Two-way and three-way matching explained

Matching is how a buyer decides whether to pay an invoice. It compares the invoice with the documents that came before it, and pays only when they agree.

Two-way matching

Two-way matching compares the invoice with the purchase order:

• Is there a purchase order with this number, raised by us, to this supplier?
• Is each invoiced item on the order?
• Is the price on the invoice the price on the order?
• Is the quantity invoiced no more than the quantity ordered?

It suits services and low-value purchases where there is no physical delivery to count.

Three-way matching

Three-way matching adds the goods received note (GRN), the record made when the delivery arrived:

• Was the invoiced quantity actually received?

This stops the buyer paying for goods that were short-delivered, damaged and rejected, or never sent. It is the usual control for physical goods.

Some organisations add a fourth document, typically an inspection or quality record, and call it four-way matching.

Tolerances

Exact matching would hold up a lot of correct invoices over rounding and small price differences, so most systems allow tolerances. A typical setup might let a line through if the price is within a small percentage or a small fixed amount of the order price, and the quantity within the received quantity. Anything outside the tolerance is held for someone to approve.

What happens when it does not match

The invoice goes on hold. Someone in accounts payable has to work out why, usually by emailing the buyer, the warehouse or the supplier. Until it is resolved, the supplier is not paid. For a supplier, a held invoice means late cash and time spent chasing.

What suppliers can do

Most mismatches come from details the supplier controls:

• Quote the PO number exactly. Including any prefix or revision.
• Use the order's prices. If prices changed since the order, agree the change before invoicing.
• Invoice what was delivered, line by line. Part deliveries need part invoices that match the GRN.
• Use the customer's units and references. If they ordered "boxes of 200" with their own part code, invoice the same way.
• Send it where they asked. Many orders name an accounts payable mailbox for invoices.

All of these depend on having read the purchase order correctly in the first place. VioPO returns the PO number, the customer's part numbers, units and prices, and the invoice address and instructions as separate fields, so they can go straight into your invoice.