Declining Balance Orders: Best Practices for Smooth Procurement
Declining Balance Orders (DBOs) are a useful tool for managing recurring or variable purchases at VCU, but they come with specific rules to keep things compliant and efficient. With year-end reconciliation on the horizon, it’s the perfect time to revisit how to use DBOs correctly. Whether you’re ordering utilities, services, or project-based goods, these best practices will help your department avoid audit headaches, streamline invoicing, and stay in sync with VCU’s procurement policies. Let’s dive in!
What’s a Declining Balance Order?
A DBO is a single-line purchase order (PO) used for blanket agreements, tracking costs in dollars rather than quantities. It’s ideal for recurring services, variable-cost purchases, or orders that may change over time. However, improper use can delay payments and create additional administrative work.
Why This Matters
DBOs are under scrutiny because they impact both compliance and efficiency. For orders over $10,000, Purchasing must ensure proper use of DBOs. For orders under $10,000, departments must follow the right steps to avoid manual fixes.
The Digital Mail Room (DMR) relies on clear descriptions and single-line POs to pair invoices accurately. When things go off-script—like using multiple declining balance lines—it creates extra work for staff and can cause errors that affect budgets or delay payments.
Key Best Practices for DBOs
Here’s how to set up and manage DBOs like a pro:
1. Keep the “Declining Balance” Language
Every DBO line must include the description “Declining Balance PO.” You can add more details (e.g., “Utility Services for FY25”), but don’t delete this base language. This helps our Digital Mail Room (DMR) match invoices correctly.
2. Stick to One Line
DBOs should be single-line POs. If you need to increase the order amount, submit a change request through RealSource to adjust the total—don’t add new lines. Multiple lines confuse the system, often defaulting to pairing invoices to line one, which can lead to errors that staff must manually correct.
3. Match Descriptions
Ensure the DBO line description aligns with the invoice description. For example, if your PO says “Declining Balance PO for Lab Services,” the invoice should reflect similar wording. Mismatched descriptions can delay processing and may trigger audit flags.
4. Split Accounts by Dollar Amount
If you need to allocate costs across multiple accounts or indexes, split the DBO by specific dollar amounts (e.g., $5,000 to Index A, $3,000 to Index B). Avoid percentage splits, as Banner doesn’t handle them well and they can complicate reconciliation. If your index needs are highly specific, consider whether a standard PO might be a better fit than a DBO.
5. Estimate Realistically and Adjust
Use a realistic dollar estimate for the DBO (e.g., $50,000 for FY25 utilities). If you won’t use the full amount or if costs exceed the estimate, submit a change request to adjust the PO. This keeps your budget accurate and prevents encumbrance issues at fiscal year-end.
6. Stay Within Fiscal Years
DBOs should generally not cross fiscal years (July 1 to June 30). At year-end, liquidate any remaining encumbrances, close the old PO, and create a new DBO for the next period. Exceptions, such as milestone payments or facilities projects, require Procurement Services’ approval.
7. Avoid e-Catalog Vendors
Do not use DBOs for vendors with e-Catalogs in RealSource. These vendors have streamlined ordering processes, and using DBOs can disrupt procurement data tracking and eVA compliance.
Need Help?
DBOs don’t have to be tricky. If you’re unsure about setting up a DBO or adjusting a PO, reach out to Procurement Services at [email protected] for assistance.
Categories Procurement Services