Purchase Orders – The Unsung Heroes of the Healthcare Accounts Payable System

While not every single purchase made by your healthcare payable system needs a purchase order (PO), it’s important to remember that POs can help ensure clarity and accountability in the procurement process and play a critical role in achieving AP and supply chain efficiency, cost control and compliance. Using POs for the right types of purchases can help improve payment accuracy, help reconcile transactions and ensure negotiated terms and pricing are honored.


Consistent use of POs can help avoid duplicate orders and payments

We did a quick healthcare claims data analysis and found that over the past few years, duplicate payments as a percentage of total recovery were 20 percent lower for healthcare systems with a minimum of 75-80% PO usage during the audit period. And while we know that there are other reasons for duplicate payments (like having duplicate suppliers in the payable system and data entry errors), PO usage can act as a check and balance in the payment process and ensure visibility into order management and spending. There’s more too.


POs play a major role in the inventory management process

POs provide a record of exactly what you ordered and at what price to clearly communicate all the details of a purchase. They help you keep track of what products should be arriving and invoices can be matched against the POs for accuracy. POs can help track returns, help keep a record of the inventory on hand and identify any discrepancies between the values shown in the records and the actual stock.


No matter what type of PO or accounts payable system you use, the following information should be included on your POs:

  • A unique number for tracking and reference purposes, known as the PO number.
  • The date of issue and the expected delivery date of products or services.
  • Buyer and seller contact information.
  • A detailed description of the products or services being purchased, including product codes, quantities, part numbers, unit prices and any other details.
  • Payment terms, including payment method, due date, and any applicable discounts or penalties for early or late payment.
  • Shipping details, including delivery method, shipping address, expected delivery date or timeframe, and any specific instructions or requirements.
  • Any additional terms, conditions, or contractual obligations agreed upon by the buyer and seller, such as warranties, return policies or other stipulations.
  • Authorized signatures from relevant parties providing approval of the PO.
  • Any special instructions or notes regarding the purchase.
  • Tax information.


Over the past ten years, duplicate payments represented the third largest PCR AP recovery by category. When used consistently and correctly, POs can be your unsung heroes, improving your bottom line by preventing duplicate and other payment errors.


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