Troubles & Solutions in AP Processing: Price Mismatches with PO

How often does this happen to you? The unit price on one line of an invoice does not match the purchase order price and the entire invoice goes on “hold”. In our experience, it is common. Between 25% to 30% of incoming PO invoices contain pricing mismatches. This situation causes headaches for both the AP staff and Vendors alike because a hold status forces someone to check the data (line-by-line) before it is approved, and a payment is sent. This can add hours or even days to the processing timeline.

Manually checking and entering data is easily the most time-consuming part of an AP practitioner’s day. (The only thing worse is when an invoice goes on hold and the information has to be entered more than once.) It bogs down the entire process and is the single biggest complaint that we hear from companies that are still using a manual process. And it’s not just time consuming for the person doing data entry. They often can’t solve the problem alone, so others in the organization need to be consulted, or vendors may need to be contacted, which further drains an organization’s precious time. Even if the pricing is actually accurate, the Company’s ERP may need one (or more) updates to allow the invoice to be posted. Time is wasted, efficiency suffers, and, unfortunately for many companies, it’s the only way they can handle this problem.

Thankfully artificial intelligence and automation have improved significantly over the years and there is a better way to handle invoice price mismatches.

The process starts by using AI based software that uses Cognitive OCR (Optical Character Recognition) to capture invoice data with close to 100% accuracy. The invoice data is then imported into a workflow system where it is compared with the PO and Receipts data to automatically “Pair” each invoice line with the appropriate line on the PO. (Pairing is the concept to determine which PO line is associated with each invoice line and is done by comparing the part number, unit price, and quantity between the invoice and the PO.)

Once invoices and POs are “paired”, the line-items from within the documents are “matched” against each other. Matching is another automated part of the process that determines if there is a price variance on any line. When a variance is discovered, the system flags the line with the variance, records a comment, and automatically routes that invoice (along with its image) to the appropriate approver based on the company’s established routing rules. An example of a comment would be: “Price Variance: On line 2, the PO price is $1.10 and the invoice price is $1.12.” The invoice is routed to the buyer who created the PO and they get an email alerting them to review the invoice with the issue. The buyer now has all the information to make the decision without any of the AP staff ever having to touch the invoice.

These features are all included in Nimbello AP’s automation solution, and can cut manual work by up to 80% and triple processing speed.

Of course, exceptions will inevitably persist due to outdated pricing lists (in the ERP) and vendors charging an incorrect amount, but the implications are no longer as severe and corrections require much less time and effort. AP staff are able to focus on a select few exceptions, and they are able to simply monitor progress on a dashboard instead of pushing everything along themselves. As a result of this technology, companies are able to simultaneously save time and money while improving efficiency and morale. To learn how Nimbello can help you resolve and reduce PO price variances, contact us or click here to learn more. 

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