ITESOFT Insider View – Do You Need Line Item Matching? Why?

Do you need line item matching? Why?

Join Alan Brown, senior sales consultant @ ITESOFT as he talks through the top 5 things to understand about AP processing & matching.

Part 3, Alan will be delving into line item matching… Do you really need it, and if so, why?

For anyone involved in an Accounts Payable automation project, or is thinking about getting started these sessions will give you some actionable insights to help.

Watch the video, listen to the podcast or read the transcript below.

Part 3 of 5.

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Welcome to the ITESOFT Insider View.

Thank you for joining us, tis part 3 of a 5 part series.

My name is Alan Brown, I am senior Sales consultant within the organisation. I am going to be taking you through today’s session.

The overall theme has been around the top 5 things to understand about AP Processing & matching.

Week 1, we talked about how much time and money is actually spent on the invoice matching side of things.

Week 2 was looking at and understanding how you currently match your supplier invoices.

The week is week 3, we are going to talk about line item matching & why do you need it? So thank you for joining me for this.

Do you need line item matching? Why?

Line item matching is something that crops up in 80% of the conversations that I will have with most organisations.

I say 80% because there are probably 20% of the organisations out there, that we speak with, where they only do header and footer. And thats, as far as they are concerned, is all they need.

For a lot of other organisations that we are dealing with they have got line items put in place and they are already dealing with line items.

And that’s great, but, the question i’ve got for yourselves, especially as most organisations have got line items in place is… Why?

Why do you need to have line item matching in place?

It’s an interesting conversation that I have with most organisations about this. And in all honesty, it tends to get a little bit contentious.

Lets be politically correct about it and say contentious rather than confrontational.

Matching line items is just something we have always done…

It’s not that there isn’t a reason for doing it, but part of the reason why I am bringing this up is because you are looking to move, with a paradigm shift, to something different.

In this case with digital automation of your invoices.

So therefore, as part of that paradigm shift, why are you going to carry on, or, potentially best case, replicate what you are currently doing from a manual perspective, into automation?

You wouldn’t do that in many other parts of the business, just replicate what you’ve currently got for something different that is now more automated.

Ok, maybe there’s a vast amount of benefits to that, but, there are some things that you can make a radical step change with and that potentially to do with line items as well.

This is an area where it takes up a huge amount of time around the AP process.

Removing line item processing saves huge amounts of time.

For most organisations that are already doing this. If we were to take out line item matching, and the processing that they high, or significant, or vast amount of time that it currently takes, that therefore gives you the byproduct which is huge time savings.

Even if there is still a little bit of manual processing involved around that.

Let’s think about it.

Most of the invoices that you have coming in at this point in time, even with the line items. Let’s take the 80 20 rule for instance. Your suppliers are wanting to get product out to you so that they can invoice that.

They don’t want to send out partial deliveries because they cant invoice for all of that.

They might send multiple drop deliveries, that’s another matter altogether.

But, they want to get as much out to you, as quickly as possible, so they can invoice you and they get your money. At a very basic level.

Boosting your RoI when automating.

Assuming that 80% of the invoices that come in with line items are going to meet your goods receipting. Assuming your goods receipting and goods receipting policy is done on time and done properly.

And it’s also going to meet the threshold that you have put in place around your purchase ordering, then they are going to go straight through your system.

Why are we even manually dealing with these? Why is there any sort of work that is involved around line items and dealing with them manually?

This can also mean a much more significant return on your investment round automation if you say:

“We will deal with line items in a different way.”

And I am not saying get rid of line items, I am just saying lets deal with them, and how your dealing with them, and why you are dealing with them, in a different way.

To allow you to get the automation rates in place that you are looking for.

Still puts safeguards in place that you need to have.

There are a number of questions that I want to be able to throw out here to yourselves to consider. To be able to conjugate on. And see whether it is worthwhile doing.

Why are you REALLy processing at line level? Is it a hangover?

So for instance. One of the things that I want to ask here is:

Why are you processing at a line item anyway?

Is this purely because you have always done it this way?

Is it a hangover from what you have always done? You joined the organisation 5 years ago and someone then said that this was really important and you’ve carried on doing it that way.

Noone has told you it’s not important, so is that a question that you need to go and ask in the business?

Or, actually, maybe not even in the business but to your Financial Controller or your CFO.

Who is it really for?

Is this important for the accountants? Is this important for audit? At what point, or which part of the business is this important for?

I get within, for instance a manufacturing organisation.

Lets say its a car manufacturer, as we are all aware of cars.

You’ve got 100’s of different individual components that come together that make 1 product, and they need to know how many widgets they’ve got.

Perhaps because of just in time ordering and they know how many they need to go on one vehicle and they need to keep production going.

But is that actually to do with ordering and stock levels? Or is that to do with invoice processing and how we are dealing with this?

This brings us neatly onto my next question for you.

Is line item matching integral to your business?

Is this something that is really integral to your business?

Now, it might be. Going back to the example of the manufacturer of cars. It might be from a production point of view, thats a given.

But how does that then come back to how is this integral for AP and Finance to be able to operate? Not necessarily quite sure.

Especially when we take, sweeping generalisation again, 80% rule, or the 80 20 rule, that 80% of your line items are going to go through with no issues at all.

I suspect it will be higher.

When I’ve really dug into this with other organisations it tends to be probably closer to somewhere between 85 – 90% rather than anything else.

Is it because you have never looked at automation?

In a lot of cases, it tends to be a combination of: You’ve always done it this way and therefore you haven’t thought really, and haven’t been challenged about doing it any other way.

You’ve probably also never had the opportunity of asking, can we do it another way?

Is it because you’ve never looked at digitalising the AP process? So this is a perfect time for you to be able to look at it because you are looking at automation and digitallinising the AP and purchase to pay process?

Is this a way of being able to change and alter how your dealing with the ine items?

Is it a trust issue?

Is it because you’ve got line item matching in place because, historically, it might be back to the hangovers again but…

Historically, let’s be politically incorrect this time… you don’t trust the business or your suppliers, and this is your way of putting some checks, controls, balances in place.

It may have happened once and it may have been a huge issue X number of years ago. Do you still need to have that in place now? Are there other ways of being able to deal with that?

For instance, if you are going to digitalise and automate your process, aren’t you going to get better reporting out of that?

Brings me to the next point that we have.

Is it an issue with visibility of your invoices and processes?

Is it a lack of internal visibility, reporting, governance around the manual processes that you currently have in place?

Including around your purchase orders, goods receipting and invoicing that by digitalising would help take out that lack of visibility.

And bring a lot more clarity, potentially real time reporting into the system that hadn’t been there before.

This is where we are then talking about how your staff are going to be operating.

Is it to justify the effort spent in handling credit notes?

Could it be something slightly left of field here. For instance.

Is it a way of being able to justify the processing of your invoices and credit notes.

A lot of organisations that have line items in place therefore also have a large number of credit notes in place.

What I mean by that, as the invoice comes in and the line items don’t match, the automatic process that they have is that they automatically ask for a credit note.

Therefore we need to be able to deal with how we process the credit note.

So, there are lots of questions there that I am pushing back onto you with.

This is what you need to be able to consider to change and improve the relationship, and what you are offering, to both the business internally as well as to your suppliers.

Improve relationships, offer flexibility… Supplier Portals.

One of the things that you might want to consider, as part of your digitalising capability or processing is things like a supplier portal.

That allows your suppliers to have greater visibility and self service as part of the overall capability you are giving them. Giving them the ownership so that they can build their own trust.

If the issues is to do with the internal visibility. The lack of reporting, lack of governance that’s in place. and you need to build trust, or create the opportunities for trust to happen within the business then the real time reporting tools that you should be looking to get, as part of this, will help build into it.

Guys, this has been a really great chat. I’ve really enjoyed being able to speak with you about this.

This is the end of part 3. Really looking forward to seeing you in part 4.

Thank you and have a great day.

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