Table of Contents

Achieving Seamless Invoice Matching with Technology Solutions: A Comprehensive Guide

In today’s business climate, organizations need to keep pace with the ever-increasing demands of managing their spending. One way to achieve this is by implementing invoice matching technology. The manual matching of invoices with purchase orders and goods receipts can be time-consuming and error-prone, leading to discrepancies in inventory and financial records. Invoice matching technology can help streamline operations, enhance operational efficiency, and ensure accurate vendor payments and correct accounting of costs. In this comprehensive guide, we will explore the concept of invoice matching, its benefits, and how technology solutions can help organizations achieve seamless invoice matching.

What is Invoice Matching?

Invoice matching is a critical process in the accounts payable department. It involves comparing information on an invoice with supporting documents such as a purchase order, goods receipt, and contract. The goal of invoice matching is to ensure accurate vendor payments and correct accounting of costs while enabling compliance with purchasing contracts and easy detection of potentially fraudulent invoices.

The process of invoice matching begins with the creation of a purchase order (PO) that specifies the goods or services needed, quantity, vendor, and contracted price. A purchase requisition is approved, and the PO is sent to the vendor. Upon delivery of the goods or services, the buyer registers a goods receipt in the ERP or procurement system. Once the invoice arrives, it is checked against the purchase order and goods receipt to ensure that the details match.

The Challenges of Manual Invoice Matching

Manual invoice matching can be complex, time-consuming, and resource-heavy, making it prone to human error. Matching invoices with supporting documents manually can lead to discrepancies in inventory and financial records, resulting in delayed payments, overpayments, and duplicate payments. The AP team can spend valuable time chasing down purchasing or receiving departments to resolve discrepancies, leading to delayed invoice processing and an increase in processing costs.

According to the Ardent Partners’ State of ePayables 2021 Report, 45% of organizations see exceptions as a top challenge for accounts payable. The report also found that the average invoice exception rate among surveyed companies was 22.5% in 2021. These statistics highlight the need for a more efficient and accurate invoice matching process.

The Benefits of Automated Invoice Matching

Automated invoice matching can help organizations achieve seamless invoice processing by enabling touchless invoice processing via robust AP automation solutions. When done right and leveraging modern automation tools, invoice matching can save an AP team time and reduce the potential for fraudulent invoices, duplicate payments, and overpaying invoices.

Automated invoice matching provides a real advantage for AP teams, saving time and resources while reducing the risk of human error. It also enables organizations to capture early payment discounts and ensure on-time payments, leading to improved vendor relationships and more favorable payment terms.

The Three-Way Match Process

The three-way match process is a critical component of invoice matching that compares three documents: the purchase order, receipt of goods, and invoice. This process ensures accurate invoice processing and prompt payment by reducing invoice processing time. Utilizing the three-way match streamlines the entire approval process, reducing the potential for fraudulent invoices, duplicate payments, and overpaying invoices.

The purchase order specifies the goods or services needed, quantity, vendor, and contracted price. Once the purchase requisition is approved, a purchase order is generated and sent to the vendor. Upon delivery of the goods or services, the buyer registers a goods receipt in the ERP or procurement system. When the invoice arrives, it is checked against the purchase order and goods receipt to ensure that the details match.

Types of Invoice Matching Deviations

Deviation, also known as an invoice exception, occurs when the details on the invoice do not match the supporting documents. The two most common deviation types are quantity deviation and price deviation. Quantity deviation occurs when the number of items invoiced does not match the number on the purchase order and/or the goods receipt. Price deviation occurs when the item price on the invoice does not match the item price stated on the purchase order.

Managing deviations is often one of the most time-consuming tasks in the AP department. Pre-configured tolerance levels are often used to accept common additional costs such as freight, administrative fees, or currency exchange. AP teams can also configure the AP automation solution to allow a certain level of deviation to increase the number of invoices that are matched automatically and reduce manual reviews.

Two-Way, Three-Way, and Four-Way Invoice Matching

Most companies use three-way invoice matching, which verifies that the invoice information matches both the purchase order and the goods receipt. Two-way matching verifies that invoice information matches the corresponding purchase order, while four-way matching adds another criterion to verify that the invoice details also match the acceptance or inspection document if it is part of the purchasing process.

To enable automated three-way matching, organizations need to ensure that master data, including vendor ledgers, purchase order details, and goods receipts, can synchronize seamlessly between the ERP system and the AP automation solution.

Matching Invoices to Contracts

Purchase orders are often not used for indirect expenses, requiring manual handling. However, if this type of indirect expense is regulated by a vendor contract with a payment plan, invoice matching can be done automatically in AP automation solutions. In this case, the invoice details are matched to the contract and payment plan instead of a purchase order.

Data Quality in Invoice Matching

Automated invoice matching provides a real advantage for AP teams, saving time and resources, but it’s not as easy as simply implementing AP automation solutions. Organizations need to ensure that there is a reliable connection between the AP automation solution and the ERP system to ensure master data synchronization for total success.

Organizations need to continually update their data ledgers to enable the high levels of automated invoice matching required to stay efficient. As new vendors are onboarded, price lists are updated, and inventory lists changed, the AP, finance, and procurement teams need to update their data ledgers continually.

Automated Invoice Matching

Reaching high levels of automated invoice matching does not happen overnight or by only implementing a new system. AP teams need to apply a continuous improvement approach to automating their process. They should leverage the data that sits within the AP automation solution to identify bottlenecks in the invoice matching process.

AP teams can continuously improve the data quality internally and with vendors. They can configure the AP automation solution to allow a certain level of deviation to increase the number of invoices that are matched automatically and reduce manual reviews.

Automated invoice matching can enable fully touchless invoice processing. When all data on the invoice matches supporting documents (and applied tolerance levels), the invoice can go directly from receipt and data capture to final posting in the ERP for payment without anyone reviewing or touching it.

E-Invoicing for Seamless Invoice Matching

E-invoicing is a game-changer for organizations looking to achieve seamless invoice matching. With e-invoicing, invoices are received electronically as data, eliminating the need to manually look at paper or an image from an email. The data comes directly from the supplier’s billing system, making it easier to match the invoice with supporting documents.

During the implementation stage, the service provider is given all the company’s matching rules and PO and receiving data and then integrates them into the SaaS-based automated matching system, which works in conjunction with the ERP or AP system.

Conclusion

Achieving seamless invoice matching is critical to the success of any organization. Manual invoice matching can be time-consuming and error-prone, leading to discrepancies in inventory and financial records. Automated invoice matching can help streamline operations, enhance operational efficiency, and ensure accurate vendor payments and correct accounting of costs.

By implementing technology solutions such as AP automation and e-invoicing, organizations can achieve seamless invoice matching, reduce the potential for fraudulent invoices, duplicate payments, and overpaying invoices, and ensure on-time payments and improved vendor relationships. With a continuous improvement approach to automating their process, organizations can realize cost and time savings that go straight to their bottom line.

“Take your procurement strategy to the next level with Zapro. Trusted by 1,000+ companies.”
Optimize Your Procurement StrategyNow! Choose Zapro. Trusted by 1,000+ global procurement leaders.