Purchasing

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    Judy Hamner
    Is it possible to create a Multi-Year Purchase Order?
    Topic posted January 30, 2019 by Judy HamnerSilver Trophy: 7,500+ Points, tagged Create Requisition, Fusion, How-To, Orders, Requisition Processing 
    178 Views, 9 Comments
    Title:
    Is it possible to create a Multi-Year Purchase Order?
    Summary:
    We need to create a multi-year Purchase Order that doesn't encumber the entire balance in the first year.
    Content:

    We have a requirement from a supplier to create a 3 year purchase order.  Since the balance is to be paid over a 3 year period, we do not want the entire balance encumbered immediately when it is created as that would mis-represent our actual current year encumbrance/obligations.  Any thoughts on how to accomplish this?

     

    Comment

     

    • Lori Farris

      We create POs with "place holder" lines for $.01 for the years beyond year one. 

    • Judy Hamner

      Thanks, Lori.  Do you complete a change order in the following year(s) in order to encumber the additional amounts?  Is the supplier willing to accept a PO that doesn't include the entire amount for all years?

       

    • Lori Farris

      Yes, we do a change order to the line to encumber the next year's amount. Often, these POs are in response to a bid that has been done and the specifications and terms and conditions of the bid govern the PO (we have statements to that effect on the PO).  The specifications encompass the agreed upon term so the vendor is comfortable with the PO being less than the 3 year contracted amount because of this reference to the bid.  We also list on the PO (in Notes to Supplier) the total term of the contract as more assurance to the vendor.  Hope that helps.  

    • Neelam Thakur

      This is a good post with great inputs. One question: If the PO amount is know in advance, couldn't it just be created with three lines, each representing a third of the amount?

    • Lori Farris

      Neelam...

      This may be a budgeting issue more unique to higher ed. but Judy's issue stems from not wanting to encumber all three years of spend in the fiscal year that the PO is issued.  Line #1 would be for year one spend.  Line #s 2 and 3 would be $0.01 each and line 2 would be edited to the full 2nd year amount when the time came for year 2 and the same repeated for line #3 and year 3.  

      • Alan

        Wouldn't this just be accomplished by putting in a start and end date for each line item? That way your accounting team should not be accruing for Year 2 or Year 3 in the current year. This would eliminate the extra work that needs to be done with change orders later in the future. 

        If the commitment was already made for 3 years up front, there is no harm is creating a PR/PO with 3 lines covering for the 3 year agreement.

        To make it even easier, you could technically creating a PO with 1 line for the cost of the 3 year agreement and stating that this is for services from 2019 to 2022, that way, this should be accrued over 36 months.

    • Judy Hamner

      If you are following this post, I have found another possible option.  If you open future encumbrance periods on the ledger, you can put a future budget date on the PO lines.  When you run create accounting, only the line with the current budget period is encumbered, even though the entire PO is created and dispatched.  We are researching a bit more to see if this will work for us or not.

      Judy