Organizations that purchase inventory items, know full well, the problems faced by the accounts payable department that spends (too) much time on the administrative processing of the entire purchasing process, from order to processing the purchase invoices. A number of examples where things go wrong in this process are: purchases are not recorded in the system, receipts are not booked, packing slips are lost, nobody in the organization knows who has placed the order, questions from suppliers cannot be answered quickly and the stack papers on the desk of the administrative assistant continues to increase. The more you recognize yourself in the above, the greater the need to get started.
By recording orders in an ERP system and digitally and automatically processing incoming invoices, the process from purchasing up to and including payment is relaxed. By arranging the process in such a way that invoices can automatically match with the corresponding purchase order and any packing note, this process can be further automated and accelerated. In this blog we will tell you more about it.
Organizations can have various reasons for registering their purchases or orders, such as: keeping track of inventory, recording commitments that have been entered into or the possibility to link a purchase to a project or a sale. The way in which a purchase / an order is registered differs per company; from the order form in Excel to the creation of a purchase order in an ERP system, whereby the purchase order also arrives automatically (by e-mail or as an electronic invoice) at the supplier. In SMEs, the majority of orders are placed “simply” by telephone or e-mail, without any further recording in a system.
In addition to the way in which purchases / orders are registered, there is often a difference in the degree of details that are recorded in the purchase order, whereby we again cite two extremes. There are organizations where goods are ordered on the basis of a product description, without sometimes even knowing the price at all. On the other hand, there are organizations in their ERP system that have the complete article file of their suppliers with the corresponding prices and purchases fully digitally / electronically record and handled. To automatically match an invoice with the preceding purchase order, use is made of the available data on both order and invoice. In general, we can therefore state that the more complete there are, the greater the chance that invoice and order will match automatically. This speeds up the process from purchasing to payment, which means that proper recording of purchases provides benefits for both parties.
Once you have received an order, you naturally also want to check the goods that are delivered on the basis of, among other things, the quantities ordered and the quality of the delivery. The manner in which this receipt check takes place differs per organization and depends, among other things, on the destination of the goods, from their own warehouse to directly on a project. If approved, the warehouse or a similar department signs for the receipt.
The way in which the receipt (s) are subsequently recorded varies widely, from signed packing slip to a complete receipt registration in an ERP system. At the moment that the receipt is recorded in an ERP system, the stock is in fact also digitally recorded and the value of the stock is recorded. No matter how the entire process is arranged, the common denominator is that purchases or orders must also be registered as received before the invoice can be approved for payment.
The check of invoice and goods receipt can be done manually or automatically. If no order has been recorded in an ERP system, the packing slip is sometimes used as “confirmation of the order”. In that case, the check of packing slip with invoice takes place manually. If both order and receipt are digitally recorded, the invoice can be automatically compared and checked with the order and receipt. More on this will be shared later.
Dealing with packing slips
Organizations that do not yet record their purchases / orders in an ERP system also cannot automatically compare order, packing slip and invoice and, upon agreement, automatically record the invoice in the administration. These organizations often use the signed packing slip to check the invoice and order together.
Our customers have asked in the past whether we, Blue10, could help make this process easier and that is why we have introduced a packing slip module. Hereby packing notes that arrive somewhere in the organization are scanned immediately upon receipt, possibly with the help of a mobile App, and are thus automatically placed in our software, where the user can register the packing note with a supplier. A major advantage of this is that the packing slip is immediately digitally available upon receipt and therefore does not have to be stored on paper until the invoice arrives. The moment the invoice arrives, the relevant order or packing slip number can be registered on the invoice, after which both the invoice and packing slip are (automatically) linked to each other. In this way, delivery notes are digitally available and directly linked to the relevant invoice. This makes checking invoices and delivery notes much easier.
Automatically match invoices
When purchases are digitally registered and receipts are recorded digitally, the invoices that arrive afterwards can be linked to each other automatically. This is called purchase order matching. The term “purchase order matching” is taken for granted. The degree of automation in the booking process is different at one software supplier or at a different level than at the other supplier. At Blue10 we maintain the following definition: “The automated matching of a purchase invoice with a previously created purchase order, the associated (goods) receipts and the actual automatic posting of an invoice in the ERP / accounting system at the time the order (receipt) and the invoice match. ”
When the software only looks at a match between invoice and order, one speaks of a so-called 2-way match. The disadvantage of this is that it is actually assumed that the goods received in numbers and quality always correspond to what is laid down in the order. With a 3-way match, the invoice is not only checked on the basis of the order, but also a check is made on booked receipts. By also matching the order and invoice with booked receipts, there is a smaller chance that invoices are wrongly “approved” when matching and this also prevents physical and / or accounting stock differences. With a 2-way match it can happen that goods are booked for accounting purposes (upon receipt of the invoice), but never actually arrive and are therefore not in stock at all.
In this blog we have given an introduction to the purchasing process and have given an initial impetus to the various options available for handling orders, receipts (and packing slips) and ultimately invoices. It is clear that when orders are recorded digitally and receipts are registered digitally, it is much easier to check the invoice. With automatic order matching, the checking process even runs (fully) automatically, which in turn helps prevent the approval (and payment) of invoices that contain errors, in numbers and / or prices.
After the introduction of the purchasing process in this blog, we will discuss the various forms of purchase order matching in the following blog, namely one order = one invoice versus line matching. In a final blog we then discuss the further optimization of purchase order matching in practice.