Invoice Matchingby Udit Jain on June 13, 2007
Retailers raise Purchase Orders (POs) and send them to vendors. Goods shipped to the retailer by the vendor are accompanied by a shipping manifest. Upon arrival, the retailer normally checks off receipts against the shipping manifest to identify discrepancies. At some later point, the retailer invoices the goods.
To pay the invoice, retailers retrieve the PO and the shipping manifest, match them to the invoice and approve the invoice for payment if all three documents agree. Historically, about 30% of these document sets will have discrepancies. (Improvements in supply chain processes and increased collaboration with suppliers can reduce these problems.)
When the documents fail to match, some retailers set a percent variance tolerance rule, and will pay invoices whose discrepancies fall within the allowed variance. The thought being that the effort to resolve small discrepancies is not worth the additional cost to the retailer to research and resolve. For problem invoices falling outside of this tolerance, the retailer may either hold the entire payment or send partial payment until the issue has been researched and resolved.
The efficiency of this process can be improved by using an automated invoice matching program, scanning paper documents into a document management system, and doing all filing and retrieval electronically. Retailers with an EDLP (every day low price) philosophy normally see a lower incidence of matching discrepancies. This is because they don’t suffer from promotional prices being incorrectly applied as a major source of problems.