How GenAI Contract-Aware Reconciliation Protects Profits

Invoice reconciliation is a critical control point for finance and procurement teams. It protects margins and ensures companies only pay for what they should. Yet despite sophisticated systems and well-documented processes, most companies still leave money on the table – and the numbers are staggering:

• Companies lose an average of 9.2% of annual revenue to poor contract management and value leakage.
• As much as 40% of a contract’s value can be lost due to inefficient management.
• 1% to 5% of EBITA may leak out through overlooked terms, weak reconciliation, and siloed systems.
• Globally, $270 billion in economic value is destroyed annually due to contract mismanagement.

Most reconciliation workflows verify that you received what you ordered and that the invoice aligns with the documentation. But they stop short of answering the most important question:

Does this invoice reflect the deal we negotiated?

To truly protect margins, companies need to go beyond four-way matching and bring the contract into the process.

Why Don’t Companies Match Invoices to Contracts?

It sounds simple: just compare the invoice to the contract. But in reality, it’s anything but.

Most companies manage hundreds, sometimes thousands, of vendor contracts. Each one may have different terms, discounts, penalties, service-level agreements (SLAs), or rebate clauses. Contracts are frequently updated, and amendments are often scattered across folders, email threads, or buried in ERP attachments.

While a finance analyst may be familiar with the terms of a major supplier, they’re unlikely to have complete visibility across the entire long tail of vendors. Enforcing terms consistently becomes impossible, especially when teams are focused on ensuring payments are processed smoothly.

The result: missed discounts, unclaimed credits, and unnoticed billing discrepancies.

And the outcome: real dollars lost, straight off the bottom line.

That’s why most teams stop at four-way matching. It’s all their systems can support. But that limitation is costing you.

The Traditional Matching Levels—What They Solve and What They Don’t

Two-Way Matching: Did You Receive What You Ordered

• Documents: Purchase Order (PO) and Receiving Report
• Person: Shipping & Receiving Clerk or Warehouse Associate
• Process: This checks whether the delivered quantity matches the ordered quantity and flags any damaged or missing goods.
• Solves: Discrepancies between what was ordered and received.
  

Three-Way Matching: Are You Paying for What You Received?

• Documents: PO, Receiving Report, and Invoice
• Person: Accounts Payable Analyst, Procurement Analyst, or Finance Associate
• Process: This step adds the invoice to confirm that the billing matches the order and delivery.
• Solves: Overbilling, invoicing for undelivered goods, and delivery errors.

Four-Way Matching: Did the Goods Meet Your Standards?

• Documents: PO, Receiving Report, Invoice, and Quality Inspection Report
• Person: Quality Assurance Specialist, Supply Chain Manager, or operations analyst
• Process: For industries with strict quality requirements, this ensures you’re not paying for goods that fail inspection.
• Solves: Payment for substandard or non-compliant goods.

However, even four-way matching leaves a significant gap.

The Missing Link: The Contract

All of these checks validate the documents in front of you. None of them validates the deal behind them.

Even if an invoice matches the PO, the PO itself may be incorrect, especially if the buyer didn’t know about a volume discount or updated terms. And when contracts aren’t part of the reconciliation process, you’re vulnerable to:

• Missed discounts
• Overlooked penalties or service credits
• Early payment terms are not enforced
• POs created using outdated pricing

This isn’t just a theoretical problem. We’ve seen companies lose—and recover—millions by catching contract discrepancies.

In one case, a manufacturer discovered a shipping vendor had been overbilling on every shipment for months. No one noticed, as the invoices matched the purchase orders. After a lengthy reconciliation, they uncovered $6 million in overcharges and spent months clawing it back.

Introducing Contract-Aware Matching from Sway AI

Sway AI adds a new layer of intelligence to your invoice reconciliation process by embedding contract awareness directly into your workflow.

Here’s how it works:

Extract – Using our Prompt Studio, we extract key contract terms, including discounts, payment schedules, penalties, and SLAs, and convert them into structured, machine-readable data.

Compare – When an invoice arrives, Sway AI compares it to the purchase order (PO), receiving report, inspection slip, and contract terms. Discrepancies are flagged automatically.

Review – Issues are listed in your dashboard, linked directly to the relevant documents. Review them in seconds.

Resolve – Our friendly chatbot interface drafts a vendor email explaining the issue. You approve it, and it’s sent directly from your inbox, so you receive the response.

Track – Get notified when messages are sent and track resolution progress, all in one system.

This isn’t just automation. It’s practical, intelligent control over your contract obligations—without adding complexity or headcount.

Why Sway AI Is Different

Most solutions stop at automation or require you to overhaul your systems. Sway AI is designed to support how your team works.

• Works with Your Existing Systems: No need to replace your ERP or procurement tools. Sway AI integrates into your current workflow.
• Tailored to Your Contracts: Our team helps you build prompts customized to your contract structure, reviewed and approved by your legal and finance teams.
• Built for Security: Sway AI runs securely inside your infrastructure. Your contracts and documents never leave your environment. This is a unique architecture in the industry.
• From Insight to Action: We don’t just flag issues—we help you resolve them. Review, approve, and send corrections to vendors in a single flow.

The Bottom Line: Contract Awareness Pays Off

Invoice reconciliation isn’t just about accuracy—it’s about protecting profits. And when the contract isn’t part of the process, value leaks out.

Traditional systems catch delivery errors and mismatches. But only contract-aware reconciliation ensures you’re paying what you actually agreed to—nothing more, nothing less.

If your team is relying on document matching alone, you’re likely missing real savings. Let Sway AI help you fix that.

How Much Could Contract Intelligence Save You?

Let us show you what you’re missing—and how quickly it adds up.