Why your procure-to-pay workflow leaks margin, and where to close it
In short
Most small distributors lose margin between the purchase order and the supplier invoice because the three documents that prove what was ordered, delivered, and billed never meet before payment. Match your purchase orders against goods received notes and supplier invoices before every payment run.
The procure-to-pay workflow runs from purchase requisition to supplier payment. For small distributors, margin disappears at the invoice-matching step - and fixing that handoff recovers more than renegotiating supplier prices ever will.
A procure-to-pay workflow covers six steps: identifying the need, raising a purchase requisition, issuing a purchase order, recording what was received, matching the supplier invoice against what was ordered and delivered, and releasing payment. For large businesses, dedicated accounts payable teams manage this as a formal process. For small distributors, it usually means a purchase order sent by email, a delivery signed off by whoever was in the warehouse that day, and a supplier invoice paid when it arrives because there is a payment run due. The money goes missing at step five - the match between what was ordered, what arrived, and what is being billed. That match rarely happens because the three documents that should enable it live in three different places, and nobody has the time to pull them together before the cheque goes out.
The Three Documents That Should Talk to Each Other
Three-way matching is the process of comparing a purchase order, a goods received note (GRN), and a supplier invoice before releasing payment. Done properly, it closes the gap between what you agreed to pay and what you actually pay. In an enterprise, software automates this comparison. In a small distributor, it falls on one person - usually the same person who raised the purchase order and approved the goods in - and it happens inconsistently, if at all.
The common failure mode is not fraud. It is drift. The purchase order lives in the quoting system or a spreadsheet. The GRN is a signed paper delivery note filed in a folder near the goods-in door. The supplier invoice arrives as a PDF by email and gets forwarded to accounts. Nobody pulls all three together before the payment run because nobody's workflow requires it. Research published in 2026 by Ivalua found that 42% of companies experience revenue leakage due to inefficiencies in their procurement workflows, with invoice approval consistently cited as the most common failure point.
When the match does not happen, overpayments slip through quietly. A supplier invoices for 50 units; 48 were delivered and one was returned, but the credit note was never reconciled. The £60 difference disappears into cost of sales. It happens on every third or fourth order. By the end of the year, it adds up to a margin variance that looks like pricing pressure when it is actually an accounts payable control problem - one that no amount of supplier negotiation can fix.
Why Renegotiating Supplier Prices Solves the Wrong Problem
Many distributors respond to margin pressure by pushing suppliers for better prices. That is a reasonable instinct, but it addresses the wrong variable. A 2% price reduction on a £5,000 order saves £100. An unmatched invoice on the same order can lose the same amount - and the invoice problem recurs on every order without exception, not just the ones where you successfully negotiated a discount.
The deeper issue is that most small businesses cannot clearly see the cost of unmatched invoices, because those losses do not appear as a single identifiable line. They surface as unexplained cost-of-goods variances, small write-offs, and gross margin that consistently comes in below what the quote implied. The right diagnostic is to calculate the rate at which incoming supplier invoices actually match the corresponding purchase orders and delivery records. A business processing 40 supplier invoices a month with a 15% mismatch rate has six invoices every month going to payment without verification. At an average order value of £2,000, that is £12,000 a month in spend with no matching control applied to it.
Fixing the Handoffs Without an Accounts Payable Team
The structural fix is not a price negotiation. It is ensuring the purchase order, the goods received record, and the supplier invoice travel together through a single approval step before payment is authorized.
Zigaflow's purchase orders feature connects each order to its supplier and lets you log what was actually received against it. When the supplier invoice arrives, it can be matched against both the PO quantity and the received quantity before anyone approves it for payment. The inventory record updates in the same action - so a short delivery triggers a stock adjustment at the moment the invoice discrepancy is flagged, rather than being discovered weeks later during a stocktake.
The approvals feature closes the loop on the authorization side. Instead of a supplier invoice being paid because it arrived and looked approximately right, it moves through a defined approval step. The approver sees the original PO, the received quantity, and the invoiced amount on the same screen. If the three figures agree, the invoice is approved in one click. If they do not, it is held until the supplier issues a credit note or the delivery discrepancy is resolved with the goods-in team.
This does not require hiring an AP manager. It requires the three documents to exist in one place so the comparison takes place before payment, not after the period-end accounts reveal the damage.
Don't wait for the year-end accounts
By the time a margin variance shows up in your management accounts, the invoices causing it have already been paid. The fix has to happen at the point of approval, not at the point of review.
Businesses that have established consistent three-way matching typically find that the value recovered from catching invoice discrepancies in the first three months exceeds what a year of supplier price negotiations would have returned - without the relationship friction that accompanies every request for a lower price.
The procure-to-pay process is where operational discipline translates directly into margin. In a small distributor, the steps from purchase order to supplier payment are rarely managed as a single connected process - and that gap is where the money goes. Tightening the handoff between what you ordered, what arrived, and what you have been asked to pay costs far less than permanent supplier price concessions, and the returns compound across every order rather than being renegotiated one supplier at a time.
Sources
- 10 Procure-to-Pay Best Practices for Efficiency & ControlIvalua · accessed 2026-10-07
- What Is 3-way Matching in Accounts Payable?Ramp · accessed 2026-10-07