Paying the bills quickly and accurately may not be anyone’s idea of a fun way to spend a sunny afternoon, but for businesses looking to save money, build value, and create strong vendor relationships, optimal invoice processing is key. The invoice matching process is particularly important in this regard, and may not be living up to its potential if you’re still using manual workflows and paper-based tools.
Capturing the value hidden in the invoice matching process is easier than you may think. By moving beyond traditional approaches and updating both your workflows and technological toolset, you can improve the accuracy, efficiency, and speed of your invoice matching, and create more value for your business.
What Is The Invoice Matching Process?
A support process that connects receiving, procurement, and accounts payable, traditional invoice matching—often referred to as 3-way matching or simply three-way match—is designed to improve the accuracy, completeness, and speed with which invoices are paid.
A three-way invoice matching process compares a set of documents against each other to verify all information is correct and complete:
- The original purchase order (PO). This document, sent from the buyer to the supplier, confirms and authorizes a purchase of goods or services.
- The receiving documents. Attached to the shipment sent by the vendor, these documents provide proof of purchase and delivery. They detail the exact contents of the order, including unit price, as well as other information such as payment terms and method of payment. Examples include goods received note (GRN) (also known as a goods receipt), packing slips, manifests, and order receipts.
- The vendor invoice. Sent by the supplier to the buyer. Ideally, a supplier invoice contains the same information contained in the purchase order and receiving documents, along with:
- An invoice number.
- Contact information for the vendor.
- The total invoice amount.
- Payment schedule.
- Credits or discounts to be applied for early payment.
By comparing these three documents for every invoice, it’s possible to manage invoice processing based on exceptions rather than line item review of every invoice received. A triple match confirms that the company’s expectations for price, goods, and service match those of the vendor.
Variations on the invoice matching process include:
Two-way matching, wherein quantities and amounts listed on a given invoice are matched to those on the corresponding purchase order.
Four-way matching, wherein the quantities of goods and amounts listed on a given invoice must fall within previously established tolerance levels within a procurement software environment. Non-compliant invoices are flagged for immediate review.
Focusing on exceptions rather than tedious and time-consuming itemized review absolutely saves time, labor, and frustration. However, the invoice matching process still requires quite a significant amount of time, labor, and resources to complete if you’re relying on manual, paper-based processes.
“As with PO processing, invoice matching is where AI and automation tools really shine. Automatic three-way matching is standard, along with automated approval workflows for invoices in need of review or payment approval. You can even set thresholds to automate payment if no discrepancies are found, speeding the process further and giving your staff more time to dedicate to correcting exceptions and other, more valuable tasks.”
Why the Invoice Matching Process Matters
Aside from the immediate time and work saved by centering exceptions rather than line-based review, invoice matching also helps protect your business by minimizing or eliminating invoice fraud and recapturing value potentially lost to rogue spend (legitimate invoices that nevertheless lack a corresponding purchase order add to the workload because they must be verified manually).
In addition, invoice matching provides a reliable mechanism for verifying the integrity of vendor pricing, terms, and product quality. If any of these criteria appearing on the supplier invoice fail to match those specified on the original purchase order or the shipping documents, the accounts payable team has reliable evidence to plead their case when pursuing a replacement, refund, or adjustment.
Finally, if optimized and executed with technologies like artificial intelligence (AI) and process automation, invoice matching can help shift your overall business process management toward creating value rather than simply pursuing cost savings.
Automation eliminates the need for human intervention on most invoices, and an AI can process and automatically match invoices at speeds many times faster than humans. This frees your staff to pursue more valuable work, lowers overhead, and eliminates the need for expensive, wasteful paper-based document creation, organization, and storage.
You’ll also be able to take advantage of early payment discounts, and avoid problems like duplicate, late, or missed payments that can damage supplier relationships and your company’s reputation.
Streamlining Your Invoice Matching Process
While you can optimize your invoice matching process in several important ways, the best place to start is with upstream processes in the Procure-to-Pay (P2P) process.
Typically, these processes include supply chain management and optimization, strategic sourcing initiatives, and contract management optimization. Strengthening both the quality and price of the goods and services your supply chain and your relationships with the vendors who provide them sets the stage for successful optimization of downstream processes like invoice matching.
One of the most reliable ways to begin optimizing these upstream processes is by investing in cloud-based procurement software like PLANERGY. Equipped with artificial intelligence and designed to help procurement and accounts payable teams leverage process automation to achieve continuous improvement, best-in-class procurement software helps your company streamline its processes by :
- Centralizing data collection, organization, and storage.
- Consolidating your software environment by connecting to your existing enterprise resource planning (ERP) system, as well as other software such as accounting suites, customer relationship management (CRM) programs, etc.
- Providing easy and transparent access to all transaction data for improved analysis, reporting, and forecasting on demand.
- Ensuring information used on purchase orders (including vendor information, contract data like payment terms and conditions, and complete pricing and terms) is complete and correct, without the need for data entry.
- Eliminating human error, as well as risk factors such as maverick spend and invoice fraud, by creating a closed system where buyers choose from a pre-approved list of vendors chosen automatically based on pricing and terms.
- Connect suppliers to your system via vendor portals for easier onboarding and ready monitoring of compliance and performance.
- Enhancing supplier relationships through collaboration, improved communication, and a move toward strategic partnerships.
- Implementing AI and process automation as standard operating procedure for high-volume, repetitive, and time-consuming tasks, and by extension, creating a foundation for continuous improvement within all processes used across the organization.
AP automation makes it possible to achieve all of these benefits, and provides a natural segue for workflows like matching invoices to achieve optimal performance, accuracy, and speed.
As with PO processing, invoice matching is where AI and automation tools really shine. Automatic three-way matching is standard, along with automated approval workflows for invoices in need of review or payment approval. You can even set thresholds to automate payment if no discrepancies are found, speeding the process further and giving your staff more time to dedicate to correcting exceptions and other, more valuable tasks.
The result? You get lower invoice cycle times, greater overall efficiency and cost savings, and a stellar reputation with your suppliers as a prompt payer who’s on top of both discounts and discrepancies.
Beyond the benefits of better vendor relationships and savings created by early payment discounts, automating your invoice matching provides even more data for your team to collect, consolidate, and analyze for valuable strategic insights that power smarter decision-making and planning.
You’ll quickly discover which suppliers are your best—those whose invoices are always correct and complete, those who offer the most enticing early payment discounts, etc.—and therefore the most likely to generate additional value through shared initiatives, product or market innovations, and negotiated perks and bonuses.
Streamline Your Invoice Matching and Save
Paying the bills reliably and with time to spare may not be glamorous, but it’s the key to healthy supplier relationships, financial stability, and a positive reputation for your business. And whether you use two-, three-, or four-way invoice matching, chances are there’s room for improvement in your workflows. By updating your processes and taking advantage of technological advancements like AI and automation, you can make the most of your invoice matching process—along with all your other payable processes—to create value while eliminating wasted labor and needless expense.
Optimize Your Invoice Workflows for Greater Efficiency and Accuracy with PLANERGY.Find Out How