By Safock Procurement Research Team7 min read
A buyer spends 15 minutes creating a purchase order and sending it to the supplier. That costs $10.50. By the time the invoice is paid, the same order has taken 106 minutes of people's time across five roles and cost $73.60. The most expensive step was chasing and giving approval, at $13.00, and the second was a site manager working out what to order.
At 12,000 POs a year, that is $883,200 and the equivalent of 12 full-time people. Buyers account for $15.75 of it. The rest is spent by site managers, approvers, receivers and accounts payable.
List every step a PO goes through, from deciding what to order to paying the invoice. For each step:
Cost per PO = minutes × share of POs that need the step × loaded hourly rate ÷ 60
Add the steps, then add anything else that is spent per PO: software, printing, postage.
Two inputs are easy to get wrong:
The Cost-per-PO Calculator's defaults describe a multi-site operator placing 12,000 POs a year:
| Step | Who | Minutes | % of POs | Rate | Per PO |
|---|---|---|---|---|---|
| Work out what to order and raise the request | Site manager | 20 | 100% | $38/h | $12.67 |
| Chase and give approval | Operations director | 12 | 100% | $65/h | $13.00 |
| Create the PO and send it to the supplier | Buyer | 15 | 100% | $42/h | $10.50 |
| Supplier queries and expediting | Buyer | 25 | 30% | $42/h | $5.25 |
| Receive and check the delivery | Receiver | 20 | 100% | $28/h | $9.33 |
| Match the invoice to the PO and receipt | AP clerk | 12 | 100% | $34/h | $6.80 |
| Resolve match exceptions | AP clerk | 45 | 30% | $34/h | $7.65 |
| Pay and reconcile | AP clerk | 6 | 100% | $34/h | $3.40 |
| Other costs (software, printing, postage) | $5.00 | ||||
| Total | 106 | $73.60 |
By role, accounts payable carries $17.85 per PO, buyers $15.75, the operations director $13.00, site managers $12.67 and receivers $9.33.
Three things stand out.
Each change below is made on its own, then all three together:
| Change | Cost per PO | A year | Full-time equivalents |
|---|---|---|---|
| As it is | $73.60 | $883,200 | 12 |
| Exceptions on 10% of invoices instead of 30% | $68.50 | $822,000 | 11.0 |
| Expediting on 10% of POs instead of 30% | $70.10 | $841,200 | 11.5 |
| Approval in 3 minutes instead of 12 | $63.85 | $766,200 | 11.0 |
| All three | $55.25 | $663,000 | 9.4 |
Approval comes out on top here because it happens on every PO and is done by the most expensive person in the process. The exceptions fix is close behind, and it brings other savings that this model leaves out, such as fewer late-payment fees and more early-payment discounts taken on time.
The cost of a PO doesn't depend on what is ordered. A $40 order of cleaning supplies goes through the same eight steps as a $40,000 one. Halving the number of POs, from 12,000 to 6,000, halves the annual cost to $441,600 without making any single PO cheaper.
That means consolidating small orders to the same supplier, setting order quantities with the economic order quantity rather than ordering little and often, and using contracts or blanket orders for regular items. Check carrying costs and shelf life before ordering more at a time.
Published figures for the cost of a PO vary widely by source, industry and method. Some count only the purchasing team's time; others include requisitioning, receiving and accounts payable, as this example does. Highly automated organisations are often quoted at tens of dollars, and manual, paper-heavy ones at hundreds.
A borrowed benchmark tells you less than your own number measured the same way each year. If you do compare, check what the benchmark counts. APQC's procurement benchmarks state their definitions.
Change the minutes and the share of POs for any step. The defaults are the example above.
Cost of one PO · same maths as the full calculator
| Step | Minutes | % of POs | Rate | Per PO |
|---|---|---|---|---|
| Work out what to order & raise requestSite manager | $38/h | $12.67 | ||
| Chase and give approvalOps director | $65/h | $13.00 | ||
| Create PO and send to vendorBuyer | $42/h | $10.50 | ||
| Vendor queries & expeditingBuyer | $42/h | $5.25 | ||
| Receive and check the deliveryReceiver | $28/h | $9.33 | ||
| Match invoice to PO and receiptAP clerk | $34/h | $6.80 | ||
| Resolve match exceptionsAP clerk | $34/h | $7.65 | ||
| Pay and reconcileAP clerk | $34/h | $3.40 |
Free tool
Cost per Purchase Order Calculator
Add or remove steps, set each role's rate, see your annual cost and headcount, and model how much of each step automation would remove. Share the result as a link or email yourself the brief.
Runs in your browser. No sign-up.
List every step from deciding what to order to paying the invoice. For each, multiply the minutes it takes by the loaded hourly rate of the person doing it and by the share of POs that need it. Add the steps, plus any other costs per PO such as software or postage.
Published benchmarks vary widely by source, industry and method, from tens of dollars for highly automated organisations to hundreds for manual, paper-based ones. Your own number, measured the same way each year, is more useful than a borrowed average.
Often the ones outside purchasing. In the example in this guide, chasing and giving approval was the single most expensive step, working out what to order came second, and site and operations managers carried more than a third of the cost before a buyer touched the PO.
Shorten approvals, cut the share of invoices that need exceptions resolved, reduce supplier chasing, and place fewer, larger orders where it makes sense. In the example, faster approvals, fewer exceptions and less expediting together cut the cost per PO by $18.35.
Yes, when it doesn’t create other costs. Each PO carries the same process cost whatever its value, so consolidating small orders and using economic order quantities cuts the total. Check holding costs and shelf life before ordering larger quantities.