Order, Cost of Raising

The cost of raising a purchase order is the sum of all those costs associated with the user raising a requisition, budgetary approval, choosing the source, raising the physical purchase order, communicating it to the supplier, receiving the goods or services, reconciling the purchase order and invoice, approving the invoice for payment, paying the invoice and archiving the documents. The true dollar cost varies with the methods used to create the purchase order, process the purchase order and effect payment. For example, a completely manual system with hard-copy documents and a cheque payment will cost more than an online transaction or the use of a procurement card. The ‘order to receipt’ part of the process will cost between $10 and $25 depending upon the degree of automation. The ‘invoice to payment’ process will cost anywhere between $10 and $30, again depending upon the processes employed. See also e-Commerce and Card, Procurement.

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