Purchase Orders and AP Automation


Ah the purchase order and the automated invoice. I have been wanting to write about this delicate little dance for so long, and today it my day. The picture denotes a two-party stand-off which if you automate Accounts Payable and purchase orders separately then you will have the same outcome.

I Only Write What I Know

One of the very difficult things about Automating Accounts Payable are assumptions and theories. Both can get you in big trouble in business, and when approaching automation both show themselves on a consistent basis. Assumptions when automating (I am writing about negative assumptions) generally shows up in the vetting process or the initial process of finding an automator. The chief assumption that hurts the most is that the automated process is just like the paper process without paper. It’s not true (and it also another article at another time – unfortunately I don’t have space to write why, but I did write a book about it – The 8 Pitfalls).

Theory, on the other hand seems to impact the PO and Invoice matching process to the point to killing it. First, what I mean by theory is the idea that a process or procedure “should” work a particular way, but the person driving the decision doesn’t have any experience on that process or procedure. Experience is the key. When companies go from paper to an automated Accounts Payable process there is generally no experience with automation. Some organizations try to hedge their inexperience by hiring a consultant or an adding to their team, but that person or group doesn’t have experience with your organization (you need both).

There Is A Light

That’s right, there is a light at the end of the tunnel and it’s not an oncoming train. It’s a little practical advice. I have a lot as it pertains to AP Automation and a purchase order process…. lets call them nuggets:

Nugget Number 1 – Make sure both PO and Invoice is automated
Nugget Number 2 – Beware of line item matching
Nugget Number 3 – Three-way matching (PO – Receive – Invoice) is best done in the accounting system

When you automate AP and you don’t have a paperless PO system there is no way you will be able to report and match the PO to the invoice to make sure that it was bill correctly.

Second, beware of line item matching. There is a consistent school of thought that when the PO is created and the invoice shows up the automation service provider will explain that it is a simple match to make sure what was ordered was billed (on the invoice). The problem is the two have to be on the correct line (same place on the PO as the Invoice) and the information has to be exact to enable the software to judge if the invoice is correct based on the PO. There is way too much room for error. Make sure you anticipate this in your vetting process.

Third. I could write a lot about this… but a short piece of advice is to not let your three-way match process out of the accounting system. Find a service provider that will work with your accounting system to get the electronic invoice into the correct section of your accounting system. You don’t want to create a process that exist in two different software platforms.

I hope these were nuggets of goal… more great articles next week!

You Should Buy My Books!

To buy the book – The Argument to Automate – How Innovation Can INSPIRE Not Fire – click here to buy

(Also) To get your copy of The 8 Pitfalls of Accounts Payable Automation – click here to buy

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