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October 11, 2016

Small Supply Chain Fixes Can Add Up to Big Savings

How to detect and solve out of balance invoices.

One of the most common issues we find when analyzing client’s EDI data is a simple mistake that often flies under the radar, costing companies small dollars that can quickly add up to significant costs. This issue is easily detectable with the right tools, can be easily corrected and is a quick win for any accounting department.

The issue is the dreaded “Invoice Out of Balance,” a curse for any accounting department who prides themselves on balancing every document and ledger. And often times the issue occurs completely unnoticed.

The implications of an out of balance invoice are the inevitable short payments that are incurred.

For instance, does the customer pay the amount at the bottom of the invoice or sum of the line items? This probably depends on which one is less. Or do these short payments fall under the accepted “threshold” that your company allows? Flying under the radar and are written off?

One of the most common reasons we find these issues is missing freight charges on the invoice and the reason it happens is completely understandable, and avoidable.

Imagine back when you first starting doing business with this client, chances are freight charges were not passed to them on the invoice. When the customer was set up on EDI, freight charges were not included in your EDI maps and therefore weren’t even considered at the time.

Then the e-commerce orders started picking up steam and you found yourself shipping product to consumers’ homes in individual boxes, rather than bulk shipments on pallets to a distribution center. The freight charges started to add up and the sales team negotiated with the client to be able to pass along the freight charges in the invoice.

Here’s where the issue began.

The business change to add freight charges was communicated to the accounting team who added them to the invoice, but no one told the EDI/IT team to add this data to the outbound invoice map. Therefore, the invoices balanced just fine in your ERP, but in the EDI document that you sent your clients, not so much. The outbound EDI data includes the line item details and the total, but not the freight charges. Therefore the total is more than the sum of the line items because of the missing freight charge data.

CASE STUDY: How Innova Disc Golf solved their freight charge issue.

And the issue of the out of balance invoices crept into the small dark corner of your supply chain—hidden from sight costing you $10 to $20 on each and every order, but still falling under your $50 threshold, continuing to add up over time.

So here’s a quick homework assignment for everyone. Check your EDI invoices to see if you’re suffering from this very common predicament. Or better yet, check out our new IntelligentXchange solution that helps give you the insights you need to avoid this and many other issues that can plague your supply chain to reduce costs, improve on time receivables, and improve your most important business relationships.