Matching Purchase Orders with Invoices

Matching Purchase Orders with Invoices

Invoice matching is usually neglected, but it is one of the important processes in the business. In an organization, the accounts payable department established the flow of the funds. It is the obligation of the accounts payable department to be experts in the invoice matching.

This blog provides you with the information of matching invoices, their importance, and how this process works. Whether you are an experienced professional or new to the accounts payable department, seizing the details of invoice matching is essential for smooth operations in the financial processes of any business.

What is Invoice matching?

Invoice matching is a way of examining invoices with validation documents to check that the information is accurate prior to payment. The goal is to ensure that the quantities, prices, and terms on the invoice align with what was ordered and received, preventing overpayment, incorrect payments, or fraudulent invoices.

Types of Invoice matching

Invoice matching can be of different types. Organizations use their required type to ensure accuracy and efficiency for their accounts payable operations. The most common types of invoice matching are:

1.      Three-Way Match

In this type of match, three documents—the Purchase order (PO), the goods receipt note (GRN), and the vendor’s invoice—are taken for cross-checking. Authentication of these three documents brings accurate information so that the organization can use that for checking the accurate amount paid for the goods or services that are received by them.

2.      Two-Way Match

This matching involves two documents: the purchase order and the supplier’s invoice. The goods receipt is not considered in this type. Two-way matching is employed when the goods acquired are consumed so instantly that leads to goods and receipt note (GRN) inessential.

3.       Four-Way Match

This match involves the inspection and acceptance of goods that are received. It is basically considered the addition to the three-way match. This type of match is used to check the quality so that these goods can be matched with the organization’s standard. In industries where quality control is primary, this type of match is used.

4.       Evaluated Receipt Settlement

This is a method that is used where the payments are automatically released depending on the receipt of goods or services. Also, it is a great substitute for paperwork, manual adjustments, and improving efficiency in the payment procedure.

Why Are Accounts Payable Teams Need to Match Invoices?

Invoice matching is a beneficial resource that brings strategic observations that provide help to the accounts payable teams to formulate useful decisions and plans. Below are some of the reasons that will guide you about why account payable teams need to execute the process of invoice matching: –

1. Error Reduction:  Invoicing matching provides surety that the information on the purchase order, goods and receipt note (GRN), and supplier’s invoice adjust clearly. This authentication decreases the risk of mistakes in payment handling.

2. Fraud identification: With multiple referencing documents, invoice matching brings defense against misleading activities, decreasing the likelihood of settling fake invoices and improving security in monetary transactions.

3. Vendor Relationship Management: Matching invoices optimizes the payment process, which enables account payable teams to instantly resolve vendor dues. Thus, it improves the coordination, terms of negotiation, and a strategic advantage in the supply chain.

4. Settlement of Inconsistencies: Upon detecting discrepancies in the matching process, the accounts payable team can investigate and resolve issues prior to payment. This approach helps in the case of excessive payments.

5. Adherence to Compliance: Invoice matching is carried out to maintain equilibrium with the established policies, which leads to a decrease in the risk of monetary as well as legal consequences.

6. Financial Clarity: During the audit trail, financial clarity is critical. Invoice matching enhances financial transparency. This clarity is important for internal reporting, external audits, as well as total financial oversight.

Questions to Understand your ability

Que.1 What’s the point of invoice matching anyway?

A) To create invoices

B) To see how much stock is left

C) To double-check if invoices match orders before paying

D) To negotiate better prices with vendors

Answer: C) To double-check if invoices match orders before paying

Que.2 In a Three-Way Match, which documents get compared?

A) Purchase order, goods receipt note, and the vendor’s invoice

B) Purchase order and invoice only

C) Invoice and payment receipt

D) Goods receipt note and payment receipt

Answer: A) Purchase order, goods receipt note, and the vendor’s invoice

Que.3 Which matching process skips checking the goods receipt note (GRN)?

A) Three-Way Match

B) Two-Way Match

C) Four-Way Match

D) Evaluated Receipt Settlement

Answer: B) Two-Way Match

Que.4 What’s the extra step in Four-Way Matching that’s not in a Three-Way Match?

A) Automatic payment release

B) Checking if the supplier is reliable

C) Inspecting the goods for quality

D) Manually comparing all documents

Answer: C) Inspecting the goods for quality

Que.5 How does invoice matching really help finance teams stay on top of things?

A) Cuts down manual work

B) Makes sure vendors get paid faster

C) Improves financial clarity and transparency

D) Helps with marketing plans

Answer: C) Improves financial clarity and transparency

Conclusion

Any organization must prioritize the accuracy, efficiency, and security of financial transactions. Invoice matching is helpful for those three essentials. It reduces errors, prevents fraud, improves vendor relationships, maintains compliance, provides financial clarity, and helps improve financial management.