Best Practices for Managing Discrepancies in Purchase Orders

Dec 17, 2021 | Basic 101: Introduction to procurement

Stawan photo


Dec 17, 20213 min read

Establishing a process for managing purchase order discrepancies is crucial for reducing financial losses, delays in shipment, and maintaining customer satisfaction. Companies should define roles, set timelines, and document changes to avoid discrepancies. Implementing a purchase order discrepancy management system can result in improved accuracy and cost savings.

Purchase order discrepancies can have a major impact on the business operations of a company. These discrepancies occur when there is a mismatch between the actual goods or services purchased, and what is stated in the original purchase order. These discrepancies can lead to lost revenue, delays in shipment, or other issues that can affect customer satisfaction and the bottom line. As a result, it is imperative for companies to take steps to identify and resolve purchase order discrepancies in an efficient and timely manner. 

The Impact of Purchase Order Discrepancies on Business Operations 

Purchase order discrepancies can create problems for businesses in a variety of ways. The most common issue associated with purchase order discrepancies is financial loss. When goods are delivered with discrepancies, it can be difficult for businesses to recover any associated costs. This can result in unexpected expenses, which can significantly reduce profits or even cause companies to experience losses. 

In addition to financial losses, purchase order discrepancies can also cause delays in shipment. If goods are delivered with discrepancies, they may need to be rejected or returned, delaying shipment and causing further issues with customer satisfaction. Moreover, if goods are not properly documented and recorded, it can lead to disputes between vendors and customers. These disputes may end up in legal proceedings, which can cost time and money. 

Furthermore, purchase order discrepancies can lead to a lack of trust between vendors and customers. If discrepancies are not addressed in a timely manner, customers may become wary of the vendor and their ability to provide accurate and reliable goods. This can lead to a decrease in sales and a decrease in customer loyalty, which can have a long-term negative impact on the business. 

Identifying & Resolving Common Purchase Order Discrepancies 

Once the communication protocols have been established, companies can begin to identify and resolve common purchase order discrepancies. This involves analyzing the data from the original purchase order and looking for any inconsistencies or inaccuracies. Companies should also look for any discrepancies in pricing or quantity that may have been overlooked during the initial order. 

Once any inconsistencies have been identified, companies should take steps to resolve them in an efficient manner. This could involve contacting the vendor to discuss the issue and find a suitable resolution, or reaching out to customers to explain any discrepancies that may have occurred. Companies should also ensure that any changes made to the purchase order are documented so that the issue does not arise again in the future. 

It is important to remember that purchase order discrepancies can be costly for both the vendor and the customer. Therefore, it is essential that companies take the necessary steps to ensure that all discrepancies are identified and resolved quickly and efficiently.  

Establishing an Efficient Process for Managing Purchase Order Discrepancies 

In order to ensure that purchase order discrepancies are managed efficiently and effectively, companies should establish a process for identifying and resolving them. This process should involve clearly defining roles and responsibilities of all parties involved, setting timelines for resolution, and establishing a system for documenting any changes made to the purchase order. Companies should also strive to establish clear communication protocols between vendors and customers so that any issues can be addressed quickly and efficiently. 

Ford Motor Company, an American multinational automaker, implemented a purchase order discrepancy management system that helped to reduce the number of discrepancies by over 90% and achieve cost savings of up to 10%. 

Johnson & Johnson, a multinational medical devices, pharmaceutical, and consumer packaged goods manufacturer, leveraged advanced technologies to automate its purchase order discrepancy management process, resulting in improved accuracy and reduced costs. 

By following the steps, companies can ensure that purchase order discrepancies are managed in an efficient manner. This will help reduce financial losses and delays in shipment, as well as ensure customer satisfaction. Moreover, it will help companies save time and money by avoiding costly legal proceedings associated with unresolved purchase order discrepancies. 

On FactWise Source-to-Pay, an end-to-end comprehensive procurement platform for global product manufacturers, purchase order creation is simplified and can be automated to ensure accuracy and efficiency. With our holistic supplier analytics and RfX management analytics, teams can negotiate lower costs and payment terms to maximize their cash flow. PO creation is automated on FactWise, and all item information including item description and specifications, quantities, payment terms, delivery timelines, incoterms, and other user-added custom fields are auto-added from the RfX event to all Purchase Orders created ensuring a high degree of data integrity and tremendous accuracy. FactWise POs also include all company information for buyers and sellers, and can be downloaded from the system with a single click.  

In the off-chance that discrepancies are detected, stakeholders get notified easily and automatically, and rescheduling is extremely simple. FactWise increases savings by up to 25% and efficiency by up to 20%.  

About the Author

Stawan is the founder and CEO of FactWise. Before founding FactWise, Stawan was the NA TMT-Procurement Leader at McKinsey. Passionate about procurement, Stawan has 15 years’ experience in enabling clients of all sizes to achieve business impact via procurement.


Show all

No comments to show

Suggested Articles



Privacy Policy

Terms & Conditions

©Copyright 2024. FactWise. All Rights Reserved.