A Simple Guide to PO Matching
by The Ottimate Editorial Team
Purchase order (PO) matching, also called invoice matching, is a critical step in accounts payable (AP). A purchase order is a legally binding document that’s issued to sellers from buyers outlining the types, quantities, and prices of requested goods and services. PO matching compares information in an invoice to its corresponding PO to ensure the details are accurate and aligned before approving an invoice.
While a necessary part of the process, PO matching can be painful and time-consuming for AP teams, especially when done manually. Invoices can be complex, particularly for large orders or those involving multiple items, taxes, and discounts. Ensuring that all line items on the invoice match the PO can be challenging when relying on manual intervention. In some cases, vendors may submit invoices that are difficult to read — from low-quality PDFs to hard-to-read handwritten text.
Using an AP automation solution to automate PO matching enables teams to better detect discrepancies and, in turn, reduce coding and payment errors. Keep reading to learn more about PO matching and how automation can help increase efficiency and accuracy throughout the AP workflow.
How Does PO Matching Work?
One of the main goals of PO matching is to detect discrepancies that could lead to additional AP errors down the line. These deviations occur when there is a mismatch between the details outlined in the invoice and purchase order. There are two types of discrepancies:
- Price discrepancy: a mismatch between the price listed on a purchase order and the cost outlined in the corresponding invoice.
- Quantity discrepancy: the discrepancy between the number of items listed on the purchase order and the invoice.
The most common ways to match POs to invoices and detect discrepancies are 2-way and 3-way matching. Two-way matching involves linking and cross-checking the invoice and PO to ensure all data on both documents are aligned. With 3-way matching, PO items are received, the PO and receipt are linked to the corresponding invoice, and data on all three documents are compared and matched.
For recurring purchases, 2-way matching may be sufficient, as you’re already familiar with the costs and less likely to have a mismatch. However, most companies rely on 3-way matching to better detect errors and ensure accurate invoice processing. As a result, they can avoid overpaying, making duplicate payments, or fulfilling fraudulent invoices.
Why is PO Matching Important?
Purchase order matching goes beyond comparing invoices, POs, and receipts to detect mismatches. One of the most critical key performance indicators (or KPIs) for accounts payable teams is the first-time match rate. The first-time match rate measures the quality of the documents received by the AP team — such as invoices, POs, and receipts — and the efficiency with which the team matches them.
An efficient matching process can help improve match rates while also processing invoices in a way that:
- Reduces payment errors: By verifying the amounts on the PO, receipt, and invoice align, you can ensure your company is paying the correct amount for the goods and services received. This helps eliminate overpayments and duplicate payments while improving cost control and reducing the risk of financial losses.
- Mitigates fraud: PO matching enables you and your team to better detect discrepancies, such as double billing or unauthorized charges. As a result, you avoid paying for fraudulent invoices.
- Improves vendor relationships: Accurate invoice and payment processing builds trust with vendors and suppliers. Maintaining positive relationships can lead to favorable credit terms, discounts, or other vendor perks.
- Simplifies financial reporting: Invoice matching helps to ensure payments to vendors are correct and that the payments are accurately recorded in the accounting systems, contributing to accurate and timely financial reports.
How Does Automated PO Matching Work?
Automated invoice matching matches line item details in POs and invoices without tedious manual processes. Some automation tools will ingest POs from your ERP or accounting system, while others enable you to generate POs within their platform. Once an invoice is submitted, the tool will use 2-way or 3-way matching to automatically link and cross-check invoices and POs and flag any mismatches in the data.
By removing manual intervention in the process, AP teams can boost efficiency and productivity while reducing the chances of discrepancies falling through the cracks.
Automating the Procure-to-Pay Process with Ottimate
PO matching is a multistep process that can be cumbersome for AP teams. Ottimate’s end-to-end AP automation solution does the heavy lifting for you, optimizing the procure-to-pay process for your company. You can manage the entire purchase order process in one platform — from creating a purchase requisition to matching POs.
Our 3-way matching engine uses AI and machine learning to automatically match invoices to POs and receipts at the header and line levels and alerts you when a discrepancy is detected, prompting you to review the invoice and make corrections. And with streamlined approval workflows, invoices are approved, processed, and paid with minimal errors and delays.
Ready to transform your end-to-end AP experience? Schedule a demo today!
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