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Should I create purchase orders for regular bills?

Should I create purchase orders for regular, monthly bills or only irregular purchases?

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I have started a new job and the procurement process set in place involves creating purchase orders for ALL bills.

As I have digitised the procurement process and moved the procurement workflow to ApprovalMax, I do not see the point of raising PO for every bill. It is a waste of time and resources and creates unnecessary clutter in Xero. 

What is the view from auditing point of view? 

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By Paul Crowley
03rd Jun 2021 08:48

If there is a process in place the either follow the process or get the process changed.
Audit is about proper controls
If controls are ignored, the failures demonstrate that the controls are ineffectual.
Push the problem back to the person who set up the process

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By nmms
03rd Jun 2021 08:58

Thank you.
It's hard to push back to person who created the process, as it is my job now. :)
I thought it would be good to change the workflow for regular bills and skip POs step, but I am not sure if any auditors auditing our accounts may have problem with that.
We are in the process of tendering to new accountants so I cannot really ask our accountants..

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By Truthsayer
03rd Jun 2021 09:09

The auditors will adapt to whatever system you choose. I would estimate that 95%+ of commercial buying is done without a PO, so don't worry about it from that angle.

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By tom123
03rd Jun 2021 09:22

Mine would be the reverse - but I am a manufacturer.

For me the distinction is generally:

Parts - Yes
Services - (like repair to buildings etc ) - Yes
Advertising - Yes

Electricity bills / rent / copier contracts / Insurance - No
Vehicle repairs - No.

Everything I buy is on a purchase ledger though, with the exception of Amazon.

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By Tax Dragon
03rd Jun 2021 09:31

nmms wrote:

Thank you.
It's hard to push back to person who created the process, as it is my job now. :)
I thought it would be good to change the workflow for regular bills and skip POs step, but I am not sure if any auditors auditing our accounts may have problem with that.
We are in the process of tendering to new accountants so I cannot really ask our accountants..

Could you not wait until new accountants are appointed and then ask?

(Thanks to Dulls for pointing out the need for the "not" in that sentence.)

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By Duggimon
03rd Jun 2021 09:23

The point of the process is to guarantee, or as close as possible, with failsafes and checks built in, that every transaction is properly captured and recorded and fed into the financial statements.

Provided the process is robust enough to ensure this happens, and prove it's happened, the auditors will be happy. It doesn't matter whether you achieve it with or without purchase orders.

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By johnt27
03rd Jun 2021 09:43

If you control the process whether or not purchase orders are needed all the time is entirely up to you, assuming your boss will sign off on the change. All the auditors are interested in are the systems in place in the year they are reviewing and whether or not they can poke holes in them or rely on them, if they choose to do so. They're not bothered if the process is highly inefficient...

As for what is appropriate you don't mention if there are budgets, regular management accounts etc which all act as controls if spend is monitored against them. For some invoices - services, rent, rates etc you're going to get those irrespective of whether you have a PO or not and I wouldn't expect a PO should be generated for these, but an appropriate approval and payment process be in place, assuming they aren't settled on DD. You can do that in ApprovalMax easily.

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