Often, the worst invoices to reconcile were those from recruitment agencies due to the variance of hours, overtime, change of staff, etc. However, just before I left, something revolutionary happened: an online PO system was introduced. Suddenly, invoice processing became much faster…
Fifteen years later, I am still shocked that PO systems hold sway in the world of contingent labour. A question that I regularly receive from clients is, “How does your VMS system integrate with our PO process?”
Limitations of Traditional PO Systems
I must confess that I find this a strange question. The reason is that a VMS with a robust procure-to-pay process will offer you all of the controls that a PO gives and more. Some of the limitations that POs have include:
- POs only track spend, not deliverables or quality or results. This is particularly critical in the Statement of Work (SOW) world where one of the key drivers for bringing this spend under management is to ensure that you are actually getting what you paid for.
- POs are really a trigger after the horse has bolted. Typically they are receipted at the point at which the invoice is received, where there is little opportunity to review or negotiate with the supplier.
All of the benefits that are offered by a PO, including visibility of spend and budget control, are included in a VMS and are typically embedded earlier in the process. As noted by Staffing Industry Analysts, “purchase orders and contingent labour just don’t mix
At IQN, we talk about the four-way match that gives the necessary control of the procure-to-pay process. The four steps are as follows:
- Requisition or RFx stage – approval of estimated budget
- Assignment or SOW – approval of finalised budget (which cannot exceed the original estimate without further approval)
- Billing Expenditures – costs (e.g., timecards or milestones) drawn down against the pre-approved budget
- Invoice – transactions match exactly to approved billing expenditures
These four steps give you the best of both traditional PO controls. They also provide more insight that will allow you to grow and mature a programme while having efficient procure-to-pay processes (particularly important if the programme is supplier funded).
Just Say ‘No’ to the PO
During an implementation process, we encourage the abolition of POs. The worst outcome for a client and a MSP during this process is the retention of the POs alongside the VMS. Keeping PO and VMS systems in sync can be challenging, with considerable duplication of work from input through to approvals.
Therefore, if you want to get the best of your VMS and focus on growing your programme, we strongly encourage you to join us and do away with POs!