Guide to Invoice Matching

Learning how to manage your invoicing is one of the most important parts of running a successful business, and it can often be one of the most challenging, too. Finding out which invoices match up with which specific purchase orders is a time-consuming and complicated process, and it’s helpful to know how you can streamline this.

The invoice matching process is a system designed to create more accurate, timely and complete invoice payment. Essentially, it involves comparing different documents, namely the purchase order, receiving documents and invoice, and cross-checking them for accuracy. Keep reading to find out the answer to questions such as “what is invoice matching?”

What is invoice matching?

So you’ve had a general overview of the invoice matching process, but what does this involve in detail? As previously mentioned, invoice matching is the process of comparing different documents, and as such there are different types of invoice matching depending on the documents you compare.

3 way invoice matching is one of the most common forms of invoice matching, and this means that you are comparing the information from the following three documents:

• The original purchase order, which is sent from buyer to supplier as a confirmation of their desire to purchase goods or services.

• The vendor invoice, which is sent in the other direction, from supplier to buyer, detailing the necessary information to make payments. This will include a detailed list of the tasks, a breakdown of costs, bank details for payment, and a due date.

• Receiving documents, which demonstrate the proof of purchase and delivery. For example, with a shipment, these will provide exact details of the goods delivered and will often require a signature of receipt of delivery.

As well as 3 way invoice matching, you may hear people talking about 2 way invoice matching. This simply means that you are comparing only the purchase order and invoice, without considering the receiving documents.

In addition to 2 way invoice matching, some companies also carry out 4 way invoice matching. This means that you are comparing the same three types of documents as in 3 way invoice matching, with the addition of inspection slips as well.

Why is invoice matching important?

Now that you know a little more about the specifics of invoice matching, you might be wondering why a business should bother to do this. Basically, the main objective is to verify invoices before making a payment, and the benefits of this include:

• Ensuring that you are only paying for the goods and services that you actually receive.

• Easy tracking of payments across multiple vendors.

• Eliminating common errors such as double payments.

• Having an accurate record of payments and invoices available when you need to audit and calculate any business metrics you are using to measure performance.

• Faster and more accurate payments, which can improve your relationship with suppliers and vendors.

In short, a thorough invoice matching process will ensure more accurate and reliable payments. In the long-run, this has the effect of saving you both time and money.

Automating the invoice matching process

Since comparing these different documents can be a time-consuming and tedious process, many companies now choose to use AI. Automation removes the need for human involvement in invoice matching, cutting down your labour costs and leaving your employees free to focus on other tasks.

In addition to this, computers tend to carry out these tasks at a much faster speed than humans, and will make much fewer errors. AI is able to process early payments and avoid common problems that occur due to human error, and in this way you can encourage better supplier relationships.

If you’re finding that the invoicing process is becoming too time-consuming, you may wish to look into a payments solution like GoCardless. GoCardless enables businesses to collect invoice payments directly from customer bank accounts via Direct Debit, and because you’re pulling payments directly from customers, you’re more likely to be successful. In fact, an impressive 97.1% of GoCardless payments are successfully collected on the due date (GoCardless Product Data, 2021). 

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.