lack of diligence in PO creation affect the PO closing process, and what steps can be taken to improve this?

Shaun Walker: A couple of examples, there might be difficulties or complications with closing POs, different delivery, and invoice staging. One of the things that we can do is implement standardized templates and have a detailed approval process, and that’ll enhance the accuracy of the POs as they’re being created.

Sherry: Since AI is taking the finance industry by storm, I have to ask, what role does AI play in improving the PO closing process? And what specific AI applications have proven effective?

Shaun Walker: The great thing with AI is it’s able to somehow predict the future. It can look at data and potential issues. With AI, we can optimize workflows, and create automatic matching, and automatic reconciliation as well.

Sherry: From your experience, can you share some examples of how vendor performance issues have impacted the PO closure? And what strategies can mitigate these issues?

Shaun Walker: Sometimes when products are being delivered, they might be delivered in incorrect quantities, or even if it is the right quantity, it might not be delivered at the right time. Having systems in place that track these things for you, creating less likelihood of human error, is the key to improving the invoicing process.

Sherry: Makes sense, Shaun. What recommendations do you have for organizations or our viewers looking to streamline their PO closing processes and reduce the number of open POs?

Shaun Walker: The main thing is looking at their ERP system to see if there are any updates for optimization. Having a system in place that can perform reconciliations, update workflows, and automatically match these invoices will increase the overall efficiency of the system and the invoice processing in an AP department.

Sherry: Thank you so much for such an insightful session, Shaun. Your views on such notable concerns in the industry are invaluable for organizations looking to enhance their PO closing processes.

Shaun Walker: Absolutely. Thank you so much.

What to read next