Accounts Payable Workflow Systems can automatically manage 2-way PO Invoice Matching and Routing to Approvers if the rules of a Company’s manual process can be documented and presented to a Provider for configuration in the System.
As mentioned in the previous article, one of the first conversations a Company has with an AP Workflow Provider should address whether Vendor invoices are matched to Purchase Orders in the Company’s existing process. If so, what types of PO matching is used, 2-way or 3-way. Be sure everyone on the project team understands not only the PO matching types but also the PO categories such as Inventory, Services, or MRO. Matching rules could be different based on the category.
One of the most significant differences between 2-way and 3-way matching is that all 2-way match PO invoices need to be approved once they are matched to a PO. Consider these questions. How many approvals are needed? Is a Delegation of Authority to be applied? Are invoices to be approved only by representatives from the department the invoice is to be charged to? If only one approver is needed, does the invoice first need to be reviewed by someone without DOA? Just about any matching and approval rules can be configured in an AP Automation System but to avoid delays in implementation, they should be inclusive of all scenarios and be presented to the Provider in a clear and concise manner.
Include the right people in determining the requirements for 2-way matching and approval. The group could be completely different than the one consulting on 3-way PO invoice matching. Consider including representatives from the below listed teams for the reasons supplied:
- Purchasing – to ensure PO data includes a 2-way match indicator, the PO category and perhaps the name of the requester or approver.
- IT – To work with the Provider to ensure the PO integration file includes references to PO match type, the category and to the requestor or approver.
- Accounts Payable – To understand how AP currently matches 2-way PO invoices and how it is determined who the invoices are to be sent to for approval.
- Compliance Representative – Someone who can speak to the approval rules, limits and other compliance rules to be considered.
- General Ledger Accounting Team – If tax and freight amounts are not included in the PO amount, are they to be allocated to pre-determined account coding strings?
- Provider – Their Subject Matter Expert on PO Matching and/or representatives from their engineering team
To cover how 2-way PO invoice matching and routing to an approver is done in a Workflow System, consider the following and that the invoice passed the validation steps:
- A 2-way match PO has been created for vendor ABC for $500
- The services have been rendered and an invoice for $500 has been received/loaded into the Company’s Workflow Tool.
- The System confirms the PO number supplied on the invoice is valid by comparing is to the PO details loaded into the Workflow System.
- It is also confirmed the vendor name on the invoice matches the PO
- The System checks to ensure the amount of the PO is still available for matching to an invoice; no other invoices have been previously applied to the PO within the System.
- The invoice is matched to the PO – the PO is tagged as being invoiced within the Workflow System.
- Assuming the name of the requestor or approver was included in the PO details loaded into the Workflow Tool, and the configured business rules indicate this behavior, the matched invoice is routed to that person, within the System, for review and/or approval.
- Once reviewed or approved, the System will route either to the next approver based on configured rules or could send the invoice details directly into the ERP so the invoice can be posted.
Note that no Accounts Payable positions were included in this narrative. Depending on the requirements of the Company, and the configuration of the System, Accounts Payable may not need to be involved unless there are invoice exceptions.
To optimize the automated throughput of 2-way match PO invoices, take the time to accurately document all steps of the manual matching process. Include the steps taken to send invoices out for review and/or approval. Be sure it includes business rules pertaining to Delegation of Authority and review/approval requirements. The more detailed the presentation of details to the Provider, the more accurate the configuration of the System. Imagine how much quicker 2-way match PO invoices could be reviewed, approved and posted if they don’t need to be “touched” by Accounts Payable.
Want to learn more? Contact New England Document Systems. They have the experience, and the resources to assist you; from answering your questions about available solutions to helping you to implement the right tool. Contact us to discuss just how much improvement you want to see in your Accounts Payable Operation.
This article is part of New England Document Systems’ partnership with industry experts. This contribution was written by Anne Wheeler of CS Process Flows, LLC. Anne is a Consultant and Project Manager specializing in Accounts Payable processes and systems.