Free text purchase orders are where some of your easiest cost reduction opportunities are lurking. They represent irregular spend. Often, they’re one-time purchases or non-repeatable transactions that slip through the cracks.
Every business has them. Few manage them well.
These purchases are difficult to track against budgets. Their unpredictability makes them easy to overlook. Yet they often represent significant financial exposure.
What is a free text purchase order?
A free text purchase order (PO) is a type of purchase order that doesn’t rely on pre-defined catalogs or structured material or service master data within an Enterprise Resource Planning (ERP) system. Instead of selecting items from a list, the requisitioner manually enters a plain text description of the goods or services being procured, along with the quantity and price.
This is typically used for one-off purchases, non-standard items, or services where a formal material record is impractical or unavailable.
Free text purchase orders create unnecessary risk. These POs usually can’t be deciphered to anyone except the person who made the purchase requisition.
- Accounts Payable staff often find it difficult to reconcile invoices with POs.
- Procurement teams can’t easily classify or understand what exactly has been purchased.
Classic examples of bad free text PO descriptions
- “Sandwiches for customer meeting” – For how many people? The administrative cost of processing this invoice probably exceeds the sandwich cost itself.
- “Maintenance technician for XYZ line” – Who performed the work? For how long? What was their hourly rate? Did they charge overtime? Was their time measured against an estimate?
- “Spares for line upgrade” – Which spares? Was a quote issued? What was the unit price for each item? How much was charged for transport?
- “Quote XYZ123” – The worst offender. A proper quote exists somewhere. It’s just been squirrelled away in someone’s email inbox rather than itemised in the PO.
Free text POs exist across all categories. Materials, services, and software all suffer from this problem. But the risks differ significantly between these categories.
What are the downsides of free text purchase orders?
Free text purchase orders create multiple threats to your organisation.
- Poor data quality sits at the heart of the problem. When PO descriptions are vague or incomplete, spend analysis becomes impossible. You can’t identify patterns. You can’t benchmark pricing. You can’t negotiate volume discounts.
- Fraud risk increases dramatically. Vague descriptions provide cover for collusion between suppliers and requisitioners. A supplier could charge well above market rates. Or they could invoice a higher price and offer the requisitioner a kickback. With poor descriptions, proving fraud becomes nearly impossible without investigation.
- Invoice reconciliation becomes a nightmare. Accounts Payable staff waste hours trying to match invoices to POs. This creates bottlenecks and inevitably delays payments. It frustrates suppliers, and the administrative cost often exceeds the value of what was purchased.
- Budget control evaporates. Without proper categorisation, these purchases escape financial oversight. Spend leaks through holes in your process. Management lacks visibility into where money goes.
- Maverick spending flourishes in this environment. When the proper process is difficult or unclear, stakeholders take shortcuts. They commit to purchases before raising POs. They bypass procurement entirely.
The collective impact can be staggering. For most mid-market organisations, free text POs represent thousands of transactions annually. Each one is a missed opportunity for better control, savings, or fraud prevention.
How are the risks different for materials, services, and software?
The specific risks vary dramatically depending on what category you’re purchasing.
Materials and parts
Manufacturing companies typically have materials under better control. They’re listed according to bills of material. Master data exists in the system.
Standard costs are set for the annual budget. Purchase price variance is tracked for repeatable purchases. Market price movements get accounted for properly.
But problems still occur with one-off purchases.
- MRO items ordered from non-preferred suppliers.
- Components for prototypes or testing.
- Emergency maintenance interventions
These irregular material purchases become free text POs. The risk lies in pricing validation. Without master data or previous purchase history, how do you know if you’re being overcharged?
Services
Services present even greater challenges. Regular services like cleaning, security, or equipment leases typically have proper contracts. Monthly invoices can be checked against agreed rates.
But irregular services such as emergency repairs, consulting projects, or technical support for specific issues often become free text POs with vague descriptions.
The risk intensifies because services are harder to audit. Once a service is performed, validating what was delivered becomes much harder.
- Hourly rates might not be specified.
- Travel costs might be hidden.
- Overtime charges could be excessive.
Without proper documentation in the PO, challenging these costs later becomes nearly impossible.
Software and SaaS
Software purchases present unique modern challenges. Subscription models have exploded. Every department now procures software tools independently.
Free text POs for software create several specific risks. Shadow IT flourishes when requisitions simply say “software subscription” or “cloud service”.
- What exactly was purchased?
- How many licences?
- What tier of service?
- What renewal terms?
Without proper tracking, costs mid-contract can spiral.
- Duplicate subscriptions emerge.
- Departments buy the same tool independently.
- No one consolidates usage or negotiates volume discounts.
Compliance risks multiply. Without proper documentation, tracking licence usage becomes impossible. You may be under-licensed or over-licensed. Both situations create problems.
Why tackling free text POs can give quick wins on savings
Free text purchase orders represent your easiest savings opportunities. Several factors make them ideal targets for cost reduction.
- Low-hanging fruit exists in abundance. Most organisations have never properly analysed this spend. Basic housekeeping yields immediate results. Simply improving descriptions exposes overcharging and duplicate purchases.
- Quick implementation is possible. Unlike strategic sourcing initiatives that take months, improving free text POs delivers results quickly. Better processes can be implemented in weeks. Savings and cost avoidance can be almost immediate.
- No complex negotiations are required. You’re simply bringing unmanaged spend under control. This makes it politically easier than challenging existing supplier relationships.
- Improved data enables further savings. Once you can see what’s actually being spent, opportunities become obvious. Supplier consolidation becomes feasible. Volume aggregation becomes possible. Strategic sourcing can follow.
- Administrative savings compound the benefits. Reducing the time spent on invoice reconciliation frees up staff. Accounts Payable becomes more efficient. Procurement teams can focus on strategic work instead of firefighting.
The payback period is typically measured in weeks rather than months. Implementation costs are low. Technology solutions are increasingly affordable for SMEs and mid-market businesses. The return on investment is compelling.
Best practices to avoid poor data in free text POs
Prevention is better than cure. Several practices can dramatically reduce free text PO problems.
- Create requisition templates for common purchase types. A template for maintenance services should require specific fields. Technician details, hourly rates, estimated hours, and scope of work become mandatory. This forces better documentation upfront.
- Establish minimum information requirements for different categories. Materials must include part numbers or specifications. Services must include rates and time estimates. Software must include licence counts and subscription terms.
- Train stakeholders on proper requisition practices. Many people don’t understand why detailed descriptions matter. Education reduces resistance. It makes compliance easier.
- Enable easy escalation when stakeholders have questions. If the proper process is unclear, people take shortcuts. Make it simple to get help. Reduce the temptation to bypass the system.
Regularly audit free text POs. Spot checks catch problems early. They also demonstrate that oversight exists. This deters fraud and encourages compliance. - Provide fast feedback when requisitions are rejected or require changes. Help people understand what went wrong. This improves future submissions.
But the golden rule? Make the approved process easier than the maverick alternative. If following procedure is harder than going rogue, compliance will always suffer.
These practices work best when supported by appropriate technology. Manual processes create too much friction.
Modern procurement tools make proper procedure effortless.
What types of procurement tools can eliminate free-text POs?
Technology now offers multiple approaches to eliminate free text POs. Each solution tackles the problem from a different angle.
Intake modules
Intake modules transform the requisition process. They sit at the front door of procurement. Every purchase request comes through a guided interface, rather than a static purchase request module typically seen in ERP systems.
Users describe what they need in plain language. The system asks clarifying questions. It routes requests to the right people. It suggests preferred suppliers and it prevents poor descriptions from entering the system.
Zip dominates this space, as they were first to market and now boast over 500 customers. They pioneered the intake-to-pay model. Their solution orchestrates the entire procurement process from intake, right through the traditional source-to-pay cycle.
Other growing competitors in the intake-to-pay space are Omnea, Opstream, and Pivot. These are focused more on mid-market businesses. Their strength lies in simplicity and rapid deployment. With an intuitive interface and the feature to design your own no-code workflows, these platforms offer consumer grade UX in B2B software.
Users adopt it quickly.
Vertice and Tropic specialize in software procurement, but also offer category-agnostic intake functionality as part of their product. This enables companies with high spend on software to also utilize these platforms for other indirect spend.
These solutions all share common benefits. Namely, they capture all spend requests before anything is purchased. They enable real-time spend control. This helps to prevents maverick spending and provides greater visibility, without increasing the administrative burden.
AI-powered guided buying
Artificial intelligence has transformed guided buying. The technology is now far more intuitive than what legacy Source-to-Pay suites offered.
Modern AI understands context. A user types “I need a laptop for a new hire”. The system asks relevant questions.
- What’s their role?
- What software will they use?
- What’s the budget?
Based on answers, it suggests specific approved models from preferred suppliers.
The AI learns from past purchases. It recognises patterns. If your organisation typically orders Dell laptops for engineers and MacBooks for designers, the system makes these suggestions automatically.
Descriptions and pricing populate automatically once choices are made. This eliminates free text POs. The data is clean. It’s categorised properly, and spend analysis becomes reliable.
The intelligence extends beyond simple product recommendations. AI can identify when a request should go through different approval paths. It can flag unusual purchases for additional scrutiny and it can suggest alternatives that are in stock or have better terms.
Legacy S2P suites offer catalogue-based buying, but their rigid workflows frustrate users. Modern AI-powered solutions feel more like consumer shopping experiences.
Autonomous sourcing and negotiation bots
Autonomous procurement represents the cutting edge. These tools handle the entire sourcing process without human intervention.
The technology works particularly well for tactical and tail spend. Non-strategic purchases that consume procurement time but deliver limited value. Perfect candidates for automation.
How autonomous sourcing works:
- A requisition comes in.
- The system understands what’s needed.
- It scouts for and identifies suitable suppliers, both incumbents and potential new vendors.
- It sends RFQs automatically.
- It analyses responses and negotiates terms.
- Then, it selects the winner and creates the purchase order.
The entire process happens without human involvement if desired. Or, you can determine when the human should specifically be in the loop.
Pactum leads in autonomous negotiations. Their AI conducts detailed discussions on legal and commercial terms. Large enterprises already use Pactum to manage thousands of supplier relationships. Nibble is growing as a competitor.
Fairmarkit focuses on autonomous sourcing. Their platform replaces traditional RFQ processes. It gathers demand, creates sourcing events, and analyses responses automatically. Procurement teams gain capacity for strategic work.
askLio manages the end-to-end process for tail spend requisitions. From the moment a request is received, it autonomously scouts, sources, negotiates, then raises the PO. But their agents also track PO confirmations and manage the transaction through to goods receipt.
Possibly in the future, pay-per-usage models will emerge for autonomous sourcing. This would make autonomous procurement accessible to smaller organisations. The technology becomes viable for businesses with limited procurement headcount.
The trend will continue. As these tools mature and competition increases, pricing will fall further. Mid-market adoption will accelerate.
E-catalogs
Catalogs remain surprisingly effective, especially for smaller procurement teams. They solve the free text PO problem for high-volume, low-value purchases.
Two types of e-catalog exist. Each has distinct advantages.
Internal or self-hosted catalogs contain supplier price lists housed on your servers. Users browse these catalogs to make purchases. You no longer need manual requisitions.
Advantages are clear.
- Free text POs are eliminated.
- Pricing is locked in.
- Suppliers can’t change prices without requesting approval from procurement.
Disadvantages exist too.
- Catalog management requires constant maintenance, making them impractical for suppliers with thousands of SKUs.
- They work best for limited, repeatable product ranges.
Punch-out or supplier-hosted catalogs connect your ERP or procure-to-pay (P2P) system to a supplier’s webshop. Users browse the supplier’s site. They add items to their basket. The transaction flows back to your system as a properly formatted requisition.
This approach works brilliantly for IT peripherals, mobile accessories, lab supplies. Items you need occasionally but not regularly.
The supplier manages their own catalog. It stays up to date automatically. Users can browse the full product range. Procurement maintains control through approved supplier lists and spending limits.
Office supplies remain the classic use case. Consumables, PPE, tools, IT peripherals, mobile accessories, lab supplies are all great uses cases for catalogs.
Items you need occasionally but not regularly.. Standardised items shipped on demand. These purchases are low-value but high-volume. Perfect for e-catalogue solutions.
Punch-out connections remain popular despite being decades-old technology.
P-Cards
Procurement cards present a paradox. They’re not ideal for spend control. Stakeholders receive ability to spend at will. This creates obvious risks.
Yet P-cards deliver one crucial advantage. The transactional data is clean. Card statements contain detailed line-item information. Merchant category codes provide automatic categorisation. Spend reporting becomes reliable.
Business spend management platforms have evolved P-cards further. Employees can make necessary purchases. But the spending is visible, tracked, and reconciled automatically.
The result eliminates free text POs for a category of spend. Small, urgent purchases that would otherwise bypass the system now flow through controlled channels. The data quality is high, but the administrative burden is low.
P-cards work best for specific scenarios:
- Employee expenses
- Small supplies
- Emergency purchases.
They’re not suitable for large supplier contracts, but for their niche, they solve the free text PO problem effectively.
Drive compliance while plugging holes in your bucket
Eliminating free text purchase orders delivers multiple benefits. Thanks to modern procurement technology, these solutions are within reach of mid-market businesses.
You eliminate potential fraud. Better descriptions and proper controls make collusion harder. Overcharging becomes visible. Irregular spending patterns trigger alerts.
You improve data quality. Clean spend data enables strategic decisions. You can identify consolidation opportunities, benchmark pricing, and track budget utilisation accurately.
Maverick spending decreases when you bring more spend under procurement control. Preferred supplier adoption increases and your requisitioners use negotiated rates instead of spot rates.
You automate without creating workload. Self-serve models empower stakeholders. They can buy what they need through proper channels. Procurement teams focus on strategic activities rather than processing routine purchases.
The investment pays back quickly. Often within weeks or months. Productivity gains materialise immediately. Cost savings follow close behind. You’re not just improving compliance. You’re plugging holes in your leaking bucket.
Free text purchase orders represent a solvable problem.
The technology exists. The business case is clear. The time to act is now.
