Seamless PO Matching

Invoice matching software is designed to streamline and automate the process of matching supplier invoices to corresponding documents like purchase orders, receipts etc.

Invoice automation software helps to ensure that payments are made only for goods or services that have been received and accurately billed. 

Essential functions of this software include:

• Automated matching: includes three-way matching against POs and goods receipts based on pre-set rules and algorithms.
• Exception handling: uses artificial intelligence to identify discrepancies between invoices, POs, and receipts; then flags for extra review. It also recognises non-PO invoices.
• Data extraction: is what some invoice management software systems use, including optical character recognition (OCR) to extract relevant invoice data by line item.
• Approval workflows: to route electronic invoices through predefined workflows, ensuring approval before payment.
• Top integrations: with other accounting systems and enterprise resource planning (ERP) platforms.
• Reporting and analytics: to provide insights into exception rates, validations, AP team performance, and more.

Depending on your business needs, many invoice matching software platforms can be customised to optimise the payable process.

Case studies from all over the globe have proven the many benefits of invoice matching software in accounts payable. Here are just a few:

Boosted Efficiency
Automating time-consuming, repetitive tasks naturally speeds up the invoice processing cycle. Eliminating manual processes allows finance teams to focus on strategy and growth.

Enhanced Accuracy
The right technology significantly reduces inaccuracies in the invoice matching process. This is particularly useful when AP is run using manual data entry by the payable team. 

Cost Savings
Invoice matching software will minimise the risk of overpayments and duplicate payments, leading to potential cost savings. Faster payments also mean companies can take advantage of early payment discounts.

Improved Compliance
Invoice process automation ensures all invoices comply with company policies and regulatory requirements, reducing fraud and non-compliance risk.

Additional Benefits

• Real-time visibility into invoice status and payments
• Improved vendor relationships with better contract terms
• Supports scaling operations by handling increased volumes

When evaluating invoice matching software, it’s essential to consider features that will best meet your organisational needs and help to optimise your accounts payable process. 

Here are some primary functions to consider:

Automated Three-Way Matching
Ensure your chosen software automatically matches invoices with purchase orders and goods receipts. This is the primary feature for reducing manual workload and errors.

Exception Handling and Resolution
The software should flag discrepancies between invoices, purchase orders, and receipts, and notify relevant users automatically. The platform should include a streamlined workflow for resolving mismatches, and the ability to assign tasks, track progress, and approve resolutions.

Data Extraction
The system should employ OCR to extract data from scanned or digital invoices. 

Integration Capabilities
Invoice-matching software should provide seamless integration with your existing ERP and accounting systems, which is essential for data flow and reporting. 

Real-Time Reporting and Analytics
Features should also include customisable dashboards to provide an overview of invoice processing status, exceptions, and critical metrics.

Implementing invoice-matching software requires careful planning and execution to ensure a smooth transition and optimise the benefits of automation. 

Here are some best practises to follow:

#1) Assess Current Processes and Identify Needs
Conduct a process review and map out your existing invoice management and matching processes. This includes the flow of documents, approval hierarchies, and common pain points.

Identify requirements and determine the specific needs of your business, like the volume of invoices, complexity of matching requirements, and integration with existing systems. 

#2) Choose the Right Platform
Research and evaluate your options based on your business needs, budget, and scalability requirements. Make sure the chosen software integrates well with your existing systems. Select a system with a user-friendly interface and intuitive design to minimise training time and improve adoption rates.

#3) Plan for Change Management
Prepare a comprehensive transition plan, including strategies for communication, training sessions, and user experience. From the outset, engage key stakeholders (like people in finance, the CFO, procurement, IT teams, and end-users) to ensure their input is considered and gain their buy-in.

#4) Configure the Software
Make sure to configure the software’s matching rules to align with the company’s specific policies, such as tolerance levels for price or quantity discrepancies. Define and configure approval workflows that match the hierarchy and processes of the business. 

Other Considerations

• Perform data cleansing before migrating and create standardised formats
• Create comprehensive training sessions with access to resources
• Track key performance indicators (KPIs) like processing times and exception rates
• Create clear protocols for handling exceptions, including roles and responsibilities
• Maintain compliance with internal policies and external laws

2-way and 3-way PO matching are standard methods used in invoice processing to verify that payments are made correctly and only for goods or services ordered and received. 

Here’s a breakdown of the differences between the two:

2-Way PO Matching
This involves comparing the purchase order to the vendor invoice. The primary purpose of 2-way matching is to ensure that the invoice details match the purchase order information.

2-way PO matching is often used when purchasing services (e.g., consulting) without a physical receipt of goods. It’s also suitable for straightforward transactions where the risk of discrepancies is low or physical receipt verification is unnecessary.

3-Way PO Matching
This involves comparing three documents: the purchase order, invoice, and goods receipt (receiving report). The primary purpose of 3-way matching is to ensure that the invoice matches the PO and that the goods/services billed were received in terms of quality and condition.

A 3-way PO is commonly used for purchases involving physical goods where verification of receipt is critical. It’s also used in scenarios where the risk of discrepancies is higher, such as with expensive, high-volume, or complex purchases.

The tolerance range in PO matching defines the acceptable level of discrepancies between documents, such as the purchase order, invoice, and goods receipt. 

A tolerance range provides flexibility to accommodate minor variances in quantity, price, or value without requiring manual intervention for every slight difference.

There can be different types of tolerance ranges as well, including:

• Quantity tolerance
• Price tolerance
• Value tolerance
• Shipping tolerance

How does it work? When an invoice is received, the system automatically compares it against the corresponding PO and goods receipt. This matching process includes checking whether any discrepancies fall within the predefined tolerance ranges.  

If the discrepancies (in quantity, price, value, etc.) are within the set tolerance range, then the invoice is automatically approved, and payment processing continues without any manual intervention.

The invoice is flagged for further review if the discrepancies exceed the defined tolerance range. This triggers a workflow where someone manually investigates the discrepancy, contacts the supplier, or decides about approval or rejection.