Invoices must pass through several different stages in the accounts payable process before they can be approved. One of the first distinctions to make is whether the invoice involves a matching purchase order or not. What is a PO invoice, and how does it differ from a non-PO invoice? Here’s what you need to know about the invoice approval process.
PO invoice meaning
The PO invoice meaning refers to a purchase order invoice – an invoice that’s generated in response to an approved purchase order. It should include the purchase order number as well as specific details of the goods or services provided. When a purchase order invoice is submitted to accounts payable, it’s matched against the original purchase order for verification. This ensures that the agreed-upon costs per unit are uniform as per the agreement between buyer and seller.
Non-PO invoice meaning
By contrast, the non-PO invoice meaning refers to an invoice that doesn’t have an associated purchase order. These arise when your business spends money outside of the usual procurement process. Non-PO invoices are also sometimes called expense invoices, and they can be used for numerous indirect purchases a business makes.
Some examples of typical non-PO invoices include things like:
Travel reimbursement forms for employee travel expenses
Mileage reimbursement forms to cover employee driving and parking fees
Miscellaneous payment forms to cover the costs of stipends, professional licenses, society dues, or other odd expenses
Difference between PO and non-PO invoice
The invoice approval process will differ depending on whether a purchase order is involved. Purchase orders are generated by the vendor and sent to a supplier as an agreement before the transaction is completed. However, for expenses or one-off purchases made outside of the usual system, the supplier will send a non-PO invoice instead
Approval process for PO and non-PO invoice
PO invoices are associated with purchase orders; non-PO invoices are not. What does this mean for the invoice approval process?
PO invoice processing example
PO invoices are essentially pre-approved, because the supplier, goods or services, and amount are already agreed upon with the purchase order. For example, imagine that Company ABC orders a software package from Company XYZ at an agreed-upon price of $500. This would be stated on the purchase order and approved by both companies.
When Company XYZ sends its PO invoice for the software, it will include the same details. This means that Company ABC can automatically process the invoice for payment provided that the details on the purchase order and invoice match. However, if the PO invoice states a different price than the original $500, the invoice would be sent back to Company XYZ for review.
Non-PO invoice processing example
On the other hand, a non-PO invoice doesn’t have a pre-approved document associated with it. Therefore, the invoice approval process will be slightly more complicated. For example, imagine that an employee of Company ABC has just returned from a business conference and wishes to be reimbursed. They’ll submit a non-PO invoice outlining the expenses incurred for approval and repayment. This document must go through internal processing with appropriate management approving the expenses before it can be given the green light for payment.
The bottom line
As you can see, non-PO invoice processing tends to be more complex than PO invoice processing. This is simply due to the lack of a purchase order. GoCardless offers automated invoice processing to handle invoices and minimise human error. This streamlines the accounts payable process for PO and non-PO invoices alike. Non-PO invoices are automatically distributed to the correct departments for approval, while PO invoices go through automated matching and verification. The result is a faster invoice approval process.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.