Invoice Matching
The process of verifying invoices against purchase orders and receipts before payment.
Definition
Invoice matching is an accounts payable control process that verifies invoices against purchase orders and receiving documents before authorizing payment. Three-way matching compares the invoice to both the purchase order (what was ordered) and the goods receipt (what was received).
Two-way matching compares invoices to purchase orders only, while four-way matching adds inspection results. Matching tolerances define acceptable variances—if the invoice amount is within 2% of the PO, for example, it might auto-approve.
Why It Matters
Invoice matching prevents payment errors and fraud. Without matching, businesses might pay for goods never ordered, pay incorrect amounts, or pay for items never received. Studies show 3-8% of invoices contain errors that matching would catch.
Automated matching in modern ERP systems reduces manual review while maintaining control. Invoices that match within tolerance auto-approve; exceptions route to reviewers, focusing human attention where it's needed.
Examples
- 1
An invoice for 100 units at $50/unit is matched against a PO for 100 units at $50—it matches perfectly and is approved for payment.
- 2
A goods receipt shows only 95 units received, but the invoice bills for 100. The 5-unit discrepancy routes the invoice for manual review.
- 3
A company sets a 3% matching tolerance: invoices within 3% of PO amounts auto-approve, while larger variances require approval.
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