Procurement teams need to balance choosing the right supplier for fulfilling the needs and achieving the targeted cost savings. To achieve this right balance, procurement teams need to put in stringent procurement processes. An AP Team member spends 4-15 hours per week to ensure stringent processes are followed (Paystream Advisors Report). AP team applies different validations or business rules within organizations such as Vendor validation, PO Matching, G/L Account validation, etc. 2-way/3–way matching is the most common validation applied across any organization.
What is Invoice matching?
Invoice matching is a mechanism of comparing invoice information with all purchase documents such as contracts, purchase order or goods receipt. Invoice matching ensures accurate vendor payments and journal entries. In this step, Invoice matching professional collaborates with purchasing contracts and good receiving departments and creates an audit trail that helps to detect fraudulent invoices. The AP team reads the invoice matching audit trail and approves the invoice payment if there is no exception.
What is 2-way Matching?
A 2-way matching is the most basic comparison of organizational purchases and vendor payments. In a 2-way matching, the AP team compares the quantity and amount on the invoice with the corresponding purchase order. During this step the accounts payable analyst will verify invoices for the following:
- Ensure that total invoice amount is less than or equal to PO Total amount
- The price of each line item on the invoice is less than or equal to the line item values on the purchase order. This is a time-consuming process because both documents should be compared, and the printed invoice needs to be compared with the listed in the organization’s finance system.
Without discrepancy, AP team processes and pays the vendors for the invoices. Moreover, in absence of an automated AP solution, this matching process can be time consuming and leaves room for manual errors. In case of Partial Invoices or Partial orders, organizations face problems to solve.
What is 3-way Matching?
In case of Three-way matching , AP teams ensure that a supplier invoice is valid against Purchase Order and Goods receipt. When AP team receives an invoice from a supplier, AP team member verifies the following information:
- Standard 2-way matching of price and quantity of Invoice with that of Purchase Order
- Comparison of vendor invoices with Goods Receipt document of the organization to ensure that the same quantity of goods ordered has been received.
This stringent mechanism helps to keep the purchases department, AP department and Inventory department on the same page. Moreover, any quality issues with the vendor can be matched with a 4-way matching with inspection orders.
Challenges of Manual 2-way/ 3-way Matching
- If done manually, this is a really time consuming process as the AP team needs to verify documents across disparate systems. Most organizations prefer automation solutions to complete 2-way/ 3-way matching.
- The 2-way/3way matching depends a lot on Data Quality of all documents. The AP team has to ensure a proper audit trail to complete verification.
- Employee expense reports cannot be verified as the parameters fail. Organizations have started using AI to analyse expense invoices and understand spend patterns.
Next Steps: Zero Touch Invoice Processing
To implement automated invoice matching, organizations must integrate invoice processing solutions with procurement, contract management, and inventory management systems. ServiceNow customers choose Aavenir Invoiceflow because it can easily verify invoice data with other systems like vendor management, procurement module and Aavenir contractflow on ServiceNow.
With the advent of Artificial Intelligence (AI), organizations can now automate the step-based rules and set-up exception workflows. Using AP Automation solutions like Aavenir Invoiceflow, organizations automate the invoice matching rules to identify the errors. Using AI, AP Automation solutions can also analyze large datasets together to find discrepancies and apply digital workflows to make course-corrections. With improved auditing capabilities and quick error identification, organizations are freeing up AP teams to focus on high-value work in organization.
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