Invoice Matching

Who Is Responsible for Invoice Matching Process in Organizations?

Invoice matching is typically a responsibility within the accounts payable department of an organization. Therefore, job titles that may be involved in invoice matching include:

These roles are responsible for reviewing and verifying invoices against purchase orders and other supporting documentation. They must ensure that the invoices are accurate, comply with company policies and regulations, and match the goods or services received. By performing invoice auto matching, these professionals help to prevent errors and ensure that payments are made accurately and on time.

Which Business Benefit from Invoice Matching Process?

Any business that purchases goods or services from suppliers and receives invoices for payment can benefit from invoice matching process. However, some businesses that typically have high volumes of invoices, complex procurement processes, or multiple locations may find invoice matching particularly beneficial.

Here are some examples of businesses that often require invoice matching:

Artsyl’s customers from different industries get benefits from invoice matching automation delivered by InvoiceAction. It helps them to improve the efficiency and accuracy of their accounts payable processes.

Ways of Invoice Matching

There are four main ways of invoice matching: four-way, three-way, two-way and one-way invoice matching. The choice of matching method depends on the complexity of the purchasing process, the specific needs of the business, and the level of verification required to ensure accuracy and prevent errors in the accounts payable process. Let’s review four different ways of invoice matching that includes:

1 Way Match

One-way invoice matching is a process of matching invoices against the terms and conditions of a contract or agreement. In this process, the invoice is compared to the contractual obligations to ensure that all the agreed-upon terms and conditions have been met. This method is usually used when the purchasing process is straightforward, and there is no need to compare the invoice against a purchase order or goods receipt. One-way invoice matching helps to ensure that businesses are only paying for what they have agreed to, and it also helps to identify any discrepancies or errors in the purchase process. While this method is simpler than two-way or three-way matching, it is still an essential part of the invoice auto matching process and helps businesses to maintain accurate financial records.

2 Way Match

Two-way invoice matching in this method of comparing an invoice against a purchase order to ensure that the prices and quantities of goods or services invoiced match those that were agreed upon in the purchase order. This method helps to identify any discrepancies between the purchase order and the invoice, such as incorrect prices, quantities, or descriptions of goods or services. By comparing the invoice to the purchase order, businesses can ensure that they are only paying for what they actually ordered, and they can avoid overpayments or underpayments. Two-way invoice matching is an important step in the invoice processing workflow, and it helps to ensure the accuracy of financial records.

3 Way Match

Three-way invoice matching is a process of comparing an invoice against a purchase order and a goods receipt to ensure that the goods or services invoiced match those that were ordered and received. This method verifies that the goods or services ordered were actually received, and that they match the specifications outlined in the purchase order. By comparing the invoice to the purchase order and the goods receipt, businesses can ensure that they are only paying for what they received, and they can avoid overpayments or underpayments. Three-way invoice matching is commonly used in complex procurement processes that involve multiple approvals and deliveries, and it helps to ensure the accuracy and completeness of financial records.

4 Way Match

Compared to 2-way and 3-way matching, four-way invoice matching is a more comprehensive process that provides an additional layer of verification. While two-way and three-way matching compare the invoice to the purchase order and goods receipt, four-way matching adds an inspection report to verify the quality of the goods received. This is especially important in industries where quality control is critical, such as manufacturing or pharmaceuticals, where goods need to meet specific quality standards.

However, four-way invoice matching can be more time-consuming and complex than two-way or three-way matching, as it involves an additional verification step. This means that it may not be necessary or cost-effective for all businesses, and the choice of matching method will depend on the complexity of the purchasing process and the specific needs of the business. Ultimately, the goal of any invoice matching process is to ensure accuracy, prevent errors, and improve efficiency in the accounts payable process.

The choice of invoice matching method depends on the business needs and the complexity of the purchase process. For example, a complex procurement process involving multiple approvals and deliveries may require three-way matching to ensure accuracy and completeness, while a simpler process may only require two-way or one-way matching. From our experience we can tell that 3-way matching is the most popular method of invoice matching in account payable departments. Automated invoice matching software such as Artsyl InvoiceAction solution can streamline the process and reduce errors, making it a valuable tool for businesses of all sizes.

Errors that May Occur if You Don't Do Invoice Matching:

If you do not perform invoice matching, several errors can occur, including:

1. Overpayment: Without invoice matching, there is a risk of paying suppliers more than the agreed-upon amount. This can occur if the invoice does not match the purchase order or if there are errors in the supplier's pricing.
2. Underpayment: If an invoice is not matched correctly, there is a risk of underpaying suppliers. This can occur if the invoice does not include all of the goods or services that were ordered.
3. Duplicate payments: Without proper invoice matching, there is a risk of making duplicate payments. This can happen if multiple invoices are received for the same purchase order or if the same invoice is paid twice.
4. Late payments: If invoices are not matched correctly, there is a risk of paying them late. This can result in late payment fees and damage supplier relationships.
5. Compliance issues: Some industries have specific regulations and compliance requirements for procurement and payment processes. Without proper invoice matching, there is a risk of violating these requirements.

Matching Invoices to Contracts and Purchase Orders

Matching invoices to purchase orders involves comparing the details of an invoice with the corresponding purchase order to ensure that the goods or services were delivered as agreed upon, and that the pricing is accurate. This process helps to prevent overpayments or underpayments.

Matching invoices to contracts, on the other hand, involves verifying that the goods or services invoiced were provided as per the terms and conditions outlined in the contract. This ensures that the vendor is paid according to the agreed-upon pricing and delivery terms, and helps to prevent any deviations from the contract terms.

While both matching invoices to purchase orders and contracts are essential for proper financial record-keeping and preventing fraud, they differ in terms of the level of detail and specificity required for verification. Matching invoices to contracts involves a more thorough review of the terms and conditions outlined in the contract, while matching invoices to purchase orders is focused on verifying the specifics of the delivery and pricing agreed upon in the purchase order.

Artsyl InvoiceAction automatically match invoices to contracts and purchase orders. This type of automation helps preventing overpayments or underpayments and ensures that vendors are paid in a timely manner.

What is Automated Invoice Matching Software?

Automated invoice matching software is a computer program that uses artificial intelligence and machine learning algorithms to automate the process of matching invoices to purchase orders, contracts, and goods receipts. Artsyl’s InvoiceAction is an example of automated invoice matching software that not only automatically processes invoices but also performs different types of invoice matching such as 2-, 3- and 4-way matching.

The software is designed to scan and extract data from invoices and compare it to the corresponding purchase order or contract. The software then verifies that the prices, quantities, and descriptions of goods or services invoiced match those that were agreed upon in the purchase order or contract. If there are any discrepancies, the software can flag them for review and resolution.

Automated invoice matching software helps businesses to streamline the accounts payable process, reduce errors, and improve efficiency. By automating the matching process, businesses can process invoices faster, reduce the risk of errors, and free up staff time to focus on more value-added tasks. This results in cost savings, improved financial controls, and better supplier relationships.

What Role OCR Plays in Invoice Matching?

OCR plays a significant role in invoice matching by enabling the automation of data entry and reducing the manual effort required to process invoices. When combined with invoice matching software, OCR technology can extract data from invoices and automatically compare it to the corresponding purchase order or contract, reducing the risk of errors and speeding up the matching process.

Artsyl docAlpha intelligent automation platform that includes OCR technology can read printed and scanned documents and extract information such as the supplier name, invoice number, and line item details, making it easier to reconcile invoices with purchase orders and goods receipts. By eliminating manual data entry and reducing the potential for human error, OCR technology can help to improve the accuracy and efficiency of the accounts payable process, resulting in cost savings and better supplier relationships.

OCR technology is a critical component of invoice matching, helping businesses to automate data entry, reduce the risk of errors, and streamline the accounts payable process.

Benefits of Automated Invoice Matching

There are several benefits of automated invoice matching, including:

1. Improved accuracy: Automated invoice matching can significantly reduce the risk of errors, such as overpayments or duplicate payments. The software compares invoices to purchase orders and contracts automatically, ensuring that all data is accurate and consistent.
2. Increased efficiency: Automated invoice matching software can process invoices much faster than manual processing. This reduces the time and resources required for data entry, allowing staff to focus on other critical tasks.
3. Cost savings: By reducing errors and increasing efficiency, automated invoice matching can result in significant cost savings for businesses. It can also reduce the risk of late payment fees and penalties.
4. Better financial control: Automated invoice matching provides a mechanism for monitoring and controlling spending. It ensures that invoices are paid according to the terms of the contract and helps to prevent unauthorized or fraudulent payments.
5. Improved supplier relationships: Automated invoice matching can help to streamline the accounts payable process, providing suppliers with a faster and more efficient payment process. This can help to build stronger relationships with suppliers and improve the overall supply chain.

Artsyl’s customers confess that InvoiceAction automated invoice matching provides many benefits to businesses, including increased accuracy, efficiency, cost savings, financial control, and improved supplier relationships.

Summary

Accounts payable invoice matching is a critical process in the financial management of a company. It involves comparing the information on an invoice with the corresponding purchase order and goods receipt documentation to ensure that the payment is accurate and valid. The goal is to avoid paying incorrect or fraudulent invoices, which could result in financial losses for the company. The matching process typically involves verifying the quantity, price, and item descriptions, and any discrepancies are investigated and resolved before payment is made. Accounts payable invoice matching is an essential component of a company's internal controls, ensuring that expenses are accurately recorded and reported.

FAQ

What is an invoice?

An invoice is a document that details a transaction between a seller and a buyer. Usually invoices are used in business-to-business (B2B) transactions. It typically includes information such as an invoice number, the date of the transaction, an invoice payment term, a description of the goods or services sold, the quantity and price of the items, shipping and handling fees and any applicable taxes.

What is accounting software?

Accounting software is a software that helps businesses and individuals manage their financial transactions and records. Accounting software is usually used by accounting department in organizations. It allows users to track income, expenses and other financial data, generate financial reports and perform other accounting-related tasks.

Accounting software is useful for businesses of all sizes, from sole proprietors to large corporations. It helps to streamline financial management tasks, reduce errors and save time.

When choosing an accounting software, it is important to consider factors such as your business needs, the size of your business, the complexity of your accounting needs and your company budget. There are many accounting software options available in the market. Each accounting software comes with its own set of features, pricing and target audience. Some popular accounting software options include QuickBooks, Xero, FreshBooks, Wave and Zoho Books.

What is invoice processing?

Invoice processing is the series of steps that a company goes through to handle an incoming invoice for goods or services received. This typically involves verifying the accuracy of the invoice, recording it in the company's accounting system, and approving it for payment.

There are two main methods of invoice processing: manual and automated. Manual processing involves manually entering invoice data into an accounting system, checking for accuracy, and routing the invoice for approval, while automated processing uses software to extract data from invoices, validate it, and route the invoice for approval.

Automated invoice processing is done by invoice processing software such as InvoiceAction which includes OCR (Optical Character Recognition) that recognizes characters on an invoice, automatically extracts data and enters it into the accounting system.

The choice of invoice processing method depends on the volume of invoices processed, the complexity of the accounting system and available resources. If your organization process more than 2000 invoices per year the invoice automation software like InvoiceAction that helps to reduce errors, improve efficiency and save time compared to manual invoice processing. With InvoiceAction, businesses can streamline their accounts payable process and better manage their cash flow. Book InvoiceAction demo now!

What is a purchase order?

A purchase order (PO) is a commercial document that a buyer sends to a seller to say what they want to buy, how much they w, and how much they are willing to pay for it. The purchase order is a formal contract between the buyer and the seller, outlining the terms and conditions of the transaction.

Purchase orders typically include information such as the buyer's and seller's contact information, the product or service being purchased, the quantity and unit price, delivery dates, delivery address, payment terms and any other relevant terms or conditions. They are used by businesses to ensure that the correct goods or services are received on time and at the agreed-upon price and to provide a clear record of the transaction for accounting.

Purchase order vs. sales order: What is the difference?

A purchase order (PO) and a sales order (SO) are both documents used in business transactions, but they serve different purposes. The main difference between a purchase order and a sales order is that a purchase order is a document issued by a buyer to a seller to request the purchase of goods or services, while a sales order, on the other hand, is a document issued by a seller to a buyer to confirm the sale of goods or services.