COMPUTER-BASED MATCHING (STUDY OBJECTIVE 6)
The IT system used for purchasing and payments can be used to automate the document matching process. Automated matching is a computer software technique in which the computer software matches an invoice to its related purchase order and receiving report. Traditional systems rely on a person to do this matching, whereas an automated matching system does not. To institute an automated matching system, all of the relevant files must be available and constantly ready for processing. This means that purchase order and receiving files and records must be online or in databases. When an invoice is received from a vendor, an employee enters the details into the accounting system by completing fields in the invoice entry screen. The purchase order number usually appears on the invoice, and this number is entered as the invoice is entered. The system can then access the online purchase order and receiving files and check the match of items, quantities, and prices. The system will not approve an invoice for payment unless the items and quantities match with the packing slip, and the prices match the purchase order prices. This ensures that the vendor has billed for the correct items, quantities, and prices.
During the matching process, the system will also check for mathematical errors and ensure that there are no previous payments that would make this payment a duplicate one. Without such checking, duplicate invoices can be received and paid. Vendors can accidentally or intentionally invoice the same order twice. The system checks for duplicate invoices by examining the invoice number, the vendor number, and the dollar amount. The system can print any instances it finds as potential duplicate payments, and this list can be reviewed by a manager prior to payment. In addition, the automated system can evaluate the discount terms and select the most advantageous timing of the actual payment. For example, if payment terms are 2/10, net/30, the system can be programmed to determine whether the 2 percent discount is advantageous when compared with the company's cost of funds.
An automated matching system can reduce time, costs, errors, and duplicate payments in invoice processing. These improvements over manual matching can decrease the amount of time required to enter invoices and therefore give management more timely information to forecast future cash outflows for payment of invoices. In addition, the system can summarize detailed transactions into summary amounts that are posted to general ledger accounts. Thus, management receives more complete feedback in a much more timely manner, enabling management to better plan and control cash disbursements. While there are many advantages to automated matching, there are also risks, including system errors in the matching process, unauthorized access, fraud, and inadequate backup of files.
THE REAL WORLD
Frymaster Corporation is a company in Shreveport, Louisiana, that manufactures food-service equipment such as fryers and frying systems, food dispensing equipment, pasta cookers, and toasters. Frymaster uses an automated document-matching system for invoice payment. It is a medium-size company with four people in its accounts payable department. Compared with companies like it, Frymaster has a cost per vendor payment processed that is extremely low: Frymaster's average cost is only about one-fourth of the overall average cost for a medium-size company.
Frymaster has such lower cost because more than 75 percent of the invoices it receives usually match the other documents the first time. These matched invoices are paid automatically by the system so that no employee time is needed.
Therefore, fewer staff members are needed to process a larger volume of payments, so the staff can focus on exceptions—the other 25 percent of invoices that do not initially match. Documents that are properly matched are processed automatically, and only those with differences require manual steps to reconcile.