Why Your Purchase Order Process Is Not Giving You Control of Spend
A supplier invoice arrives for £12,000.
Finance was not expecting it.
Operations says the work was approved weeks ago.
The project manager assumed purchasing knew.
Purchasing assumed finance could already see it.
Nobody has necessarily done anything wrong.
The problem is that the purchase order process did not give the business visibility of the commitment when the decision was made.
This is common in growing businesses.
Purchasing often begins as a simple administrative task. As transaction volumes increase, that same process needs to become a way of controlling commitments, budgets and cash flow.
If it does not, finance only sees part of the picture until invoices arrive.
Why does the purchase order process matter so much?
A purchase order is not just paperwork for a supplier.
Used properly, it records a financial commitment before cash leaves the business.
That matters because there can be a significant gap between deciding to spend money and receiving the invoice.
During that period, the business has already committed financially.
If that commitment is invisible, management may believe there is more budget or cash available than there really is.
📊 Good purchasing control starts when the business commits to spend, not when finance receives the bill.
What happens when purchasing is managed informally?
Informal purchasing can work surprisingly well when a business is small.
Someone needs something.
They ask a manager.
The manager agrees.
The order is placed.
Finance deals with the invoice later.
The problem appears when this happens dozens or hundreds of times across different teams.
Suddenly, commitments are being made through:
Emails
Phone calls
Supplier portals
Project conversations
Spreadsheets
Verbal agreements
Company cards
Finance may know what has already been invoiced.
It cannot necessarily see everything the business has agreed to buy.
That is where control begins to weaken.
Why does committed spend disappear from view?
Committed spend is money the business has agreed to spend but may not yet have been invoiced for.
For example:
A project manager orders £20,000 of subcontracted work.
The supplier will invoice next month.
Operationally, the commitment already exists.
Financially, the cost may not yet appear in the accounts.
If that purchase is captured through a structured process, management can see it.
If it exists only in an email chain, finance may discover it when the invoice arrives.
That difference can affect:
Cash-flow forecasts
Project margins
Departmental budgets
Purchasing decisions
Month-end reporting
💷 An invoice should confirm a commitment the business already understands. It should not be the first time finance learns about it.
What are the warning signs your purchasing process has outgrown the business?
Weak purchasing control tends to reveal itself through recurring operational problems.
Finance regularly receives unexpected invoices
The invoice may be completely legitimate.
The problem is that finance did not know the cost was coming.
This creates extra checking and makes cash-flow planning harder.
Purchase orders are raised after the order was placed
This is sometimes called a retrospective PO.
Someone buys the goods or services first.
Then, when the invoice arrives, they raise a purchase order so the paperwork matches.
At that point, the purchase order is no longer controlling anything.
It has become an administrative record of a decision already made.
👉 A purchase order raised after the spending decision is documentation, not control.
Suppliers regularly invoice without a PO number
Finance has to investigate:
Who ordered it?
What was agreed?
Which project does it relate to?
Has the work been completed?
Is the price correct?
Who can approve it?
Every unanswered question adds delay.
Teams maintain their own purchasing spreadsheets
Operations tracks supplier commitments in one file.
Project managers have another.
Finance has the official accounts.
Purchasing may have its own list.
The business technically has all the information.
It just cannot see it in one place.
Project margins change when invoices arrive
A project looked profitable last week.
Then several supplier invoices appeared.
The actual margin falls sharply.
The invoices may not be the problem.
The business simply did not have visibility of the committed costs early enough.
People bypass the official process
Employees may avoid raising purchase orders because:
It takes too long.
They do not know how.
The process requires too much information.
Approval responsibilities are unclear.
Suppliers need an immediate answer.
The system is difficult to use.
When people repeatedly work around a process, it is worth understanding why.
Simply reminding them to follow it rarely fixes the underlying issue.
Why does poor purchasing control create more work for finance?
Finance often becomes the final control point when earlier stages are weak.
An invoice arrives.
There is no purchase order.
Finance has to find the buyer.
The buyer checks with the manager.
Someone looks for an email.
Another person checks whether the goods arrived.
Finance confirms the coding.
The invoice is eventually processed.
This may take 15 minutes.
Or it may take several days.
Multiply that across hundreds of invoices and the amount of avoidable administration becomes significant.
A stronger purchase order process moves more of that control earlier.
The information is captured when the purchase is created rather than reconstructed when the invoice arrives.
What should a good purchase order process actually achieve?
The goal is not simply to make sure every invoice has a PO number.
A useful purchasing process should answer several business questions.
What are we buying?
There should be enough information to understand the goods or services being ordered.
Why are we buying it?
The purchase should relate to a genuine business requirement.
Who authorised the commitment?
Responsibility should be clear.
What will it cost?
The expected value should be known before the invoice arrives.
Where should the cost go?
It may need allocating to:
A project
A department
A cost centre
Stock
A customer order
Has it been received?
The business should know whether the goods or services were actually delivered.
Does the invoice match what was agreed?
Finance should be able to compare the invoice against the original commitment and receipt.
When those questions are answered through the process, purchasing becomes a control mechanism rather than an administrative exercise.
Why is matching invoices back to purchases so important?
Consider a supplier invoice for £9,800.
If there is no purchase order, finance may need to establish whether:
£9,800 was the agreed price.
The full service was delivered.
The cost belongs to the right project.
The correct quantity was received.
The invoice has already been processed elsewhere.
If the original order and receipt are recorded properly, those checks become easier.
The business is comparing the invoice against something that already exists rather than rebuilding the transaction from scratch.
That reduces administration while improving control.
Should every purchase require the same process?
No.
A £30 office purchase does not necessarily need the same control as a £30,000 subcontractor commitment.
The process should reflect risk.
A business might distinguish between:
Routine low-value purchases
Simple, controlled and easy to process.
Regular supplier purchases
Structured through agreed suppliers and purchasing processes.
Project-related expenditure
Clearly linked to the project so committed costs are visible.
Significant purchases
Subject to appropriate review before the commitment is made.
Unusual or unbudgeted spend
Given additional scrutiny because it sits outside normal activity.
⚖️ Good purchasing control is not about making every purchase harder. It is about applying enough control to the purchases that matter.
How does poor purchasing affect project profitability?
Purchasing and project profitability are closely linked.
Imagine a project with:
£100,000 revenue
£50,000 recorded costs
£30,000 of subcontractor work already ordered
If the subcontractor commitment is not visible, the project might appear to have a £50,000 margin.
In reality, a significant part of that margin is already committed.
A project manager looking only at posted costs could make further spending decisions based on an incomplete picture.
Better purchasing visibility helps teams understand:
Actual costs
Committed costs
Remaining budget
Expected margin
That gives managers time to act before the project is complete.
How does purchasing affect cash-flow visibility?
Cash-flow forecasts depend partly on understanding what money is likely to leave the business.
Supplier invoices provide part of that information.
Purchase commitments can provide an earlier view.
For example:
A business may have £300,000 in the bank.
That sounds healthy.
But it may also have:
£90,000 of supplier invoices due
£80,000 of outstanding purchase commitments
£60,000 of subcontractor work underway
Those commitments matter even if some invoices have not yet arrived.
The clearer the purchasing process, the easier it becomes to understand what future cash requirements may look like.
Why spreadsheets struggle with purchase order management
A purchasing spreadsheet can work when volumes are low.
It might track:
PO number
Supplier
Value
Requester
Project
Status
Expected delivery
The challenge comes when the spreadsheet needs to remain aligned with:
Supplier invoices
Goods receipts
Project costs
Stock
Finance
Payments
Someone has to update it.
If the order changes, the spreadsheet needs changing.
If part of the order arrives, the spreadsheet needs updating.
If the invoice arrives in finance, someone needs to connect it back.
The spreadsheet gradually becomes another system.
📋 The more people required to keep a purchasing tracker accurate, the less reliable that tracker usually becomes.
How can you improve purchasing without creating more bureaucracy?
Start with the process rather than the software.
Step 1: Understand how purchases are really made
Do not rely solely on the documented process.
Follow several real purchases from request to payment.
Ask:
Who identifies the requirement?
Who chooses the supplier?
When is approval given?
When is the PO raised?
Who sends it to the supplier?
Who records receipt?
How does finance know the invoice is valid?
Look for gaps between the official process and what employees actually do.
Step 2: Identify why people bypass it
If retrospective purchase orders are common, understand the reason.
Perhaps:
The process is too slow.
Approval limits are unrealistic.
The system requires unnecessary information.
Nobody owns urgent purchases.
Employees cannot easily check whether a PO already exists.
Fixing those issues is more effective than repeatedly telling staff to comply.
Step 3: Define when a purchase order is required
The rules should be simple enough for employees to understand.
For example:
Which purchases require a PO?
Are there sensible exceptions?
Who can commit the business to spend?
Which suppliers can be used?
What information must be recorded?
Complex rules encourage workarounds.
Clear rules support consistency.
Step 4: Capture the right information once
When the PO is created, record the information the wider process needs.
That might include:
Supplier
Expected value
Required date
Project
Department
Item or service
Delivery location
Avoid asking employees to enter information that has no practical purpose.
The objective is useful control, not form filling.
Step 5: Record receipt as part of the operational process
A purchase order should not simply disappear after it is sent.
The business needs to know whether the goods or services arrived.
This is particularly important where:
Deliveries are partial.
Quantities change.
Services are completed in stages.
Stock is involved.
Project costs depend on delivery.
The receipt connects what was ordered with what was actually delivered.
Step 6: Deal with exceptions rather than every transaction
Once routine purchases follow a reliable process, teams can focus attention on unusual activity.
For example:
Invoice value does not match the PO.
Quantity differs.
Supplier is unexpected.
Purchase exceeds agreed limits.
No receipt has been recorded.
This creates better control without manually investigating every normal transaction.
How can Business Central support better purchasing control?
Microsoft Dynamics 365 Business Central can connect purchasing with the wider financial and operational process.
From a business perspective, that means purchase orders do not have to exist separately from:
Supplier records
Stock
Projects
Finance
Sales requirements
Reporting
This can give teams a clearer view of what has been ordered, received and invoiced.
Microsoft also supports approval workflows within Business Central where businesses need structured controls around particular purchasing decisions.
However, software should follow a sensible process.
If every purchase has unnecessary approval stages or employees routinely bypass the rules, putting the same process into Business Central will not automatically improve it.
The strongest Business Central purchasing setups start with clear responsibilities and practical purchasing rules.
What does a better purchasing process look like in practice?
Consider a growing engineering business.
Before
A project manager needs £15,000 of specialist components.
They email a supplier and copy their manager.
The manager replies with approval.
The supplier starts work.
Operations records the expected components in a spreadsheet.
Finance knows nothing about the commitment.
Three weeks later, a £15,000 invoice arrives.
Finance starts investigating.
The purchase was legitimate.
But the process created unnecessary uncertainty.
After
The requirement is recorded through the agreed purchasing process.
The project and expected cost are captured.
The appropriate person approves the commitment.
The purchase order is sent to the supplier.
The expected cost is visible against the project.
Receipt is recorded when the components arrive.
The invoice is then checked against an existing transaction.
The amount spent has not changed.
The visibility and control have.
Purchase order process health check ✅
Ask yourself:
Do supplier invoices regularly arrive without purchase orders?
Are purchase orders sometimes raised after the purchase was made?
Does finance discover significant costs when invoices arrive?
Do project managers track commitments in separate spreadsheets?
Can managers see what has been ordered but not yet invoiced?
Are purchasing rules understood across the business?
Do employees bypass the process because it takes too long?
Are receipts recorded consistently?
Does finance spend time finding out who ordered something?
Can you identify committed spend without asking several departments?
If several answers highlight problems, purchasing may need a wider process review.
What should you measure before changing the process?
You do not need dozens of purchasing KPIs.
Start with practical measures.
Invoices received without a valid PO
This shows how much purchasing activity is bypassing the intended process.
Retrospective purchase orders
A high number suggests POs are being used for administration rather than control.
Time from request to order
If routine purchases take too long, employees may work around the process.
Invoice exceptions
Track how often finance has to investigate mismatched values, quantities or suppliers.
Committed spend visibility
Can the business identify significant outstanding commitments before invoices arrive?
These measures help show whether the problem is improving.
Why better purchasing becomes more important as you grow
Small businesses can rely heavily on personal knowledge.
A director may know every major supplier commitment.
Finance may speak to operations every day.
Managers know which projects are spending money.
That approach becomes harder to sustain as the organisation grows.
More people gain purchasing responsibility.
More projects run simultaneously.
More suppliers are involved.
Leadership cannot personally know every commitment.
The business needs systems and processes to provide that control instead.
That is what a scalable purchasing process should achieve.
Final thoughts
Purchase orders are often treated as administrative paperwork.
We think that misses their real value.
A good purchase order process gives the business visibility of financial commitments before invoices arrive.
It connects operational decisions with financial consequences.
And it reduces the amount of time finance spends reconstructing purchases after the event.
The answer is not creating more forms or more approvals.
It is building a process that captures the right information when the spending decision is made.
👉 If finance only understands your purchasing commitments when invoices arrive, the business is seeing the cost too late.
People Also Ask
What is a purchase order process?
A purchase order process controls how a business requests, approves, orders, receives and records goods or services before supplier invoices are processed.
Why is a purchase order important?
A purchase order records what the business has agreed to buy, from which supplier and at what expected cost. It can improve spending control and visibility of commitments.
What is committed spend?
Committed spend is expenditure the business has agreed to but may not yet have received an invoice for, such as an outstanding supplier order.
Why are retrospective purchase orders a problem?
A retrospective PO is created after a purchasing decision has already been made. It records the transaction but provides little control over the original commitment.
Can Business Central manage purchase orders?
Yes. Business Central supports purchasing processes including purchase orders, receipts, invoices and related approval workflows.
How can a business improve its purchase order process?
Start by simplifying purchasing rules, clarifying ownership, recording commitments before orders are placed and connecting purchasing information with finance and operations.
