Accounts payable is difficult no matter which industry you’re in, and it’s notoriously challenging for manufacturers. Matching up the items received with an invoice and receipt is often a manual, time-consuming process that requires a lot of back-and-forth.
We recently sat down with Napoleon, a manufacturer of grills and outdoor cooking products, to discuss how they reduced the amount of invoices with discrepancies—or things their AP team needed to investigate—by a whopping 95%.
How exactly did SourceDay help them achieve this number? Glad you asked.
Why Is Invoice Matching So Hard?
The first step to addressing the problem of mismatched invoices is to understand the cause, which has surprisingly little to do with the invoices themselves.
When a manufacturer sends a purchase order to a supplier, they’re requesting confirmation on three main items:
- Can the supplier provide the quantity of materials requested?
- Can they hit the proposed delivery date?
- Is the price accurate?
By analyzing thousands of purchases, SourceDay has found that the answer will be “no” to at least one of these questions in nearly 40% of purchases. In other words, something will change (quantity, dates, or price) in almost half of all orders.
What makes matching particularly difficult is that change often occurs on a line-item level. So while one part might be late, the dozens of remaining lines on the PO will arrive on time. And when the invoice arrives, it might include items from several POs.
Because these PDF documents are usually passed back and forth and negotiated through email, the AP team has a huge blind spot. They rely heavily on ERP data and have no visibility into the inboxes of buyers negotiating with suppliers. So when invoices arrive on their desks, they need to do some amateur detective work to find out whether they should be paid as listed.
How to Reduce Invoice Discrepancies
With a problem this widespread, scaling operations becomes difficult. Growth looks like adding more and more accounts payable team members to keep up with mounting complexity. Luckily, there are ways to make this work more efficient.
Automatic 3-Way Matching
In recent years, software has come a long way in helping match invoices to purchase orders and can take PO changes into account. SourceDay has pioneered three-way invoice matching for accounts payable and uses technology to automatically compare POs, invoices, and receipts—at the line-item level.
The result is an easy-to-read dashboard where accounts payable team members can review all open line items and quickly filter between those that have been matched across their invoice, receipt, and purchase order and those that remain mismatched.
Purchase Order Audit Trail
Three-way matching is the first step to saving time and headaches, but it’s not the only step companies can take to improve transparency in the AP process. To address all the changes that take place over a PO’s lifecycle, you also need to move the conversation out of email and into a more transparent channel.
SourceDay’s PO Collaboration product allows buyers and suppliers to communicate and negotiate changes without sending any emails. Best of all, any user can see the complete history of a given purchase order.
Being able to see an audit trail of changes enables the AP team to cut to the chase when investigating discrepancies. Rather than calling up a buyer and asking them to dig through their inbox for answers, they can see the changes for themselves.
Auto-Voucher Payments
The final step of the process is making sure that the ERP’s data properly updates. SourceDay’s ability to integrate with any ERP means that vouchering can take place automatically, as soon as three-way matching has occurred. This typically manual task no longer depends on a person to complete it, which saves time and improves payment accuracy.
The Benefits of Improved Invoice Matching
According to Louise Mayer of Napoleon, reducing invoice discrepancies by 95% meant that their buyers each got about two hours of time back in their days.
It also helped the company’s bottom line. By cutting down on the “we said, they said” back-and-forths, they were able to avoid overpayments, which became more critical as the COVID-19 crisis hit and manufacturers became hyper-vigilant about protecting cash flow.
And don’t forget: many suppliers offer discounts for early payments. When cash flow is tight, these discounts can be game changers. Speeding up the AP process means your business is better equipped to take advantage of them.
Matching invoices has a negative reputation as a cumbersome, manual process. But it doesn’t have to be that way. Technology is quickly catching up and allowing accounts payable teams to speed up their processes.
Learn more about SourceDay’s accounts payable capabilities today.
