Here is a common conversation I have had with companies.
"We have a No PO, No Pay policy," Jane from Acme said with confidence.
Me, "Really, do you? What is your compliance to No PO, No Pay?"
Jane, "Well, about 20%."
Me, "Does that exclude your documented exceptions?"
Jane, "Yes."
Me, doing the math in my head, "What is on is your exception list?"
Jane, "Well, legal, marketing, utilities, ...."
Me, I have now stop listening and ponder to myself that the "policy" is more like a guideline. And Jane is still listing her exceptions.
I feel for Jane. I have been Jane. I think if we reflect back and really challenge ourselves, that we have all been Jane or still are.
So, why is this so hard? Why do we talk about having No Po, No Pay policies when we really don't? It is such a simple concept, but so complicated to truly achieve.
Executive Sponsorship
This is one of the main reasons that these policies fail. Often the executive sponsors are a name on a back of a tee ball shirt vs being an active sponsor. A sponsor who will hold other executives feet to the fire when they ask for an exception because they are unique. This sponsor also needs to clearly understand the value of such policy and promote it across the company. A sponsor who does not ask for exceptions him or herself. Unless you have a sponsor like this, your policy is at risk.
Measurement
Do you have a goal that you are striving for with your policy? Do you have a clear definition around how you will measure that goal? Please, I beg you, please do not exclude your exceptions from this calculation. If you exclude your exceptions, you are giving yourself a false warm blanket, cozy feeling versus a health dose of reality. The definition of your metric should be as simple as invoices paid on PO/total invoices paid.
Enforcement
When I think of enforcement, I think of two areas - what is your control point in the process to actually enforce the policy and what are you doing with the data to provide visibility to your sponsor and other "enforcers" across the company.
Let's start with the control point. This is simple, but complicated. The control point must be that if AP receives an invoice that is not referring to a PO, it must be rejected to the supplier. Then, the supplier must get a PO and resubmit the invoice. That part is simple. The complicated part is making that happen. You have to have a good process and technology that allows you to communicate effectively to suppliers. There will be a problem if your rejected invoices go into a blackhole. Also, the suppliers need to be fully aware of this change, as they need to take action vs just resubmitting the non PO invoice over and over again. (Been there, done that - it is not good.)
If you have the control point activated, then you also have all this lush data that you can use to change behavior within your company. Using that data is key. You could have a three strikes and then you are reported to executives in your organization for prompt action. You could provide dashboards weekly. The possibilities are endless, so please walk through that door.
Exceptions
This is my nails and chalk board moment. Exceptions....eekkk.... Exceptions are like the little thread that you pull on and unravel a beautiful shirt. Once you open the door, it is so hard to control. Here is a concept for you - do not allow them. If you receive an invoice, a PO should be referenced or at least in the system. If there is no invoice, like taxes, dues, etc...then no PO is needed. You might be thinking that is impossible, but maybe that is a large reason for the lackluster implementations of this policy. Until we start thinking differently about this, we will continue to struggle.
And, that is why this is a simple, but complicated policy to implement. At the end of the day, actually tackling No PO, No Pay gives your Procurement teams such an advantage and totally worth the effort. Good luck all!
