Automated invoice reconciliation for suppliers and vendors

by | Jun 12, 2018 | Suppliers

One thing retailers love about EDI is the ability to reconcile invoices electronically and automatically. This process compares the purchase order, receiving documents and invoice to make sure they all match each other in items, quantity and costs. Once the match is made, an EDI system will set up the invoice for payment in the retailer’s Accounts Payable system so payment can be made at the appropriate time.

Retailers like this automated purchase order-to-invoice reconciliation process because it helps them reassess their staffing, make role adjustments and redeploy people to different endeavors. In the past, before EDI, an accounts payable department might have 15 to 20 people whose sole job was to pull all the documents for transactions, compare them by hand and make sure everything matched up correctly. Every step of it was done manually, which meant it could take a little while to be completed. And if there was a discrepancy, there was a delay as that issue was resolved.

But with the EDI system loading the invoice details into the payables system, this three-way matching process is done automatically, and the system only flags a transaction when one of the three documents doesn’t match up. We know clients that have reduced their accounts payable departments by three-quarters and saved half a million dollars or more per year with EDI and automated invoice reconciliation.

Why suppliers love automated invoice reconciliation

Suppliers (and distributors) also like three-way matching systems, because they get paid “faster.” (Truth be told, you don’t actually get paid faster. It’s just that there are fewer errors between the documents, which means retailers pay on time, so it only feels faster. But still, getting your money on time feels better than getting it two weeks later because of a mismatch.)

But suppliers have other reasons for using three-way matching in their own EDI systems. For one thing, they’ve got their own suppliers and wholesalers they buy from. They send their own purchase order to their supplier, which sends the packing list and the invoice, and the whole matching process happens on that front as well.

And if they’ve got their own accounts payable department that is still processing everything by hand, they can save a lot of money and time themselves, as well as reduce the potential for errors.

We work with many large retailers and suppliers who have fully embraced EDI and everything it has to offer. But we also work with plenty of small suppliers and small retailers that may only be using the web form portion of an EDI system. They don’t have EDI installed in their ERP system (they may not even have an ERP system), but they’re able to take advantage of the EDI basics by using our web-based form system.

If this is how you’re currently using EDI, you may want to consider upgrading to a full EDI system, so you can take advantage of benefits like three-way matching. Not only can it help you get paid “faster,” but you can reduce your staff time spent on processing payments. Better still, it can even help you find new retail partners who will only work with suppliers that are EDI-compliant.

To learn more about using automated invoice reconciliation in your own EDI system (or you just want to learn how to use EDI with your own suppliers and retail partners), please visit the SPS Commerce website. You can also get a free demonstration, or speak to one of our EDI specialists.

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Scott Bolduc
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