When it comes to managing accounts payable (AP), few things are more important than making sure every transaction is accurately accounted for. That's why purchase order (PO) matching is a critical step in the AP process.
PO matching ensures your invoices align with the goods and services you purchased, and helps businesses prevent errors, fraud, and overpayments. But what exactly is PO matching, and how does it work in practice?
From what definitions and types to benefits and best practices, here's what you need to know about purchase order processing:
PO matching is the process of comparing a purchase order to the corresponding invoice before approving payment. This is done to make sure everything matches — from the quantity and price of goods or services ordered, to the amount being invoiced and the goods actually received.
By matching documents, you create a streamlined process for verifying transactions, reducing the possibility of errors and fraud. Because without PO matching, you run the risk of paying for items you didn’t order (or didn’t receive!) and of being overcharged due to pricing discrepancies or quantity errors.
PO-based invoice processing involves several steps to make sure every purchase is tracked and verified, including:
This process might sound simple, but manually your PO-based invoice process can be time-consuming and prone to error.
AP automation solutions, like Nimbello, can help. These tools transform your workflow by streamlining the matching process and enabling faster, more accurate invoice management.
A key part of PO matching is understanding the difference between a 2-way match and a 3-way match. While both boost accuracy by putting invoices through a multi-step verification process, each has its own steps and use cases.
In a 2-way matching process, the invoice is compared to the PO. This method ensures that the quantity and price of items or services billed match what was ordered. If everything matches, the invoice is approved for payment.
When to use 2-way matching:
Two-way matching is simpler and faster than 3-way matching but doesn’t include verification that the goods were received. That's why a 2-way match is best used when the company trusts that delivery will match the PO.
Three-way matching adds an extra layer of verification by comparing the invoice to both the PO and the receipt or receiving report. This confirms that the ordered goods or services align with what was actually received.
Three-way matching is especially useful for businesses handling physical goods, as it helps you avoid paying for items that were never delivered.
When to use 3-way matching:
While 3-way matching is more secure and reduces the risk of errors, it does take more time than a 2-way match.
Automated tools, like Nimbello’s AP automation solutions, help speed up the process by matching POs, invoices, and receipts automatically — no human intervention needed!
Manually matching POs with invoices works for small businesses with few transactions. But for larger companies or those handling high invoice volumes, automation is essential.
Here are some key benefits of automating your PO-based invoice processing:
To get the most out of PO matching, consider the following best practices:
PO matching is essential for ensuring that your business only pays for what they’ve ordered and received. Whether you’re using a 2-way match for simple transactions or a 3-way match for more complex purchases, having the right tools in place can make a world of difference.
Automating your PO-based invoice processing with Nimbello’s solutions can save your team time and give you greater control over your accounts payable workflow.
With Nimbello, you can simplify the entire AP process, from invoice to payment, and everything in between. Schedule a Nimbello demo today and learn how you can harness the power of automated PO matching today!