Little mistakes in a supporting document, like a purchase order, might not seem like a big deal. You can easily fix a mistake once it is pointed out. However, incorrect or missing purchase orders actually make an extremely large difference on the ability to collect on your accounts receivable. Many companies must have a purchase order, and a correct purchase order at that, in order to even consider making a payment on an invoice. If you’re not ensuring this process is getting done, you might as well not even bother trying to get paid.

If you don’t currently have a process to ensure purchase orders are going out with invoices and are correct, it’s time to get that in place. Start tracking your disputes and see how many of them are related to purchase order issues. If you notice there are a lot of them, it might be time to start creating a purchase order checklist to be followed in your collections process. Below, we highlight some key areas that should be included in your checklist.

  • All the information included in your purchase order, whether it be the company name, the terms of sale of the billing/ship to addresses, should be verified with your internal ERP or accounts receivable software before attached the purchase order.
  • Ensure the following information is included on the purchase order:
    • Date of purchase order
    • Correct company name
    • Bill-to, sold-to and ship-to address
    • Terms of sale
    • Itemized charges
    • Signature and name of purchaser
  • Your purchase order should include a formalized customer terms and conditions. The customer terms and conditions should be created and formulated by management and included across the board on all purchase orders.
  • The total of the purchase order should be clearly marked so there are no discrepancies after payment is made.
  • If any changes are made to the purchase order, they should be noted in writing and confirmed by the customer, such as signing off on it.

If the purchase order it not being sent to even 30 percent of customers incorrectly, that has a large impact on your bottom line. That means 30 percent of your invoices will be paid late and 30 percent of your accounts receivable will be inaccessible. It is paramount that purchase orders are sent every time and are correct every time. By implementing a purchase order best practices checklist for your collectors to look at and get in the habit of, you can eliminate one of the major reasons that hold up on time payments.