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Purchasing process cost
Cost per purchase order calculator
Enter the minutes each person spends on one order, a loaded hourly cost and your yearly PO volume. You get the cost of a single order and of the whole process.
The cost of a purchase order is the staff time across requisition, approval, buying, receiving and invoice matching, plus the system cost. At the default numbers one PO costs USD 66.33 and 4,800 orders cost USD 318,400 a year.
Written by Procurement VMS Editorial Team · Reviewed by Michael, Procurement Advisor Expert · Updated
Your numbers
The boxes start with an example so you can see how it works. Replace them with your own figures.
Your result
Each order costs USD 66.33 to process, of which USD 63.33 is staff time. Across 4,800 orders that is USD 318,400 a year. A 40 percent cut in handling time would save about USD 121,600 a year.
| Minutes per order | 100 minutes |
|---|---|
| Labour cost per order | USD 63.33 |
| Cost of one purchase order | USD 66.33 |
| Cost of the PO process per year | USD 318,400 |
| Yearly saving at the time cut you chose | USD 121,600 |
The currency box changes the label only. Enter amounts in the currency you choose.
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- PDF guide with the formula, a worked example and a checklist of what to enter
- Excel model with live formulas, so your own numbers recalculate at once
- Ready at once after the form, with no account to create
The files open with the example numbers from the page. Type yours over the blue cells in the Excel file. The calculator on this page is free to use without a form.
How the cost per purchase order calculator works
The formula
Cost per PO = (total minutes across all steps / 60 x hourly cost) + system cost per order. Yearly cost = cost per PO x orders per year.
Most teams do not know what a purchase order costs, and the answer is rarely small. Each step takes minutes, and the minutes sit in five different departments, so nobody adds them up.
The figure matters most for low-value purchases. If an order for USD 80 of supplies costs USD 40 to process, the process is the problem. Use the number to set thresholds for approvals, catalogues and blanket orders.
The example numbers are illustrative and are not benchmarks. Use your own data for any decision.
How to use it with your own data
- Time a handful of recent orders from request to payment and note the minutes per role.
- Use a loaded hourly cost from HR or finance, not the base salary.
- Test the saving at a few time cuts, and compare it with the price of a tool that would deliver it.
Mistakes that skew the answer
Counting only the buyer
Requesters, approvers, receiving and accounts payable all spend time. The buyer is often the smaller part.
Using base salary
Benefits, space and equipment add a real share on top of pay. Use the loaded rate.
Assuming automation removes all time
Exceptions still need people. Use a cut you can defend.
What to do with the result
Take the yearly saving into the procurement ROI calculator, and see how procurement automation and procure-to-pay software change the steps. Use the purchase order template for a consistent order form while you improve the process.
Questions about the cost per purchase order calculator
How much does a purchase order cost to process?
It depends on your process, but most teams find the figure is higher than expected. Calculate yours from the minutes spent in each step and your loaded hourly cost.
What should I include in the cost?
Staff time across requisition, approval, buying, receiving and invoice matching, plus system and paper cost. Leave out the cost of the goods.
How can I lower the cost per PO?
Use catalogues, blanket orders, card purchases for small items and automated three-way matching.
Does this apply to services?
Yes. Services often take longer to approve and match, so the cost per order can be higher.