The first time match rate
As we discussed in our previous post, first time match rate (FTM) is an essential Key Performance Indicator (KPI) for any well-established procurement and accounts payable department. Procurement tends to spend a lot of time working with other departments within an organization. One such department is accounts payable.
Accounts payable and procurement
As a result of the procure-to-pay process, procurement departments often send multiple documents to accounts payable. Of these documents, the most common are invoices, purchase orders, and receiving documents.
Let’s take a look at each:
- The invoice: This is the document that clearly shows that you owe money for something you ordered. Invoices must communicate where to send payment, when that payment is due, and what payment terms to meet. Invoices can either be simple or complex, depending on the order.
- The purchase order (PO): When the purchasing department receives a requisition, they must complete a purchase order detailing what they need from the supplier. The PO should show all of the basic details about the order. This includes quantity and price, but also any sort of discounts negotiated on the offer. The accounts payable department must notify the discounts otherwise they may not receive those discounts from the vendor.
- The receiving documents: Before the invoice is paid, you will want to ensure that you have received the correct goods. It’s important that the receiving staff always check the goods against the receiving documents.
As a standard process, many companies run three-way matching as a way to ensure everything has been paid for and received, at the prices outlined on the documents. If there is any deviation from these three documents, the correct department must be contacted and the discrepancy solved.
The unfortunate reality of this situation is that many companies have lower than a 50% first-time match rate on their invoices. This, in turn, reduces the efficiency of processing the invoice in the accounts payable department. As a result of the increase in processing time, many negotiated discounts are lost and the prices increase.
One of the benefits of using a system that can handle the procure-to-pay process is electronic invoicing. E-invoicing reduces the time spent handling invoices. This lets purchasing teams pass on purchases to the AP team. Suppliers are offered a place to send the invoice where it can be received and handled by the appropriate parties online. While it would be ideal to remove paper invoices entirely, it will take some time before everyone has completely integrated this procedure.
Simply put, using e-invoicing will certainly increase the first time match rate when handling invoices, even if it does not match the first time around. By using a procure-to-pay system, many aspects of direct and indirect procurement can be more easily integrated into the accounts payable and finance departments.
e-invoicing and a streamlined procurement process let’s everyone work smart and fast, increasing your first-time match rate.