Almost all companies are using Purchase Order Terms & Conditions with vendors that dictate the “rules of the game” for procurement transactions and the subsequent payment for those goods or services. Many are standardized and include acceptance & agreement, shipment, force majeure, price, warranty, governing law, etc. but are written solely with legal protection in mind.
Some companies take even further control of the procure to pay relationship by issuing supplier manuals and additional documents that further establish policies and procedures for doing business.
But did you know that the PO Terms and Conditions is the front-line and most effective method of controlling material costs in an organization? PO Terms and Conditions can still satisfy their intended purpose of providing protection from and settling legal disputes between a company and its suppliers while also dictating cost saving methods that can save companies millions.
One of the major issues identified after working with clients over 20 years is that the freight terms are too vague to properly define both ownership and responsibility for payments. This allows the vendor to interpret this language on their own and make decisions that could be hurtful to the purchasing company and go against the intentions of the PO Terms.
When a PO Terms document doesn’t provide proper protection, there is the opportunity for recoveries and improvement of the document to prevent future errors. For companies with extensive PO terms with well defined responsibilities, there is an even greater opportunity for an audit of the vendors’ compliance to these terms. Companies spend a tremendous amount of time and money refining these documents to protect themselves, only for vendors to ignore the rules contained within.
Auditrax is leading the charge in using the PO Terms and Conditions to help its clients reduce material costs and hold vendors accountable. As part of a procurement recovery audit, Auditrax will examine the document with a cost savings focus before the audit and also following the audit to see how errors could have been prevented using this document. All this comes without a charge or hourly rate, just the ability to work with your company to recover erroneous payments made in the past 4 years.
Protect yourself today and ensure that vendors are following the rules as agreed upon to help lower your material costs and increase profitability.