Purchase orders have recently made the news big time, as a result of Amazon pulling the plug on thousand of vendors who suddenly had theirs cancelled.

And while this story isn’t about the latest Amazon media mess, it is about the PO. With the increase in automation since the introduction of second generation e-Procurement / Procure-to-Pay platforms that could do automated m-way invoice matching to POs, goods receipts, or contract schedules, certain vendors have argued that the need for the purchase order is declining rapidly as there are so many other ways to validate an invoice or an order, especially if there is a contract, an expected fulfillment schedule, a database of agreed upon prices, and so on.

And while they are not needed in some well defined situations, they are still needed. As indicated in our piece four years ago explaining that the dream of Hi-ho. Hi-ho. It’s Off PO We Go! is a pipe-dream.

As we noted years ago, when there is no (master) contract, or in the case of services, no agreed upon rate table, how do you verify you are paying for the right goods from the right supplier at the right time at the right amount!

Now, it’s true you won’t need it for everything that is not on a (master) contract — a T&E expense, an invoice for off-contract services under a threshold, MRO products being delivered at the previous, accepted rate, etc. — but this is not the majority (by dollar value) of the off-contract organizational spend.

Furthermore, as the prophet clearly highlighted in a Plus+ piece last year on Spend Matters [Membership Required] The Consequence of Eliminating Purchase Orders, the results of this can range from errors and mistakes to outright fraud, either supplier-driven or internal.

You see, if there isn’t another document with all of the information needed to verify an invoice, the supplier could accidentally, or maliciously, charge the wrong price. And if it’s for a new SKU, with no prior price, there’d be no way to even flag that maybe, just maybe, the invoice should be manually verified before being auto-paid.

So even if you took all of the great advice that the prophet gave you, which allows you to minimize situations where you need POs, and enable better purchase controls, implement better e-invoicing systems, allow good suppliers to qualify for discounts or early payment, etc., you’re still at a much higher risk than if you simply create, and send, a PO which, guess what, like an invoice, could, and should, be electronic.

So, while the paper should go, the PO, and what it enables you to do, will never go. So implement the right systems so it’s auto-generated, auto-sent, auto-verified, and auto-matched in all appropriate situations and then you can almost pretend it’s not there. Almost.

The best way to get out of trouble is to avoid trouble in the first place. In a recent blog entry, the Strategic Sourceror outlined four common mistakes that a company can avoid to minimize poor spend management and operational efficiency.

Overlooking the Importance of Supplier Visibility

Having a clear understanding of supplier practices is essential in evaluating the risks and possible sources of disruption that are inherent in sourcing partnerships. Blindly entering a relationship with a supplier may result in a procurement strategy that is misaligned with business goals, and this could result in slashed profits in the future. For example, the strategy could be high quality to support the brand, but the end result could be poor quality and the resultant impact to the brand from the high defect rate could result in lost sales and slashed profits.

Failing to Emphasize Results

Because Procurement resides in the back office, it is often tempting to think of it as a service function and not a driver of productivity and profit. It’s critical to focus on real, measurable, and substantial results and communicate the message to the rest of the business. Like any business process, procurement management needs to impact the bottom line. When it does, and the message is communicated, Procurement, unlike Rodney Dangerfield, will get more respect.

Overlooking Contracts

Without written contracts with specific language, businesses won’t have adequate protection if a supplier relationship goes sour. That’s why contracts should be reviewed by a corporate lawyer before being signed. But just getting the contract right isn’t enough. It’s also important to make sure the terms are followed, rebates and discounts are collected, and contracts are renegotiated and not allowed to go evergreen.

Permitting In-House Inefficiencies

An inefficient internal procurement process can limit firms’ ability to obtain the goods and raw materials they need in a timely fashion. Be sure to install the appropriate e-commerce tools that will help a company identify potential suppliers, execute RFxs, conduct auctions, optimize awards, and strategically manage the maximum number of categories.