If you happen to run a distribution enterprise, you realize the drill: A buyer rejects an bill over a purchase order order discrepancy, their cost phrases reset, they usually sit in your working capital when you pay 9%+ curiosity.
Let’s discover how a mid-sized distributor solved this by scaling their buy order-sales order verification course of earlier than transport – with out including headcount or disrupting current workflows.
The true price of order discrepancies in distribution
Order discrepancies typically slip by means of 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 important prices and strained accounts receivable cycles. Their accounting workforce might solely manually confirm SOs towards 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 exhausting. As soon as supplies are delivered, clients 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 clients 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 clients would possibly 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 apparent time constraints, manually evaluating SOs towards 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 handbook 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 transport when clients had no urgency to repair
- Technical half descriptions different between clients and inside techniques (Instance: ZP vs zinc plated), complicating handbook checks
- A number of transport places shared zip codes however wanted completely different gate numbers, risking supply errors and dear reshipments
The time and price funding was substantial. As an example the accounting supervisor is making round $60.44/hour (median hourly wage for the function 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 means of $22,181 simply on handbook verification. And we’re not even counting the hours spent chasing corrections and different further duties.
Moreover, the cost clock resets each time 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 tons of of orders. Out of the blue, 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 transport—after they nonetheless had leverage to get points mounted. However any answer 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 move?
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Are order discrepancies hurting your money move?
Let’s focus on how this distributor prevented pricey 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 important change administration. Whereas we might automate your complete workflow from order entry to transport, 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 towards 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 fashion, the gross sales groups might hold their current workflow whereas the automated order matching ran within the background, catching discrepancies earlier than they turned pricey issues.
Right here’s what the workflow regarded like:
- Gross sales workforce receives buy order and creates gross sales order as regular
- 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 towards buy order
- Discrepancies get flagged earlier than transport
- 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 towards their current handbook verification course of whereas minimizing threat. Additionally they categorized their clients primarily based on verification wants — some required actual matches on each discipline, 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 varied 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 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:
- Delivery 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 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 Via Processing) fee — the share of orders being verified routinely with none handbook 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 information day by day by means of automated order matching
- Error charges lowered to only 1-2 points per batch requiring handbook evaluate
- Automated checks working all through enterprise hours (7:30 AM – 4:30 PM CT)
- Deal with complicated distribution eventualities like will-call orders and a number of transport places by means 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 transport
Monetary and money move impression:
- Order discrepancies caught earlier than transport — when fixes are simpler
- Cost delays lowered by means 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 means of sooner bill reconciliation
- Curiosity prices minimized by stopping 60+ day cost delays
Course of enchancment:
- Centralized processing by means of devoted order processing function
- System routinely flags points primarily based on severity
- Actual-time alerts despatched to related workforce members
- Complete monitoring by means of Energy BI dashboards
- Customized validation guidelines for particular buyer necessities
- Automated exception flagging and evaluations 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 evaluate. 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 start line. We might help automate your whole order processing workflow — from gross sales order creation to achievement and transport. E-book a demo at present to see how we might help you.