In case you run a distribution enterprise, you understand the drill: prospects typically reject invoices on account 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 present workflows.
The true value of order discrepancies in distribution
Order discrepancies typically slip by to post-shipping discovery. It is inevitable while you’re processing hundreds 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 crew might solely manually confirm SOs towards POs when the worth exceeded $10,000, leaving most shipments weak to pricey discrepancies.Â
At present rates of interest above 9%, each delayed cost hit exhausting. 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 checklist 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 circumstances. 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 pricey downstream issues
Past the plain time constraints, manually evaluating SOs towards 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 handbook 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 assorted between prospects and inner techniques (Instance: ZP vs zinc plated), complicating handbook checks
- A number of delivery places shared zip codes however wanted totally different gate numbers, risking supply errors and expensive reshipments
The time and value funding was substantial. To illustrate the accounting supervisor is making round $60.44/hour (median hourly wage for the position within 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 test, that meant burning by $22,181 simply on handbook verification. And we’re not even counting the hours spent chasing corrections and different extra duties.
Moreover, the cost clock resets every time a buyer rejects an bill on account 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 lots of of orders. All of a sudden, 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—once they nonetheless had leverage to get points mounted. However any answer wanted to work alongside their present order processing and achievement workflow, not substitute it. That is once they approached us at Nanonets.
Are order discrepancies hurting your money movement?
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Are order discrepancies hurting your money movement?
Let’s focus on how this distributor prevented pricey discrepancies whereas sustaining their present workflows. We’ll stroll you thru their implementation journey, the APIs and integrations, the precise 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 might contain retraining the gross sales crew and disrupting established processes.Â
That is why we started by automating how they verified their gross sales orders towards buy orders.
We realized we might ship quick 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 hold their present 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 crew receives buy order and creates gross sales order as regular
- Buy order will get uploaded to their doc administration system
- Our system robotically detects new buy orders
- System pulls corresponding gross sales order particulars from Enterprise Edge
- System verifies gross sales order particulars towards buy order
- Discrepancies get flagged earlier than delivery
- Order processing crew receives alerts for evaluation
- 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 towards their present handbook verification course of whereas minimizing threat. Additionally they categorized their prospects based mostly on verification wants — some required actual matches on each area, whereas others primarily centered 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 places
- Understanding numerous product descriptions
- Processing totally different cost time period codecs
We arrange a number of every 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 robotically flags points based mostly on severity:
Vital points requiring quick consideration:
- Whole quantity mismatches
- PO quantity discrepancies
- Fee time period variations
Non-critical points for evaluation:
- Delivery element variations
- Line merchandise matches
- Tackle format variations
This new automated workflow helped centralize their verification course of, with a devoted order processing position 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 means of Processing) charge — the share of orders being verified robotically with none handbook intervention — and 90% accuracy in information 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 every day by automated order matching
- Error charges lowered to only 1-2 points per batch requiring handbook evaluation
- Automated checks operating all through enterprise hours (7:30 AM – 4:30 PM CT)
- Deal with advanced distribution eventualities like will-call orders and a number of delivery places 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
- Decreased order cycle time from receipt to delivery
Monetary and money movement affect:
- Catching buy order and bill discrepancies earlier than delivery — when fixes are simpler
- Fee delays lowered by pre-shipping verification
- Decreased 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 position
- System robotically flags points based mostly on severity
- Actual-time alerts despatched to related crew members
- Complete monitoring by Energy BI dashboards
- Customized validation guidelines for particular buyer necessities
- Automated exception flagging and critiques changed handbook 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 evaluation. 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 place to begin. We can assist automate your whole order processing workflow — from gross sales order creation to achievement and delivery. E book a demo as we speak to see how we can assist you.
