Manually matching invoices to purchase orders (PO) is one of the most frustrating and time-consuming tasks for accounting departments.
Savvy finance departments know that there are countless vulnerabilities that come with manual invoice matching and processing. From lost invoices to late payments and less-than-stellar payables visibility, manual invoice matching can put any finance department in jeopardy.
Naturally, managing stacks of paperwork and invoices is an arduous task that is bound to incur its share of difficulties. Human error and gross inefficiencies can be avoided simply by migrating to automated 3-way match best practices.
Upon migration, automated invoice management processes won’t suffer from the long delays, bottlenecks, and processing costs that plague manual matching.
What is Automated PO Matching?
All online invoice approvals involve some form of matching. This process takes an invoice for the purchase of goods or services and matches it with a purchase order (2-way matching) and receiving information (3-way matching) as applicable in an effort to ensure that the details on each document agree with each other.
Read more: What is the 3-Way Match Process?
To be successfully verified, the invoices must satisfy matching tolerances. If they don’t, a hold is placed on the invoice and payments cannot be rendered until the hold is released or resolved. A held invoice operates as a sort of fail-safe that prevents the payment of an unmatched and unverified order.
The Difference Between 2-Way and 3-Way PO Matching
Although 2-way matching is the default for many invoice verification processes, 3-way matching is becoming more widely adopted to save businesses from overspending on larger, non-recurring orders.
Under a 2-way matching system, the quantity and amount issued on the invoice are verified against the quantity and amount on the corresponding PO notice.
To highlight how a 2-way matching process differs from the 3-way matching principle, we’ve detailed a step-by-step guide to 2-way matching below:
- An invoice is received from a vendor for goods or services ordered through PO
- Accounts payable creates an invoice matched to the PO
- During the invoice approval process, the invoice details are matched to those on the PO receipt to verify that tolerances are met
- If the tolerance is not met, a hold is placed on the invoice until the issue is rectified
- If the tolerance is met, the invoice is approved for fulfillment
The main differentiating factor between the 3-way match internal control and a standard 2-way authentication process is that the former goes one step further by matching the invoice to receiving information via an order receipt or packaging slip.
Read more: Invoice Processing Software — FAQs, Automation Overview
Take the Next Step to Protect Your Assets
By leveraging automated matching, accounting departments can streamline payment processes, mitigate the risk of human error, and exchange business documents digitally.
Data critical for business, such as invoices, purchase orders, and advanced ship notices (ASN) can all be organized and standardized electronically without the need to tackle mountains of paperwork or pick up the phone to contact a supplier.
Every business can benefit from speeding up payments and reducing the threat of human error. By integrating an automated PO matching process into your accounts receivable workflow, you can better position your business to meet early payment terms and potentially earn payment term reductions or discounts while also minimizing losses.
The truth is that accounts payable fraud is a risk that all businesses must contend with. However, incorporating automated PO matching is a critical step in protecting a company’s assets from both bad actors and human error.
