Should you run a distribution enterprise, you understand the drill: A buyer rejects an bill over a purchase order order discrepancy, their fee phrases reset, they usually sit in your working capital whilst 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 present workflows.
The actual value of order discrepancies in distribution
Order discrepancies typically slip by 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 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 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 weak to expensive discrepancies.
At present rates of interest above 9%, each delayed fee hit laborious. As soon as supplies are delivered, prospects have zero urgency to repair these points. Every bill revision resets fee phrases, making a expensive 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 complicated than it appears
In distribution, matching POs and SOs is not nearly evaluating numbers. Your prospects may checklist 10-inch 600-pound chrome steel whilst 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 fee 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.
Here 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 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 prospects had no urgency to repair
- Technical half descriptions diversified between prospects and inner techniques (Instance: ZP vs zinc plated), complicating guide checks
- A number of transport areas 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 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 verify, that meant burning by $22,181 simply on guide verification. And we’re not even counting the hours spent chasing corrections and different further duties.
Moreover, the fee 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. Immediately, 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 fastened. However any answer wanted to work alongside their present order processing and achievement workflow, not change it. That is after 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 focus on how this distributor prevented expensive 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 important change administration. Whereas we might automate all the 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 in opposition to buy orders.
We realized we might ship instant 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 present workflow whereas the automated order matching ran within the background, catching discrepancies earlier than they turned expensive issues.
Right here’s what the workflow appeared like:
- Gross sales workforce receives buy order and creates gross sales order as common
- Buy order will get uploaded to their doc administration system
- Our system mechanically 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 transport
- Order processing workforce receives alerts for overview
- 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 present guide verification course of whereas minimizing danger. In addition they categorized their prospects primarily based on verification wants — some required actual matches on each area, 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 areas
- Understanding varied product descriptions
- Processing completely different fee 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 mechanically flags points primarily based on severity:
Essential points requiring instant consideration:
- Complete quantity mismatches
- PO quantity discrepancies
- Fee time period variations
Non-critical points for overview:
- Transport element variations
- Line merchandise matches
- Deal with 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 Processing) price — the share of orders being verified mechanically with none guide intervention — and 90% accuracy in information extraction and matching. This was a major enchancment from the preliminary 70-75% accuracy price throughout early implementation.
The outcomes had been transformative:
Operational enhancements:
- Simply processing 17-18 information day by day by automated order matching
- Error charges diminished to only 1-2 points per batch requiring guide overview
- Automated checks operating all through enterprise hours (7:30 AM – 4:30 PM CT)
- Deal with complicated distribution situations like will-call orders and a number of transport areas 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 transport
Monetary and money circulation impression:
- Order discrepancies caught earlier than transport — when fixes are simpler
- Fee delays diminished 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 fee delays
Course of enchancment:
- Centralized processing by devoted order processing function
- System mechanically flags points primarily based on severity
- Actual-time alerts despatched to related workforce members
- Complete monitoring by Energy BI dashboards
- Customized validation guidelines for particular buyer necessities
- Automated exception flagging and opinions 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 overview. This streamlined method maintained each the excessive STP price 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 will help automate your total order processing workflow — from gross sales order creation to achievement and transport. E book a demo right this moment to see how we will help you.