Matching Invoices to Purchase Orders: Best Practices

Invoice matching - the process of matching invoices to purchase orders (PO) - seems pretty straightforward on the face of it.
In the purchase-to-pay cycle between a supplier and a paying business, a purchase order is raised, an invoice is processed and then the two are matched, thanks to correlating numbers on both documents.

But it’s often not as easy as this. Invoice matching is a complex task that can end up being confusing and time-consuming - often due to human error.

Automation tools make invoice matching much more simple, saving accounts payable (AP) teams time and resources by providing ‘touchless’ automated invoice processing in the purchase-to-pay process.

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What is invoice matching?

Invoice matching essentially connects three of the main processes in accounting - accounts receivable, procurement and accounts payable - which is why it’s sometimes referred to as three-way matching.

Three-way matching compares a financial document against others linked to it, in order to verify that the information provided is accurate so that the payment can be completed:

Purchase order (PO) - the approved internal document sent from the buyer to the supplier which confirms the need to purchase a set of goods or services.
Supporting documents - typically sent by the supplier after the purchase order is received - supporting documents, such as order receipts, packing slips or received notices, provide proof of purchase and/or delivery and can include information such as unit price, payment terms and method of payment.
Item invoice - sent by the supplier to the buyer after goods or services have been received, an item invoice will contain the same information as the original purchase order and supporting documents, but will also contain an invoice number, total invoice amount and vendor contact information.

What should take seconds is actually a vitally important procedure in business, because if you’re not getting paid on time then you can’t spend at the other end.

In a recent survey commissioned by Yooz, UK organisations highlighted the key issues for late payments were trouble validating invoices (38%), slow/manual processes (37%), and administrative errors (33%).

Having automation in place helps with all of these factors. In the same survey, UK organisations highlighted late payments (41%) as the biggest risk of not using automation in their accounts payable processes.

Although invoice matching ultimately aims to make sure the payment amount is correct, it can also help provide more secure payments to vendors, suppliers and clients.

Automating the purchase-to-pay process provides full validation of elements such as the purchase order number, supplier name, address and invoice amount. A full, digital audit trail can also be viewed, downloaded and shared to check for accounts payable fraud.

Thanks to automation, businesses can place more trust in their accounting processes.

How are purchase orders associated with invoices?

The invoice matching process starts when a purchase order is created by the buying organisation and an invoice is sent by the supplier to the organisation.

The buyer starts the purchase-to-pay cycle, stating factors such as services/goods needed, the date the order was raised, quantity, vendor and price. Once approved internally, a purchase order number will be raised.

This number is absolutely key in the process, as it is ultimately how purchase orders are linked with invoices to save everyone time and effort later down the chain.

The purchase order is then generated and sent to the vendor, typically via email or through an automated accounting system. Once the services or goods are delivered, the buyer receives an invoice from the seller to transfer to their accounting department for payment.

The invoice has to include the purchase order number in order to validate the payment and be recorded in financial systems. This provides accounting departments on both sides with confirmation that the transaction has been budgeted for and approved, as well as helping to speed up the payment.

But only as long as the invoice details are the same as those on the purchase order. So what happens if the two don’t match up?

Why do invoices not match purchase orders?

Issues tend to happen when the information produced on the purchase order does not match the invoice. But how can this happen, especially as documents get checked by many different people and departments?

Most mistakes tend to be down to human error. We’re all human and mistakes do happen, but these could be costly if dealing with smaller suppliers who need efficient payment.

One example could be that the quantity of products written on the invoice does not match the number on the purchase order, which could affect the price and therefore over- or under-payment.

Although some of these mistakes may be fine margins, any deviation absolutely has to be identified as part of the invoice matching process.

Nobody wants to use up resources to conduct an investigation into missing or unvalidated payments, nor do they want to take up the accounting department's time to contact the vendor or supplier to correct any errors.

Yet, the issue of invoices not matching purchase orders is one that continues to wreak havoc on accounting departments.

Having to manually manage errors in the purchase-to-payment chain can be one of the most time-consuming and resource-intensive tasks in the accounts payable department.

Businesses and organisations need to arm their teams with tools and systems that help automate these processes to make sure they never happen again.

How Yooz automates from purchase order to invoice payment

However, automation itself is not the answer. Rather than just automating the validation of invoices to purchase orders, businesses need an end-to-end solution that covers the entire purchase-to-pay cycle.

Although automation is fast becoming popular to reduce repetitive, labour-intensive tasks, too many organisations still don’t have a solution in place that is able to deal with all of the processes involved with invoicing - from the moment a purchase order is issued right up to the initiation of payment.

That’s where Yooz comes in. Not only does the Yooz platform make end-to-end accounts payable automation affordable for businesses, it takes the risk associated with human error and fraudulent activities completely out of the loop.

AP automation from Yooz boasts one of the highest rates of accuracy and speed on the market today, reducing not only the chances of human error creeping in, but also the cost of manually processing invoices by around 80 percent, as well as helping to shorten the approval process from days to hours.

The platform can be up and running in a matter of hours without any complex training or instruction manuals, allowing accounting teams to enjoy the ease of automatically routing invoices and purchase orders directly to the right people without error.

Only with end-to-end accounts payable automation will you be able to successfully complete the purchase-to-pay journey every time and boost your bottom line.

Looking to automate the purchase order matching process?

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FAQs

How does Yooz ensure accurate matching of invoices to purchase orders, and what benefits does this offer to organisations?

Yooz utilises advanced matching algorithms and machine learning capabilities to ensure accurate matching of invoices to purchase orders. Our platform automatically compares invoice details, such as line items, quantities and prices, with corresponding purchase order information to identify discrepancies and exceptions. Accurate matching helps organisations prevent errors, reduce manual intervention and streamline the accounts payable process. By automating the matching process, Yooz enables organisations to improve invoice processing efficiency, optimise payment workflows and maintain strong vendor relationships.

Can Yooz handle different types of matching scenarios, such as one-to-one, one-to-many, or many-to-many matches and how does it manage complex matching requirements?

Yes, Yooz can handle various matching scenarios, including one-to-one, one-to-many, and many-to-many matches, to accommodate different invoice and purchase order structures. Our platform offers configurable matching rules and thresholds that allow organisations to define specific matching criteria based on their unique requirements. Additionally, Yooz's intelligent matching engine leverages historical data and machine learning algorithms to adapt to complex matching scenarios and improve accuracy over time. By providing flexibility and scalability, Yooz enables organisations to effectively manage complex matching requirements and streamline their accounts payable processes.

How does Yooz handle exceptions or discrepancies in the matching process and what tools are available to resolve these issues efficiently?

Yooz provides robust exception handling capabilities to address discrepancies or mismatches in the matching process. When discrepancies are identified, our platform automatically flags the invoices for review and notifies designated users for resolution. Yooz offers intuitive dashboards and workflows that enable users to investigate discrepancies, communicate with relevant stakeholders and resolve issues promptly. Additionally, our platform supports configurable approval workflows and collaboration features that facilitate timely resolution of exceptions, ensuring smooth processing of invoices and purchase orders.

Can Yooz integrate with existing ERP or procurement systems to streamline the matching process and ensure data consistency across platforms?

Yes, Yooz seamlessly integrates with ERP and procurement systems to streamline the matching process and ensure data consistency across platforms. Our platform syncs invoice and purchase order data in real-time, enabling automatic reconciliation and validation of matching results. By integrating with existing systems, Yooz eliminates the need for manual data entry or duplicate data entry, reduces errors and enhances data integrity. Organisations can leverage Yooz's integration capabilities to achieve end-to-end automation of the accounts payable process, from invoice capture to payment reconciliation, and optimise their financial operations.