Invoice Processing

What is Invoice Matching?

Invoice matching involves aligning an invoice’s information or data with its corresponding purchase order through a two-way or three-way framework.

• A two-way match compares the invoice to the purchase order to confirm key details, such as vendor information, quantities, prices, and taxes. If everything aligns, the invoice is approved for payment. If discrepancies exist, they’re investigated before further invoice processing.
• A three-way match enhances invoice verification by also comparing it to the goods receipt note (GRN), which is a document confirming the goods or services arrived and were accepted. By incorporating a third document into their review, organizations create even more accurate financial records and protection against overpayments.

Two- and three-way matching offer valuable benefits by enhancing invoice approval control and accuracy. Both methods help prevent fraud, reduce processing costs through automation, and improve organization spending visibility. This, in turn, enables better financial oversight and decision-making.

Invoice Processing Basics

Efficient invoice processing follows a consistent sequence of events to maximize accounting accuracy, legal compliance, and timely payments.

1. Receive Invoice: Invoices can arrive via several channels, such as traditional mail, email, or electronic data interchange (EDI).
2. Invoice Entry: Record the invoice’s details with essential accounting information, such as general ledger classifications, vendor details, whether the invoice is a recurring bill, posting periods, amortization data, and required approvers. Entry can be completed manually or through invoice processing software.
3. Invoice Matching: Align the invoice’s data with its corresponding purchase order to ensure goods or services were received as expected and to verify the accuracy of listed quantities and pricing.
4. Invoice Approval: Process the invoice for approval per organizational policies or procedures.
5. Invoice Payment: When approved, pay the invoice amount either manually or electronically, depending on organizational preferences.

Invoice Processing Tips

Organizations should prioritize automating their invoice processing systems and procedures to ensure efficiency and accuracy via streamlined tasks and reduced manual errors. Furthermore, establishing a clear, documented set of process steps to share with relevant teams and use for employee training can also ensure operational consistency and accountability.

Finally, organizations should routinely monitor and assess the processing workflow to confirm it’s being followed and remains effective in preventing errors or fraud. Centralizing all related documents (e.g., GRNs and purchase orders) can further support and expedite such efforts.