Accounts Payable Operations – AP Workflow – 3-way PO Invoice Matching

By NE Docs | April 3, 2017

 3 Way PO Invoice Matching

The most significant benefit of Accounts Payable workflow is the automatic matching of PO invoices to the related Purchase Order and posted goods receipts details. By implementing such a system, a company could choose to allocate AP resources to more value-added tasks. The risks of matching errors would also be greatly reduced. If matches do not occur as expected, the root causes can be easily identified so changes can be made to the system configuration resulting in increased “first pass-thru” rates. Additionally, business rules pertaining to price variances, taxes, and freight could be auto applied. Such a system could also “hold” 3-way match PO invoices for a pre-determined period while constantly checking for the posting of the goods receipts. Do you know how much time your AP team spends today checking for goods receipts only to find they have not been posted yet?

For the purposes of this article, references will be made to the 3-way match process of matching invoice details to a Purchase Order and related goods receipt posting. 2-way match processing of invoices will be addressed in the next article.

Documenting the matching and related business rules can take up a great deal of an implementation timeline. To reduce the threat of delays, first be sure everyone on the team understands the company’s PO categories and types. Who should be involved in the discussions pertaining to PO matching rules? Representatives from:

  •  Purchasing – to ensure name of data fields and the use of stored data are understood.
  •  IT – To work with the Provider to create/build integration files that include the necessary details for PO matching.
  • Accounts Payable – An expert on matching invoices to PO’s and related goods receipts in the manual world.
  • Provider’s Subject Matter Expert on PO Matching and/or representatives from their engineering team.

Questions a Provider should ask to get the conversation started:

What types of PO matching is used by the company? Although the expected response may refer to 2-way or 3-way match, companies can have different definitions of these terms or use totally different ones.

When responding to the provider, be specific as to how the company uses these or any other terms. Too much time can be wasted if all involved are not using the same definition for the terms used.

How is a 3-way match Purchase Order identified within the ERP?

  • Is an indicator stored in each PO record?
  • Does it depend on whether a value is stored in the Part Number field?
  • Is a different PO number range used for 3-way match PO’s?

Does the company have different categories of 3-way match PO’s?

  • Inventory
  • Assets
  • Indirect Spend
  • Other?

If so, how are these categories noted in the PO record? Does it depend on the PO number series or the values in other PO fields such as the Part Number? What criteria does an AP specialist use to determine the correct category or does it matter?

In other words, how do the AP specialists tell the differences in the manual world, what decisions do they need to make when entering an invoice, and at which step in the processing? If you have not done so already, document the steps, the decision points, and what the choices are for the different options.

  • Are inventory PO invoices matched to the PO and goods receipts using a Bill of Lading or Packing Slip number? What is a specialist to do if a BOL or P/S is not referenced on either the invoice or the goods receipt record?
  • Is the total invoice amount, less tax and freight, compared to the total of the PO or matched to the PO line details? What if the total amount matches but the invoice details to not match those on the PO?
  • Does the company have quantity and/or price variance tolerances? What does a specialist do if the differences are outside of tolerances?
  • Are Freight and Tax charges billed on an invoice to be paid? Does it depend on the PO category, location of delivery, and/or the account coding on the PO? What is the final decision based on?

Bottom line is, know your system, processes, exceptions, and actions to be taken:

  • Who assigned the PO type and/or category?
  • Does the system restrict “type to category” combinations?
  • Does Accounts Payable need to identify the PO category of each invoice before matching it to the PO and goods receipts?
  • Are some of these decisions based on the vendor name or type?

The more detailed the presentation of the matching and business rules, the more accurate the configuration of the AP workflow system. Imagine up to 50% or more of all 3-way match PO invoices being processed without an AP specialist “touching” them.

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.

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