PO Line for .01

At one point our organization was strongly encouraged to never put .01 on a PO line for cost just because the buyer didn't know the price. Now I can't remember what the reasoning behind that was because at times the buyer really doesn't know what the price is going to be, but they still need to issue the PO.

Does anyone have an answer for why this is a poor practice? What's the difference if the buyer puts .01 or $185 if the true cost of the item is $200? Either way it is wrong, so would .01 make a difference? FYI, we also use average cost for issuing inventory out, so not sure if that is affected??

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Legacy Contributor

I was never given an official reason either but I believe its with the idea that buyers are encouraged to be proactive and obtain the price first. But for those instances that its not possible, think of the .01 or 1.00 (what we use) as a clear indicator that the price still needs to be obtained. Whereas if you went with 185, requesters, buyers and ap might view that as your actual cost.

dechevar

Stace, I agree with you. We went through the same deliberation; however, we instruct our requesters to add the $1 cost as the req requires a cost t be released. It is up to the buyer to determine what the appropriate cost is and correct the PO. For EDI vendors, you can set the PO10 to automatically update the PO when the PO122 is run (if you trust the vendor pricing). Manage price exceptions from GHX (or other VAN).

Lawson is very price focused, so we have devoted a lot of resource effort into loading contract and quotes to reduce the number of price exceptions. This does not account for specials though, so those must be researched by the buyer. By reducing price exceptions for Lawson built items, we free up a little more time for the buyers to perform this task.

Average cost does not affect the PO or Req.

Legacy Contributor

We don't allow .01 or $1 to be entered on a purchase order or by the requester for RQC. If the requester enters $1 for an item that is actually $2500, it by-passes process flow and makes for unhappy auditors. It also causes issues with the accruals if the PO does not get updated before the item is received. We would rather have $200 accrue for an item that is actually $150 than .01 or $1.

We too are very price focused and have devoted a lot of time in making sure items are added to the item master and pricing agreements are updated. Our price exceptions are very low. Our requesters are urged to contact the buyers for a cost before entering an item in RQC.

kim-gonzalez

We also try to get as many items in the item master and on agreements as possible. We have a Buyer Review process that must be completed before X and S item requisitions can go out for approval through ProcessFlow. We wouldn't want anyone approving a .01 or $1 requisition item when the cost is not correct.

Stace Webley

Does anyone use vendor determined as the cost option if they don't have a price?

dechevar

Terri has a good point regarding process flows. We found that 98-99% of our requisitions are under the signing authority of the approver anyway so $1, $250, or $2500 order doesn't matter. If the buyer finds the cost is higher than base approval, they are to delay the order until proper approval is acquired. If the requester feels the item is higher than their approval, they are instructed to work with the buyer or supplier to get an accurate estimate of the price.

The accrual doesn't occur until receipt. By the time it is received, the PO price should be corrected.

[Updated on 2/20/2015 10:48 AM]

Legacy Contributor

We have the users key in $1 on the req and X type items batch to a separate PO and remain unreleased so the buyer can find a cost. We would rather have the dollar as a clear indication that the user does not know the price than an estimate - which leads to the buyer trying to work the "discrepancy" that is not real.

We use $1 because .001 would be an easy typo and not require approval.

We toyed with vendor determined cost for repairs, the buyers found that it did not provide any benefit over the $1 specials.

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