In case you run a distribution enterprise, you understand the drill: prospects usually reject invoices resulting from 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 actual price of order discrepancies in distribution
Order discrepancies usually slip by way of to post-shipping discovery. It is inevitable while you’re processing 1000’s of orders month-to-month. However when your buyer rejects an bill as a result of their buy order (PO) does not match your gross sales order (SO), they don’t seem to be 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 workforce might solely manually confirm SOs in opposition to POs when the worth exceeded $10,000, leaving most shipments susceptible to expensive discrepancies.
At present rates of interest above 9%, each delayed cost hit laborious. As soon as supplies are delivered, prospects have zero urgency to repair these points. Every bill revision resets cost phrases, making a expensive cycle of delays and dealing capital constraints. Past that, these discrepancies might additionally frustrate prospects and probably result in the lack of future enterprise.
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Why stopping order discrepancies is extra complicated than it appears
In distribution, matching POs and SOs is not nearly evaluating numbers. Your prospects may listing 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 places, 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 expensive downstream issues
Past the plain time constraints, manually evaluating SOs in opposition to POs created a number of downstream issues that worsened over time.
This is what was occurring:
- Solely orders above $10,000 could possibly be manually checked — leaving most orders unverified
- Every guide matching took half-hour of senior accounting supervisor’s time
- Smaller orders have 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 different between prospects and inner methods (Instance: ZP vs zinc plated), complicating guide checks
- A number of delivery places shared zip codes however wanted completely different gate numbers, risking supply errors and dear reshipments
The time and price funding was substantial. For example 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 way of $22,181 simply on guide verification. And we’re not even counting the hours spent chasing corrections and different extra duties.
Moreover, the cost clock resets at any time when a buyer rejects an bill resulting from a discrepancy with the PO. So, at 9.5% curiosity, a 60-day delay on a single $10,000 order price them $158 in curiosity alone. Now multiply that throughout a whole bunch of orders. Immediately, these minor verification points are bleeding tens of 1000’s in curiosity prices yearly.
The distributor knew they wanted to catch PO-SO discrepancies earlier than delivery—once they nonetheless had leverage to get points fastened. However any answer wanted to work alongside their current order processing and achievement workflow, not substitute it. That is once 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 expensive discrepancies whereas sustaining their current workflows. We’ll stroll you thru their implementation journey, the APIs and integrations, the particular outcomes, and how one can obtain related 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 the complete workflow from order entry to delivery, we knew that may contain retraining the gross sales workforce 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 fast 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 manner, 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 expensive issues.
Right here’s what the workflow regarded like:
- Gross sales workforce receives buy order and creates gross sales order as normal
- Buy order will get uploaded to their doc administration system
- Our system routinely 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 workforce receives alerts for evaluate
- 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 danger. In addition they categorized their prospects primarily based on verification wants — some required actual matches on each subject, 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 complicated layouts, codecs, and emailed orders
- Managing a number of plant places
- Understanding numerous product descriptions
- Processing completely different cost time period codecs
We arrange a number of day by 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 routinely flags points primarily based on severity:
Important points requiring fast consideration:
- Whole quantity mismatches
- PO quantity discrepancies
- Cost time period variations
Non-critical points for evaluate:
- Transport element variations
- Line merchandise matches
- Handle 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 objects and exceptions whereas sustaining effectivity.
The affect of automated PO-SO matching on order processing
Inside 90 days, we helped them obtain a 90% STP (Straight By Processing) charge — the proportion of orders being verified routinely with none guide intervention — and 90% accuracy in knowledge extraction and matching. This was a big enchancment from the preliminary 70-75% accuracy charge throughout early implementation.
The outcomes have been transformative:
Operational enhancements:
- Simply processing 17-18 information day by day by way of automated order matching
- Error charges decreased to only 1-2 points per batch requiring guide evaluate
- Automated checks working all through enterprise hours (7:30 AM – 4:30 PM CT)
- Deal with complicated distribution situations like will-call orders and a number of delivery places by way of 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 affect:
- Catching buy order and bill discrepancies earlier than delivery — when fixes are simpler
- Cost delays decreased by way of 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 way of sooner bill reconciliation
- Curiosity prices minimized by stopping 60+ day cost delays
Course of enchancment:
- Centralized processing by way of devoted order processing function
- System routinely flags points primarily based on severity
- Actual-time alerts despatched to related workforce members
- Complete monitoring by way of 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 proportion of orders that wanted human evaluate. This streamlined method maintained each the excessive STP charge 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 start line. We may also help automate your complete order processing workflow — from gross sales order creation to achievement and delivery. Ebook a demo at this time to see how we may also help you.
