Self Purchase Order Facts
Updated: Oct 25, 2021
Self Purchase Orders are generated when someone other than the responsible party for purchasing through a company creates a Purchase Order. This usually happens when an employee requires some sort of product for his or her own needs, and instead of going through the proper purchasing channels, they create their own Purchase Order. Most companies that allow their employees to create Self Purchase Orders require very little in the way of approval metrics. Generally, the immediate superior of an employee will be able to issue approval for a Self Purchase Order. After the employee is given approval, the employee personally shops for a vendor and creates their own Self Purchase Order that bypasses the procurement office of the company.
It might not seem as if there is a huge difference between a standard Purchase Order and a Self Purchase Order, and in reality they are very similar from a technical standpoint, but a company that uses a Self Purchase Order system is going to operate quite differently from one that uses a dedicated procurement officer to make company purchases.
Corporate Use of a Self Purchase Order
Most companies that still allow their employees to create their own Self Purchase Orders only do so because they believe it is a more efficient system for acquiring the materials and products they need to operate on a daily basis. Many construction and oil companies use them because of the tight schedules under which they operate. They simply don’t have the time to wait for multiple layers of approval.
Potential Negatives of a Self Purchase Order
Unfortunately, the truth is that anything that provides added convenience is going to come with an added cost, even if it isn’t an obvious added cost. A Self Purchase Order might seem like the best way to procure vital items in a timely manner, but their long-term costs can easily outweigh any benefits to short-term utility. A few of the most common negative repercussions of Self Purchase Orders are listed below.
When a company gives their employees the freedom to select their own vendors, it is possible the company could be susceptible to fraud. Perhaps the employee has made some sort of deal with the vendor that includes illegal bribes, or perhaps the employee is purchasing something with company funds that he or she needs only on a personal level. False invoices can be used to siphon funds from the company to private accounts, and without any systems in place to prevent such fraud, it can be difficult to trace. There are pages and pages of results in Google that show how procurement fraud is a major issue for businesses that use Self Purchase Orders. The most frightening aspect of this potential source of loss is that most businesses could experience severe fraud without ever realizing it.
It might not seem like it, but there is a big difference between purchasing your weekly groceries and purchasing items and materials to be used by a business. It isn’t something that just anyone can do, and Self Purchase Orders have been known to create situations where companies go over-budget simply because of excessive ordering. This is especially true for businesses that don’t use any sort of accounting software to help their employees track their spending.
Any business that uses a system of Self Purchase Orders is going to end up spending more in the long run, even if their employees are perfect with their ordering patterns. The reason for this is that an overarching procurement officer in charge of all purchasing throughout the company will be able to see the buying patterns in a much more succinct way. For instance, if a procurement office sees that the company uses a certain vendor more than others, they could use that information to haggle a better price from that vendor. By limiting which vendors are used, bulk pricing can be achieved that otherwise would not be possible with Self Purchase Orders. Combined with appropriate accounting software, a skilled procurement officer can drastically reduce spending.
Vendor Performance Tracking
When an employee creates Self Purchase Orders, they are isolating their experience with that vendor from the rest of the company. If that vendor is then late on the delivery, or if they deliver the wrong item, the only person who is aware of the problem is the employee who made the order. A procurement officer, on the other hand, can track the performance of vendors based on the buying patterns of the entire company. Any employee can technically place an order, but the ability for a business to respond as a whole to subpar vendors is vital for success.
Interestingly enough, the very factor that most brands use to warrant allowing their employees to create Self Purchase Orders is one that actually doesn’t make sense. That factor is time, and many businesses seem to think it is impossible to operate in a timely manner without using Self Purchase Orders. This could not be further from the truth.
The reason many businesses believe this is because they are so used to the idea that purchasing is a slow process, but that is only due to the fact that they have such disjointed and ineffective purchasing processes. It would be a positive change to both time and financing to remove such a system, even in the industries that famously claim to need Self Purchases Orders. Modern technology can easily handle any perceivable slow-down of the purchasing process that certain businesses expect when using a procurement officer.