If you happen to run a distribution enterprise, the drill: prospects usually reject invoices as a consequence of buy order and bill discrepancies, resetting their cost phrases whereas tying up your working capital at 9%+ curiosity.
Let’s discover how a mid-sized distributor solved this by scaling their buy order-sales order verification course of earlier than delivery – with out including headcount or disrupting current workflows.
The true value of order discrepancies in distribution
Order discrepancies usually slip by to post-shipping discovery. It is inevitable whenever you’re processing hundreds of orders month-to-month. However when your buyer rejects an bill as a result of their buy order (PO) would not match your gross sales order (SO), they are not simply making a headache — they’re holding onto your working capital.
For one mid-sized distributor processing 4,000 orders month-to-month, this meant vital prices and strained accounts receivable cycles. Their accounting staff might solely manually confirm SOs in opposition to POs when the worth exceeded $10,000, leaving most shipments weak to pricey discrepancies.
At present rates of interest above 9%, each delayed cost hit onerous. As soon as supplies are delivered, prospects have zero urgency to repair these points. Every bill revision resets cost phrases, making a pricey cycle of delays and dealing capital constraints. Past that, these discrepancies might additionally frustrate prospects and doubtlessly result in the lack of future enterprise.
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Why stopping order discrepancies is extra advanced than it appears
In distribution, matching POs and SOs is not nearly evaluating numbers. Your prospects may record 10-inch 600-pound stainless-steel when you present 10-inch 600# SS. Some ship two-page POs, and others ship 60 pages with elaborate phrases and situations. Add a number of plant areas, various cost phrases, and lot cost orders — verifying orders earlier than achievement turns into more and more difficult.
The distributor’s order processing workflow earlier than automation was typical of many industrial suppliers.
Order discrepancies create pricey downstream issues
Past the plain time constraints, manually evaluating SOs in opposition to POs created a number of downstream issues that worsened over time.
Here is what was taking place:
- Solely orders above $10,000 may very well be manually checked — leaving most orders unverified
- Every guide matching took half-hour of senior accounting supervisor’s time
- Smaller orders had been shipped with out correct verification, carrying hidden dangers
- Discrepancies surfaced solely throughout invoicing, resulting in bill rejections
- Working capital and accounts receivable tied up for 60-90 days at ~9.5% curiosity
- Points found after delivery when prospects had no urgency to repair
- Technical half descriptions assorted between prospects and inside methods (Instance: ZP vs zinc plated), complicating guide checks
- A number of delivery areas shared zip codes however wanted completely different gate numbers, risking supply errors and expensive reshipments
The time and price funding was substantial. To illustrate the accounting supervisor is making round $60.44/hour (median hourly wage for the role in the US) — that is a senior expertise you are paying to match POs line by line manually. For this distributor, with 734 high-value orders yearly and half-hour per verify, that meant burning by $22,181 simply on guide verification. And we’re not even counting the hours spent chasing corrections and different further duties.
Moreover, the cost clock resets every time a buyer rejects an bill as a consequence of a discrepancy with the PO. So, at 9.5% curiosity, a 60-day delay on a single $10,000 order value them $158 in curiosity alone. Now multiply that throughout tons of of orders. Immediately, these minor verification points are bleeding tens of hundreds in curiosity prices yearly.
The distributor knew they wanted to catch PO-SO discrepancies earlier than delivery—after they nonetheless had leverage to get points mounted. However any resolution wanted to work alongside their current order processing and achievement workflow, not change it. That is after they approached us at Nanonets.
Are order discrepancies hurting your money circulation?
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Are order discrepancies hurting your money circulation?
Let’s talk about how this distributor prevented pricey discrepancies whereas sustaining their current workflows. We’ll stroll you thru their implementation journey, the APIs and integrations, the precise outcomes, and how one can obtain comparable outcomes with out disrupting your gross sales course of!
How we automated PO-SO matching
On this distributor’s case, automating order verification required vital change administration. Whereas we might automate your entire workflow from order entry to delivery, we knew that might contain retraining the gross sales staff and disrupting established processes.
That is why we started by automating how they verified their gross sales orders in opposition to buy orders.
We realized we might ship instant worth right here. Nanonets built-in with the distributor’s Enterprise Edge ERP and doc administration system – streamlining buy and gross sales order seize. This fashion, the gross sales groups might preserve their current workflow whereas the automated order matching ran within the background, catching discrepancies earlier than they grew to become pricey issues.
Right here’s what the workflow regarded like:
- Gross sales staff receives buy order and creates gross sales order as traditional
- Buy order will get uploaded to their doc administration system
- Our system mechanically detects new buy orders
- System pulls corresponding gross sales order particulars from Enterprise Edge
- System verifies gross sales order particulars in opposition to buy order
- Discrepancies get flagged earlier than delivery
- Order processing staff receives alerts for assessment
- All verifications get logged for monitoring and evaluation
The implementation course of
Working with the distributor, we took a phased method. We began with their highest-value orders above $10,000. This allowed them to benchmark our system in opposition to their current guide verification course of whereas minimizing threat. In addition they categorized their prospects based mostly on verification wants — some required actual matches on each area, whereas others primarily targeted on totals and portions.
We labored with the distributor to coach our system to deal with these PO-SO variations. This included:
- Dealing with advanced layouts, codecs, and emailed orders
- Managing a number of plant areas
- Understanding varied product descriptions
- Processing completely different cost time period codecs
We arrange a number of each day checks throughout enterprise hours (7:30 AM – 4:30 PM CT). The system periodically checks for brand spanking new buy orders, pulls the corresponding gross sales order particulars from Enterprise Edge, and runs the verification course of — all within the background.
The system then mechanically flags points based mostly on severity:
Important points requiring instant consideration:
- Complete quantity mismatches
- PO quantity discrepancies
- Cost time period variations
Non-critical points for assessment:
- Transport element variations
- Line merchandise matches
- Tackle format variations
This new automated workflow helped centralize their verification course of, with a devoted order processing function dealing with all system alerts. This ensured constant processing of flagged gadgets and exceptions whereas sustaining effectivity.
The impression of automated PO-SO matching on order processing
Inside 90 days, we helped them obtain a 90% STP (Straight By Processing) fee — the share of orders being verified mechanically with none guide intervention — and 90% accuracy in information extraction and matching. This was a big enchancment from the preliminary 70-75% accuracy fee throughout early implementation.
The outcomes had been transformative:
Operational enhancements:
- Simply processing 17-18 recordsdata each day by automated order matching
- Error charges decreased to simply 1-2 points per batch requiring guide assessment
- Automated checks operating all through enterprise hours (7:30 AM – 4:30 PM CT)
- Deal with advanced distribution situations like will-call orders and a number of delivery areas by customized guidelines
- Automated order matching protection expanded to all incoming orders – no extra $10,000 threshold
- Early PO-SO verification smoothed out downstream 3-way matching processes
- Lowered order cycle time from receipt to delivery
Monetary and money circulation impression:
- Catching buy order and bill discrepancies earlier than delivery — when fixes are simpler
- Cost delays decreased by pre-shipping verification
- Lowered publicity to 9.5% rates of interest on delayed funds
- Senior accounting expertise redirected to strategic work
- Higher working capital administration by quicker bill reconciliation
- Curiosity prices minimized by stopping 60+ day cost delays
Course of enchancment:
- Centralized processing by devoted order processing function
- System mechanically flags points based mostly on severity
- Actual-time alerts despatched to related staff members
- Complete monitoring by Energy BI dashboards
- Customized validation guidelines for particular buyer necessities
- Automated exception flagging and evaluations changed guide line-by-line matching
The success led the distributor to create a devoted order processing place, dealing with the small share of orders that wanted human assessment. This streamlined method maintained each the excessive STP fee and accuracy whereas scaling to deal with their full order quantity.
Able to automate your order processing end-to-end?
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Able to automate your order processing end-to-end?
PO-SO matching is simply the place to begin. We may also help automate your whole order processing workflow — from gross sales order creation to achievement and delivery. E book a demo immediately to see how we may also help you.
