Moderated by Kate.
Kate: Hello, everyone. My name is Kate. I’m a financial technology advisor here at Hyperbots. Today we have Polina McLaughlin with us. Good morning, Polina. How are you doing?
Polina McLaughlin: Good morning. I’m good, and excited to be here. How are you?
Kate: I am good. Thank you so much for asking. We are very excited to have you here with us today.
Kate: A little bit about Polina, she has years of experience in the pharmaceutical industry on the manufacturing and finance side and was heavily involved in cash flow optimization processes, improving AR and AP processes. Thank you so much for joining us today to discuss the importance of matching strategies in the accounts payable function. Let’s dive right in with our first question.
Polina McLaughlin: Go ahead!
Kate: Can you explain why matching strategies are critical in the accounts payable process?
Polina McLaughlin: Matching strategies are key in the AP process because you want to pay for what you’ve ordered and received. This way, you can avoid overpayments, fraud, errors, and paying twice, which can significantly impact the financial health of your company. Verifying POs to GRNs and invoices is critical for accuracy and for protecting the company’s assets.
Kate: Understood. Moving on to the next question, What are the different types of matching strategies used in accounts payable, and how do they differ?
Polina McLaughlin: You have three types of matching processes: three-way matching, two-way matching, and no matching at all. Three-way matching is for critical purchases where you match the purchase order with a goods receipt notice and the actual invoice, ensuring you received the correct items and billed the correct person or organization.
Two-way matching compares the invoice to the purchase order and is useful when you don’t need to verify the physical receipt of goods, such as with software or consulting services. No matching is for situations where neither a GRN nor a PO exists, and you need to verify an invoice without matching. Each strategy has specific applications depending on the transaction’s nature and associated risks.
Kate: That makes sense. Could you provide examples of situations where three-way matching would be most appropriate?
Polina McLaughlin: Three-way matching is the most thorough approach, often used in industries like manufacturing or retail. For example, when you receive large quantities of raw materials, you verify that the PO, goods receipt, and invoice all match, ensuring that everything was received correctly and payment was made to the right entity.
Kate: That’s clear. What about scenarios where a company might choose to use two-way matching instead of three-way matching?
Polina McLaughlin: Two-way matching is less thorough and typically used when there’s no physical goods receipt involved, like when you purchase software or services. In such cases, you can compare the invoice to the purchase order or delivery note without needing a goods receipt notice.
Kate: I agree with you completely. What about situations where no matching is possible? How should these cases be handled?
Polina McLaughlin: Some situations don’t allow for matching, like utility bills, employee reimbursements, or direct expenses without a PO or GRN. In these cases, it’s crucial to have strong internal controls like pre-approval processes, budget limits, and detailed record-keeping to ensure that such expenses are legitimate and align with the company’s financial plans.
Kate: That’s understandable. What are some best practices companies should follow when implementing matching strategies in their accounts payable processes?
Polina McLaughlin: First, automate the matching process to reduce human error and ensure consistency. Then, ensure clear documentation for POs, GRNs, and contracts, making them easily accessible. Establish exception management procedures to quickly address discrepancies. Conduct regular audits to verify that everything is matched correctly, and provide training for AP staff to understand the importance of these processes. These best practices are vital for maintaining financial integrity and reducing the risk of fraud.
Kate: I completely agree. How does artificial intelligence enhance the matching process in accounts payable?
Polina McLaughlin: AI plays a pivotal role by matching hundreds or thousands of invoices quickly and consistently. It can flag discrepancies for review, speeding up the payment process while reducing human error. AI ensures uniform data, helping companies achieve straight-through processing and significantly improving the overall efficiency of the AP function.
Kate: That was insightful. Now, we’ve come to our last question. What challenges do companies face when trying to implement these matching strategies, and how can they overcome them?
Polina McLaughlin: The first challenge is data quality. Poor data quality hampers automation efforts. Companies should invest in modern, integrated AP solutions to ensure uniform data and reduce human error. Another challenge is resistance to change. People often prefer manual processes they’re comfortable with. Overcoming this requires educating staff about the benefits and showing how automation can free up time for more meaningful tasks. Lastly, ensuring data accuracy across documents is essential. Companies need stringent documentation practices, regular audits, and a commitment to data integrity to maintain the financial health of the company.
Kate: I couldn’t agree with you more; that made a lot of sense.
Kate: Thank you so much, Polina, for providing such detailed insights into accounts payable matching strategies. These practices are vital for maintaining financial control and ensuring the smooth operation of any business. Also, a big thank you to all our listeners.
Kate: Thanks a lot, Polina, once again, and we’ll connect sometime later.
Polina McLaughlin: Yes, thank you. It was my pleasure. Ensuring the integrity of the AP process is fundamental to the overall company’s financial health, and I’m glad to share these strategies. I hope they help others achieve that. Have a wonderful rest of your day.
Kate: You have a wonderful day too, Polina. Bye-bye.
Polina McLaughlin: Bye.
