Sachin Sharma, founder of Procuredesk, shows how a purchase order process cuts month-end close from weeks to days. The three main delays: waiting for invoices without a PO system, guessing at accruals instead of using open orders, and manually recoding invoices. Capture coding at the PO stage and invoices match automatically.
Companies that close books in days and not weeks do one thing different. They are not waiting on invoices. And if you are closing books in weeks and not days, which means five to six days, then this video is for you because I'm going to show you one easy way to speed up your month end close process is using a purchase order process. So here is what the problem is. You, you probably don't have all the invoices to close books. Or if you have the invoices, you're waiting for somebody to approve them, or you're waiting for classification so that you can code it to the right chart of accounts, right project, you need more information for that and so on. And that baiting is take time, right? So then you land up creating some accruals which might not be right, then you need to reverse it creates a lot of problem. So let's jump right in if you're joining me for the first time, welcome. My name is Sachin Sharma. I am the founder of Procuredesk, where we help growing companies automate their purchasing and AP processes. So problem number one, you're waiting for invoices. And here's what typically happens, right? If you do not have a purchase order process, you do not know what you need to accrue for or you basically put it in the books, right? So you're just waiting for invoices to show up and you don't have maybe a central place to track all your invoices, go through different mailboxes and so on. And you're always asking, hey, send me all the invoices so we can start working on, you know, closing our books. And guess what? It takes, you know, three or four days or five days post the month end close for you to get that before you can actually start. Now imagine having a purchase order process where you can kind of see all the purchase orders that has been issued and you can easily see what you should expect to receive. And if you haven't received it, you can just look at, you know, easily like following up with people and getting those invoices. So you're only falling on what you expect to show up. Number two is you're probably running manual accruals. So you're basically looking at the last month data, maybe adding 10% to it, or just using guesswork to run accruals for the month if you do not have those invoices. And the reality is that the liability is created when you made the purchase, even though it's not booked from a chart of account standpoint but the liability is created as soon as you purchase the product. Instead of waiting for invoices, trying to manually run enrolls, think about having a simple open order report where you can see all the purchase orders that has been issued to the vendors and you can quickly see what is invoice, what is yet to be received, right? Or, you know, maybe you have received it but no invoices available, or invoices are there but no receipt is done, and so on. You can quickly see all that and then create a accrual report based on the forecast that is in your purchase order system versus just, you know, guessing what it should be, right? Number three is you're probably spending too much time on reclassification of invoices, right? The invoices, you know, you basically send it to a requester to just say, hey, can you quote it for me? Maybe, you know, you're at a job site and you want foreman or the superintendent to kind of go in and code it to the right project, why did they buy? And things like that. And you land up getting some data back and you realize later it was coded to a wrong project, it impacts your project profitability and so on. So wrong coding creates a lot of problem. And the biggest issue with coding is AP team doesn't know where to code it, right? What was, what was it like, why they purchased it and for what was the purpose of it? Did project for a job, is it for internal purchase and so on. Now imagine if you have a purchase order system where people go and quote it up front when they're requesting a purchase. All that is coded up front. And when the invoice comes in, invoice ties to the purchase order encoding is done. There is no more need for you to chase people for coding. And that speeds up your approval process and that speeds up the time it takes for the invoices to show up in your accounting system and that speeds up your month end close process, right? So if you're struggling with closing books on time, focus on these three things, right? Don't wait for invoices. Just make sure you have a purchase order process. Second is run accruals based on an open audit report so you know exactly what you need to accrue for. Number three is have purchase orders quoted upfront so that your team doesn't have to wait for coding or spend time reclassifying invoices. If you're dealing with any of these problems, click on the link below and schedule some time with one of our product specialists so we can walk you through how a system can help you solve these problems. Thanks for joining me today, and I'll see you in the next video. Thanks.
