Understanding why businesses follow formalized approval processes when it comes to purchase orders doesn’t require an MBA. Regardless of industry or size, scrutinizing POs is simply due diligence on the part of the businesses that use them. But while the concept of PO approval processes is unarguably sound, in practice, the methods many businesses employ fall short. In this blog, we’ll explore how PO approval processes are often more form than substance.
How Your Customers Treat PO Approvals
As a rental company, how often do you hear “It’s an emergency! I’ll get the PO to you tomorrow.” from one of your rental customers? Whether they can’t get PO issue approval due to being away from their PO system or all of their co-workers leaving for the day, this excuse is used on a near-daily basis. In these scenarios, promised POs sometimes turn up the next day and sometimes they don’t. When POs don’t materialize, follow-up invoices are often rejected by customers because they don’t have a valid PO number. Resolving this communication breakdown then falls onto the shoulders of your accounts receivable team, wasting their valuable time.
PO Approvals and Your Employees
On the flip side, your employees often find themselves in the same situation as your customers. When one of your staff needs approval on a re-rent or sub-rent but they can’t find anyone that can provide that approval, their options are limited. In most cases, your employees will call up a rental company they know and promise the PO in the morning. This starts the cycle all over again. Furthermore, depending on urgency, this same predicament applies to the purchase of parts, transport, and sometimes even equipment.
The reality is that pay order approvals are really only meaningful if they happen every time. But as the scenarios outlined above illustrate, PO approvals can falter in all-too-common everyday situations. For this reason, many businesses are finding exception reports to be more worthwhile in the long run. By deeply analyzing where their PO approval process succeeds and falls short, rental businesses can determine for themselves which approach is right for them.