Startup Check-In

Purchase Order Matching Is A Sign Of Maturity

Not every organization is diligent about matching purchase orders (POs) with invoices when handling supply chain payments and accounts payable (AP).

A PO matching process ensures that a PO has already been established and approved for the vendor before an invoice is even received, so that, when the invoice arrives, the organization can guarantee it’s paying out the correct amount and not overspending. Without a matching process, it becomes all too easy to agree to a $10,000 payment but then get billed for (and pay out) $17,000.

As digital companies grow up, their financial process matures, and the risks they are facing grow. Those that do not have an invoice workflow often begin to adopt one for at least some of their supply chain payments.

Adopting a PO matching process is a significant marker of maturity, according to Rob Israch, CMO for AP automation startup Tipalti. That’s why Israch said Tipalti decided to launch PO matching as part of its end-to-end AP suite, which aims to automate the entire AP and supplier payments workflow.

Israch said automating these processes can reduce risk and slash time spent completing these tasks manually by 80 percent.

The new PO matching element fits neatly with one of the startup’s big innovations from last year: multi-entity capability, Israch said. He explained that many organizations have multiple workflows and therefore set up an additional entity that’s part of the encompassing business in order to process supplier payments whether or not they’re backed by invoices.

Israch mentioned Uber as an example. The ridesharing marketplace uses a non-invoice-backed process to pay drivers, relying instead on an analytics-based process that disburses payments as work is performed. That saves drivers the headache of tracking and submitting their hours and mileage. This simplicity is key for attracting and retaining drivers.

Yet Uber also has overhead costs that are invoice-backed: vendors, marketing, suppliers, electricity, office space, et cetera. Israch said it’s just as important to keep those processes streamlined and efficient, but it takes a different approach than the analytics-based driver payments.

Tipalti’s multi-entity capability supports both flows, he said, and gives CFOs the dual visibility they need to have confidence around each. PO matching enhances that, he said, by keeping a tight ship in the invoice-backed payments workflow.

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