What Is a Non-PO Invoice and How Is It Processed?

Companies regularly engage in transactions that necessitate payment for goods or services received. These financial obligations are typically documented through invoices, which serve as formal requests for payment. While many invoices are linked to a pre-approved purchasing process, a significant category exists where no such prior authorization occurs. These are known as non-purchase order (non-PO) invoices.

Defining a Non-PO Invoice

A non-PO invoice is a bill a business receives for goods or services without an associated purchase order (PO). This means the expenditure was made outside the traditional procurement process, and these invoices lack a pre-established spending record. They are sometimes referred to as expense invoices, commonly used for indirect purchases.

Even without a PO, a non-PO invoice represents a legitimate financial obligation that the business must settle. Examples of expenses frequently leading to non-PO invoices include recurring utility bills like electricity, water, or internet services, and subscriptions for software or publications. Other common instances involve rent payments, legal fees, or travel and expense reimbursements for employees. These invoices require careful handling and internal validation despite not originating from a formal purchasing requisition.

Common Scenarios for Non-PO Invoices

Businesses encounter non-PO invoices when the formal procurement process is impractical or unnecessary. Recurring expenses, such as monthly office cleaning services or routine software licenses, often fall into this category because their consistent nature makes a new PO for each payment administratively burdensome. Small, ad-hoc expenditures, like minor office supplies purchased urgently or one-off repair services, also commonly result in non-PO invoices. The administrative effort involved in creating a purchase order for such low-value or infrequent transactions would often outweigh the benefits.

Emergency purchases, where immediate action is required, also generate non-PO invoices. Furthermore, direct services, such as consulting engagements or professional fees, where a contract might exist but not a specific PO for each billing cycle, lead to non-PO invoices. These scenarios highlight the flexibility non-PO invoices provide for managing diverse and sometimes unplanned expenses that do not fit neatly into a structured procurement workflow.

The Non-PO Invoice Processing Flow

Processing a non-PO invoice involves several internal steps, from its initial receipt to eventual payment. The invoice typically arrives at the accounts payable (AP) department or the department that incurred the expense. The AP team reviews the invoice to ensure it contains necessary details and then codes it, which involves assigning the expense to the correct general ledger accounts and cost centers. This coding is crucial for accurate financial reporting and budget tracking.

Following coding, the invoice enters an approval workflow, often routed to the relevant budget owner or department head responsible for the expenditure. Since non-PO invoices lack pre-authorization, this approval stage is critical to validate the expense’s legitimacy and align it with budgetary allowances. Depending on the invoice amount or type of expense, multiple levels of approval may be required, with higher-value invoices typically needing endorsement from more senior management. Once all necessary approvals are secured, the invoice is processed for payment.

Distinguishing Non-PO from PO Invoices

The fundamental difference between non-PO invoices and PO-backed invoices lies in the presence of a purchase order number. PO invoices explicitly reference a PO, which serves as a pre-approved document detailing the goods or services. Non-PO invoices, conversely, arrive without this pre-existing authorization. This distinction significantly impacts the internal control and reconciliation processes within an organization’s accounts payable function.

For PO invoices, the approval process is largely completed when the purchase order is initially created and approved. This allows for a streamlined reconciliation method known as 3-way matching, where the invoice is compared against the purchase order and the goods receipt or service confirmation to ensure all three documents align. Non-PO invoices, lacking a PO, generally undergo a 2-way matching process, where the invoice is primarily matched against a service receipt or other verification of delivery. This often requires more effort and can lead to longer processing times compared to their PO counterparts.