What is 2-Way Matching in Accounts Payable?

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What’s Invoice Matching?

Invoice matching is the action of checking if the information on the invoice matches the details written on the purchase order.

What’s 2-Way Matching?

Two-way matching is a process used in accounts payable to ensure that you’re only paying for what you actually ordered and received. This compares the purchase order (PO) and the supplier's invoice.

2-Way vs 3-Way Matching

Two-way: Compares the purchase order and the invoice. Simpler and faster, but doesn’t account for discrepancies in received goods.
Three-way: Involves matching the purchase order, the invoice, and the receiving report. Provides a deeper review but can be more time-consuming.

How 2-Way Matching Works?

Invoice received: The process starts when your company receives an invoice detailing the items purchased, quantities, and prices.
PO comparison: The AP team compares the invoice against the original purchase order, checking item descriptions, unit prices, and quantities.
Approval: If everything matches, the invoice is approved for payment. Discrepancies require further investigation before payment.

Reasons to Choose 2-Way Matching

Prevents overpayments: Ensures confidence in the invoice information.
Reduces errors: Helps identify mistakes before payment, especially in manual processes.
Better approval process: Speeds up validation of invoices.
Fraud protection: Provides an extra layer of defense against accounts payable fraud.

Should you Automate the Process?

Yes. Automation enhances speed and efficiency, reduces human errors, and simplifies compliance audits.

How to Choose between 2-Way and 3-Way Matching?

2-way matching is ideal for recurring purchases, while 3-way matching is best for large purchases requiring complete document alignment.

Best Practices for 2-Way Matching

Standardize documents: Ensure consistent formats for purchase orders and invoices.
Communicate with suppliers: Set clear expectations for invoices to minimize discrepancies.
Regularly review processes: Adjust as your business evolves.
Use technology: Improve efficiency and accuracy through automation.
Track metrics: Monitor number of matched invoices, discrepancies, and processing times to improve AP processes.

Invoice Matching Terms

Purchase Order (PO): Document outlining products, quantities, and prices needed from the supplier.
Invoice: Payment request detailing item descriptions, quantities, prices, and payment terms.
Goods Received Note (GRN): Confirms arrival of ordered goods, used for checking against orders.
Invoice hold: Occurs when discrepancies exist between documents; payment is delayed for resolution.
Tolerance: Acceptable range of discrepancies for faster approval.
Touchless processing: Automated system for handling invoices to approval with minimal intervention.
Price deviation: When invoice prices differ from PO prices, causing a hold.
Quantity deviation: Mismatch in number of items listed, often triggering an invoice hold for investigation.

Key Takeaways

Two-way matching helps prevent overpayments and errors, improving financial accuracy and speeding up approvals.
Automating this process offers significant benefits in terms of efficiency and error reduction.
Choose the appropriate matching method based on purchase type and potential discrepancies.

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Author: Amy Deiko - A procurement writer and MBA student passionate about innovative business processes.