Case Study | Title: Split Purchase Order - GRM Institute

Case Study | Title: Split Purchase Order

By Disha Dhawan

PGDRM Batch Jan’20-21

 

What is a Split Purchase Order (PO)?

 

Split PO is an attempt from the procurement function to split the PO in 2 or more to surpass the authorization process. ​

Example:​ Suppose a PO is of Rs 2,00,000 and it is getting split into two Rs.1,00,000 POs, It could have been done to bypass the authorization or DOA matrix.

Risks in Split Purchase Order
  1. Large quantities are procured without the information of senior management.​
  2. Favoritism can occur by giving orders to preferred vendors.​
  3. Identical items purchased in different amounts simultaneously or within a short period of time (false positive)​
  4. Multiple POs to one vendor in the same or similar amounts from the same requesting group​
  5. Bypassing the authorization process /DOA process​
  6. Incorrect or fraudulent purchase transactions resulting in possible financial loss.​

Analytics while Splitting a PO

Analytic Logic: Extracts all approved purchased orders for the period under review to determine potential split purchase orders where the order is for the same vendor for the same material by the same creator within a determinable number of days of each order. The quantity may differ between orders. Nature of transactions needs to be reviewed before analyzing data. ​

​These can also be linked to the same PR no. but PO is split to avoid DOA approvals.

Data Set Required: PR Dump, PO dump, invoice dump & DOA authorization matrix.

Example:

Variable: Number of Days​

​DOA will be on Amounts, not Quantity

Controls put to avoid Split PO
  1. Analytics Identifies Split PO’s where the same material was ordered from the same vendor by the same creator within a configurable number of days then it should go through Authorization Level Matrix.​
  2. Link POs to PRs.​

Example of Split PO

 

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