Introduction

To stay competitive, you know how important it is to find new ways to streamline and save on your company’s operations.

Learning how leading companies handle commercial payments can give you deeper insights into where and how you can

improve. Help you understand how to run your Procure-to-Pay processes more efficiently. Enhance visibility into corporate

spend. Gain better control and compliance. And ultimately, help enable you to add more profit to your bottom line.

Visa commissioned Deloitte Consulting to conduct 90 in-depth interviews in with more than 60 global/multinational,

mid-size and large corporations as well as federal and local government agencies across the world. In 2010, Visa

commissioned Deloitte Consulting to update each of the following 28 Travel and Corporate Card Best Practices from the

comprehensive study to include current trends, updated case studies, and additional key findings. See the section entitled

“Study Methodology” for additional detail. The Visa Global Procure-to-Pay and Commercial Card Best Practices Study describes

how these organizations implement and optimize their Procure-to-Pay processes and commercial card programs. The

study gives you access to best practices for a variety of topics: Maximizing the benefits of purchasing and corporate card

programs. Streamlining travel and entertainment management. Taking advantage of the latest innovative best practices.

And automating the entire Procure-to-Pay process.

Each best practice is divided into three useful sections—a recommendation overview, a benefits outline and steps for

implementation—so you can quickly find the information you need. For more information on the Visa Global Procure-to-Pay

and Commercial Card Best Practices Study, contact your commercial banker.

Table of Contents

Automate the Payment Approval Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

Study Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Note: Survey results, research and practice recommendations are intended for informational purposes only and should not be relied upon for marketing,legal, technical, tax, financial or other advice. When implementing any new strategy or practice, you should consult with your legal counsel to determinewhat laws and regulations may apply to your specific circumstances. Visa is not responsible for your use of the information, including errors of any kind, orany assumptions or conclusions you might draw from its use. Much of the information contained in this document applies internationally, but a certainamount of information applies only to certain countries or regions. Although Visa tries to mark all country- and region-specific information with a countryindication, it does not warrant or represent that all information without indication applies internationally. You should check the applicability of anyinformation in this document to you or your organization.

Automate the Payment Approval Process

Best practice companies automate the payment approval process by conducting 3-way

or 4-way matching, which integrates the purchase transaction data with receipt and

invoicing data. The matching occurs for the following data elements:

• Purchase Order

• Quantity of goods received

• Invoice

• Quantity of goods accepted or supplier contract terms

This automated process occurs within the e-Procurement or ERP system and verifies

that the purchase order, invoice, and receiving information matches within accepted

tolerance levels. If all documents match within a designated tolerance, the invoice is

authorized for payment. This automation minimizes the time Accounts Payable spends

reviewing and matching invoices and enables the department to focus on managing

the exceptions.

Leading companies analyze exception patterns to set the appropriate tolerances for

low risk variances. One global manufacturing organization built tolerances into its

3-way (Purchase Order, the quantity of goods received, and the invoice) matching

process to minimize the amount of invoices rejected by the system. After

implementing 3-way matching, the organization found that a significant portion of the

invoices were rejected due to variances of less than a dollar between the amount

invoiced and the amount defined in the purchase order. Therefore, the company built

tolerances into its ERP system to allow positive matches for invoice / purchase order

variances less than a dollar. Incorporating the tolerances in the system reduced the

company's exception processing.

While three-way matching was a best practice identified in the Visa 2002

Procure-to-Pay Best Practices Study, an emerging trend is the use of 4-way matching.

Four-way matching entails the authorization of payment only after the Purchase Order,

the quantity of goods received, the invoice, and either the contract price or quantity of

goods accepted is verified. This helps ensure companies use the negotiated contract

purchases and do not pay in full for incomplete orders or damaged goods. One global

manufacturing company used 4-way matching with its largest global suppliers. This

not only provided the organization with more control over payments but also provided

metrics, such as the number of incorrect invoices / shipments that could be used to

track supplier performance.

Best practice organizations automate the 3-way and 4-way matching with the

coordination of the following solutions:

• e-Procurement systems

AUTOMATE THE PAYMENT APPROVAL PROCESS

Best practice

organizations work with

their suppliers to ensure

that all invoices are

received in a predefined

format to facilitate

automated 3-way or

4-way matching.

1

• Electronic Invoice Payment and Presentment (EIPP)

• ERP systems (e.g., Procurement and Accounts Payable modules)

• Scanners to create electronic invoices and receipts

For 3-way and 4-way matching to function properly, employees must comply with

order and receipt procedures. Leading organizations communicate and enforce these

policies and procedures to minimize the time Accounts Payable spends reviewing and

managing invoices and receipts.

Options for Best Practice Adoption

The degree of automated matching used depends on the technology sophistication of

the company.

Option I Option II Option III

Options for Adoption Implement 2-way

matching (Purchase

Order and invoice)

Implement 3-way

matching (Purchase

Order, invoice, and

quantity of goods

received)

Implement 4-way

matching (Purchase

Order, invoice, quantity

of goods received, and

either contract terms or

quantity of goods

accepted)

Benefits• Requires minimal

development and

integration

• Automates the

matching of receipts

prior to payment

approval

• Improves payment

accuracy

• Increases adherence

to negotiated

contract pricing

terms

• Minimizes

overpayments

Key Considerations• Potential for

inaccurate payments

(e.g., for goods not

received)

• Potential for

overpayment of

goods delivered in

poor quality

• Requires definition

of process to record

receipt of goods

• May require a

significant amount of

coordination

internally and with

suppliers to

integrate data

Benefits

Implementing automated matching may provide companies with multiple benefits,

including improved controls, cost savings and process efficiencies, user satisfaction,

and supplier management.

AUTOMATE THE PAYMENT APPROVAL PROCESS

When implementing 3 or

4-way matching,

organizations usually

incorporate tolerances

for invoice/purchase

order matches to account

for unforeseen taxes or

shipping costs.

2

Category Benefit Obtained

Control and Compliance Matching helps to ensure that invoices being paid are valid.

Cost Savings and Process

Efficiency

Cost savings can be achieved as the automated process streamlines the

manual matching process and minimizes overpayments on goods that

are not received or received in poor quality.

Supplier Management Detailed data provided from the automated matching process enables

organizations to track suppler performance metrics which can be used to

enhance negotiating strength with suppliers and improve overall supplier

management.

User Satisfaction Automated matching eliminates the need for employees to solicit

signatures prior to payment which simplifies the overall purchasing

process.

Implementation Steps

To implement 2, 3, or 4-way matching, organizations must follow the following steps.

# Description of Action Step

1 Determine degree of matching best suited to organizational capabilities and needs

2 Identify and implement necessary supporting technology solutions

3 Incorporate formal receipt and matching process into Procure-to-Pay policies and

procedures

4 Train end-users and Procure-To-Pay employees on formal receipt and matching processes

5 Track internal and vendor matching performance and use the results to manage supplier

performance and modify the process as needed

AUTOMATE THE PAYMENT APPROVAL PROCESS

"We use 4-way matching

for all contractor invoices

as it allows us to factor in

an evaluation of the

services provided."Global Accounts Payable Manager,

U.S. Manufacturing Company

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Study Methodology

The objective of the Visa Procure-to-Pay and Commercial Card Best Practices Study

was to better understand the changes in the segment and to gain a comprehensive

understanding of best practices across the Procure-to-Pay process and within the

commercial card program. Visa commissioned Deloitte Consulting to conduct 90

in-depth interviews in the summer of 2007 with more than 60 global/multinational,

mid-size and large corporations as well as federal and local government agencies

across the world. In 2010, Visa commissioned Deloitte Consulting to update each of

the following 28 Travel and Corporate Card Best Practices from the comprehensive

study to include current trends, updated case studies, and additional key findings. The

evaluation of the Procure-to-Pay process included sourcing, order placement, payment

and settlement, reconciliation, control and audit, and reporting activities. For the

commercial card management process, the assessment focused on practices related

to the purchasing and corporate card program strategy, management, and reporting.

Interviewees included Regional Controllers, Chief Procurement Officers, Directors of

Strategic Sourcing, Procurement Managers, Accounts Payable Managers,

Global/Regional/Local Commercial Card Program Managers and Travel Managers.

Study participants had a range of commercial card programs in place including

purchasing card, corporate card and commercial “one” card programs with each of the

top three card providers: Visa, MasterCard and/or American Express.

STUDY METHODOLOGY

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