Should you run a distribution enterprise, you realize the drill: A buyer rejects an bill over a purchase order order discrepancy, their cost phrases reset, and so they 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 delivery – with out including headcount or disrupting current workflows.
The actual value of order discrepancies in distribution
Order discrepancies usually slip by way of to post-shipping discovery. It is inevitable once 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 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 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 arduous. 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 advanced than it appears
In distribution, matching POs and SOs is not nearly evaluating numbers. Your prospects would possibly listing 10-inch 600-pound chrome 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 success 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 apparent time constraints, manually evaluating SOs in opposition to POs created a number of downstream issues that worsened over time.
This is what was taking place:
- 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 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 different between prospects and inner techniques (Instance: ZP vs zinc plated), complicating guide checks
- A number of delivery areas shared zip codes however wanted totally different gate numbers, risking supply errors and expensive reshipments
The time and price funding was substantial. As an instance 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 test, 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 further duties.
Moreover, the cost clock resets each time a buyer rejects an bill attributable to 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. Abruptly, 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 current order processing and success 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 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 important change administration. Whereas we might automate your entire 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 rapid 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 hold 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 appeared like:
- Gross sales workforce receives buy order and creates gross sales order as standard
- 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 assessment
- All verifications get logged for monitoring and evaluation
The implementation course of
Working with the distributor, we took a phased strategy. 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 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 areas
- Understanding varied 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 routinely flags points based mostly on severity:
Important points requiring rapid consideration:
- Whole quantity mismatches
- PO quantity discrepancies
- Cost time period variations
Non-critical points for assessment:
- Delivery 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 way of Processing) fee — the proportion of orders being verified routinely 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 every day by way of 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 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
- Decreased order cycle time from receipt to delivery
Monetary and money movement impression:
- Order discrepancies caught earlier than delivery — when fixes are simpler
- Cost delays decreased by way of 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 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 based mostly 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 share of orders that wanted human assessment. This streamlined strategy 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 complete order processing workflow — from gross sales order creation to success and delivery. Ebook a demo in the present day to see how we might help you.
