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5 min read

How AP Automation Jump-Starts Vendor Statement Reconciliation for Auto Dealerships

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Auto dealerships operate in a fast-paced environment where balancing complex tasks—such as managing inventory and delivering top-notch customer service—is key to success. But oftentimes, a critical yet frequently underestimated aspect of back-office operations is accounts payable (AP) processing, essential to ensuring smooth business operations.

Today, one of the biggest challenges faced by dealership AP teams is managing the high volume of invoices and statements that come from parts suppliers, service providers, and inventory vendors. Traditionally, reconciling these documents has been a manual, time-consuming process requiring many hours of manual data entry and matching. Now, as dealerships grow and invoice volumes rise, relying on manual methods has become increasingly inefficient and prone to errors, which can damage vendor relationships; accounts payable automation can help streamline this process.

Fortunately, AP automation offers dealerships a unique solution by helping them streamline the statement reconciliation process. This informative CloudX article will explore more about how the vendor statement reconciliation process works—with and without automation.

The Challenges of Manual Vendor Statement Reconciliation in Auto Dealerships

Reconciling vendor statements manually involves a series of repetitive, time-consuming tasks that can easily be streamlined using an AP automation solution. Manual processing begins with collecting and organizing vendor statements from various sources, such as inventory suppliers, parts vendors, and repair services. Staff must then compare these statements to purchase orders (POs) and payments stored in PBS Systems DMS, a dealership management system, or an accounting system.

For many auto dealerships, managing a series of tasks like this is a major hurdle that can be alleviated by adopting an AP automation solution. Manual reconciliation methods and associated labor-intensive workflows get replaced by automated matching able to eliminate repetitive data entry tasks and speed up operations.

Human error is another significant concern related to manual vendor statement reconciliation. Mistakes like duplicate payments, missed invoices, and pricing discrepancies often lead to financial losses and disputes with vendors. Additionally, delays caused by these errors tend to strain vendor relationships over time.

How AP Automation Transforms Vendor Statement Processing 

AP automation eliminates the inefficiencies and risks associated with manual reconciliation by digitizing and automating each step of the process. This technology helps dealerships capture, match, and reconcile vendor statements with minimal human intervention, thereby enhancing accounting automation.

At its core, an AP automation solution utilizes advanced data technology tools, such as optical character recognition (OCR) and machine learning (ML), to digitize invoices and vendor statements. Once data is captured, the solution matches information against POs and payment records stored in a dealership’s DMS or accounting system. Discrepancies such as pricing mismatches or missing invoices are then flagged for resolution by the AP automation software.

For auto dealerships, automation tools will integrate seamlessly with existing systems to create smooth and efficient processes. Invoices from parts suppliers can be automatically 3-way matched with POs and receiving records, while payments for operational supplies can be tracked in real time through PBS Systems DMS. Automation also facilitates streamlined communication between departments so discrepancies get addressed promptly and efficiently.

In summary, by reducing the need for manual intervention, AP automation minimizes errors, saves time, and allows AP teams to focus on more strategic tasks, ultimately benefiting the entire invoice process. The resulting transformation boosts the dealership’s operational efficiency and its ability to build trust and reliability with vendors.

Manual vs. Automated Vendor Statement Reconciliation  

The differences between manual and automated reconciliation are significant, especially as invoice volumes increase. Let’s compare how the two approaches compare in terms of efficiency and accuracy:

  Aspect

  Manual Processing

  Automated Processing

  Invoice Volume

  Struggles with high volumes

  Easily handles large invoice  volumes

  Efficiency

  Time-intensive, slows down       operations

  Rapid and accurate reconciliation

  Error Rate

  Prone to human error

  Reduced errors through automation

  Staff Workload

  Requires heavy staff involvement

  Frees staff for up customer-facing tasks

  Vendor Relationships

  Delays can harm relationships

  Timely payments improve partnerships

 

Vendor Statement Reconciliation and 2-Way, 3-Way, 4-Way Matching

Accurate vendor statement reconciliation is critical for auto dealerships because it ensures that the amounts and totals recorded in the dealership’s AP system align with vendor statements. Various matching techniques are usually involved to help verify the accuracy of transactions. They can include: accounts payable automation solutions for improved efficiency.

2-Way Matching

In 2-way matching, the vendor’s invoice is compared with a purchase order (PO) to ensure that goods or services were ordered and that the invoiced amount matches the agreed-upon price, streamlining the invoice process. However, this method doesn’t account for discrepancies that may arise during goods receipt or inspection.

3-Way Matching

To enhance accuracy, the 3-way matching process adds an additional layer by incorporating the goods receipt note (GRN) into the statement comparison. Besides matching a PO to an invoice, the dealership also verifies that goods or services were received as ordered. By including this step, discrepancies can be identified related to delivery quantities or conditions, offering a more robust verification method.

4-Way Matching

For even greater precision, some dealerships implement 4-way matching, which includes an inspection report in the verification process. This method ensures that the received goods meet the specified quality standards and that any inspection findings are consistent with the PO and invoice details. While 4-way matching offers the highest level of verification, it’s more time-consuming and may not be necessary for all transactions.

The Vendor Statement Reconciliation Process 

Transitioning to automated reconciliation is straightforward and intuitive, so dealerships typically recognize immediate benefits. The process begins with digitizing vendor statements using OCR technology, which extracts key details like invoice amounts, dates, and supplier information.

Once data is captured, the automation solution can perform a 3-way match by comparing invoices to purchase orders and receiving records stored in the dealership’s DMS. Completing this step ensures that invoices align with previously approved purchases and deliveries, reducing the risk of errors.

After matching, any discrepancies such as missing invoices or price mismatches are automatically flagged for review, ensuring better visibility. The automation system then routes these issues to the appropriate department or team members so a quick and efficient resolution is met. For instance, a pricing discrepancy might be sent to the procurement team while a missing invoice may be forwarded to finance for investigation.

Workflow automation further streamlines the vendor statement reconciliation process by automating the approval and follow-up stages. In the end, the system generates real-time reconciliation reports that provide a comprehensive view of payment statuses and cash flow, enhancing visibility for automotive dealerships. These reports support better financial planning and decision-making by offering dealerships actionable insights into their operations.

To meet the unique needs of auto dealerships, AP automation solutions can usually be customized if specific features are important. For example, rules on matching can be adapted to handle variable payment terms from vendors. Integration with manufacturer-specific platforms also ensures seamless reconciliation for inventory purchases, helping enhance overall accuracy of transactions.

The Benefits of AP Automation in Dealership Accounts Payable

AP automation delivers significant benefits for auto dealerships by transforming how they manage vendor statement reconciliation. These benefits include:

1) Efficiency. Automation drastically reduces the time required to process invoices, enabling dealerships to focus on core business activities.

2) Cost savings. By reducing errors, dealerships can avoid unnecessary expenses like late payment fees or duplicate payments. Over time, these savings will offset the initial investment in automation technology.

3) Scalability. Unlike manual processes, which require additional staff to manage higher workloads, automated systems scale effortlessly so a dealership can remain efficient even as operations expand.

4) Accuracy. Automation promotes compliance by helping a dealership maintain accurate records and audit trails, which is essential for vendor payments. This is particularly important in the automotive industry, where regulatory requirements are stringent. 

Maximizing Vendor Statement Reconciliation with AP Automation for Dealerships

Implementing AP automation is a strategic move for auto dealerships aiming to increase efficiency, reduce costs, and strengthen vendor relationships. By transitioning from manual to automated reconciliation processes, dealerships can streamline operations, minimize errors, and allocate resources more effectively. 

Overall, AP automation not only addresses current operational challenges but also positions dealerships for scalable growth and sustained success in an increasingly competitive market, enhancing their invoice process.

Ready to improve your vendor statement reconciliation process with AP automation software? 

CloudX CloudX announces scalable AP automation solutions designed specifically for auto dealerships. Learn how automation can transform your operations and request a free demo by filling out our online form today. 

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