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PO Matching: the challenges AP teams face

Lotta Lundaas
Lotta Lundaas
VP of Marketing

Learn more about what invoice matching is, why its important for accounting teams, its challenges, and what you need to know about automation. ‍

December 27, 2022

min read

PO Matching: the challenges AP teams face

As technology continues to advance, you may be wondering how you can streamline your current AP processes to improve match rates and eliminate the risk of overpaying (and under-delivery).

In this article, we are going to dive deep into what invoice matching is, why its important for accounting teams, its challenges, and what you need to know about automation. 

But first, what exactly is PO matching? 

What is PO matching?

Invoice matching, or Purchase order matching (PO) is a process in which a company's financial system checks the goods or services that have been received against the purchase order that was issued to purchase those goods or services. This process is used to ensure that the goods or services received are what was ordered, and that they were received in the correct quantity and at the agreed-upon price before initiating approval and payment.

P.O. matching helps to ensure the accuracy and integrity of a company's financial records, and helps to prevent errors or fraud in the purchasing process.

There are two types of PO matching processes: 2-way matching and 3-way matching. 

2-way PO matching

2-way matching is one of the most common (and simple) ways to verify invoices. 

In 2-way matching, both the invoice and purchase order must match one another, before scheduling out the payment to a vendor or other third party. 

3-way PO matching

This three-step matching system requires AP teams to compare an invoice to a purchase order and receipt of goods before payment. 

This extra added step ensures that invoices are paid correctly so that your teams don’t have to revisit the issue later on. 

Who uses PO matching (and why)?

P.O. matching is an important part of a company's financial management and can help to prevent errors or discrepancies in the ordering and receiving process. It is ideally done automatically by a company's financial system, using software that compares the purchase order to the invoice and delivery receipt for the goods or services. If there are any discrepancies, the system will flag them for review and correction.

Many industries use PO matching to ensure that purchase orders match invoices and receipts, but industries that are particularly PO matching dependent include retail, manufacturing, and education

These industries have a high-inventory threshold and work with multiple vendors and therefore, will need to ensure that their purchase order matches either just the invoice or both the invoice and receipt of goods. 

If not, human error can adversely impact your company’s bottom line. 

From being more prone to fraud to dealing with unnecessary expenses, PO matching is an important step to keep your books balanced and avoid errors from occurring. 

What makes invoice matching difficult?

Deviations are common in the invoice processing world — and if you are in the AP department you understand this sentiment full-heartedly. 

But for those of you who don’t know what a deviation is, a deviation is a mismatch between either a purchase order, goods receipt note, or invoice. Here is what makes invoice matching difficult. 

  1. Wrong price or quantity

Two of the most common types of deviations include a discrepancy in quantity or price

For example, if you work in the education system and order 500 laptops for a particular business school lab, but the receipt of goods only says 460 laptops, that would be an instance of quantity deviation.  

Another example would be if you are a supplement manufacturing plant and order $15,000 worth of materials but the invoice reads $16,250. That is an example of price deviation. 

  1. Missing Information

Another type of deviation includes missing information on one of the financial statements. 

Sometimes the PO number doesn’t make it onto the receipt of goods altogether! By double-checking all financial statements, your AP team can ensure that missing information doesn’t go unnoticed. 

  1. Manual Coding

Manual coding can be tedious — and error-prone. 

When your accounting team has to sift through hundreds of invoices a day, invoices and other documents can often get lost in the shuffle. Not only that, but manual coding can lead to more accounting hiccups — from inaccurate financial reporting to wrong due dates being keyed in. 

  1. Low-Quality Invoice

Not all invoices are sent in high-resolution, making it hard to read or match the data to other documents. Handwritten data on invoices or missing data like invoice numbers can be difficult for AP automation software that relies on templates and rules. This can cause unnecessary back-and-forth with exception handling, causing the AP team to track down the necessary parties to clarify the data on the invoice.

Why is invoice purchase order matching critical to month and year-end close?

Did you know that 61% of late payments are due to administrative issues such as incorrect invoicing?

With that said, as the latest fiscal year (or month) comes to a close, it’s crucial to ensure that your books are up-to-date and correct before entering into the next financial period. 

This helps your financial teams forecast better for the next period while also giving you a more accurate depiction of the books. 

How can PO matching be improved?

By having an AI invoice processing system like the one we have at Vic.ai, you can match invoices to POs — no matter where certain data is. 

The benefits of onboarding an invoice automation system into your everyday operations include: 

  • Less manual coding — This means that you need less manpower to perform better and process more invoices!
  • Accurate line item detection (and matching) — With automated invoice processing, AI can detect each line item correctly and ensure that all financial documents match up before scheduling out payments. 
  • Easier invoice approval — No one likes a bottleneck, and with the Vic.ai system, users can get easier invoice approvals all within a matter of a few clicks. This means less internal friction and more invoices that are paid correctly and on time!

Although it can be tempting to maintain your current processes, by using a comprehensive invoice processing system — with PO matching capabilities — you can expect to close the gap on mismatched supporting documents once and for all. 

Streamline PO matching with Vic.ai

PO matching is one of the most time-consuming business tasks, but it doesn't have to be. 

With Vic.ai, billing has never been easier. 

Now you can increase AP productivity and reduce operating expenses — all while building better relationships with your suppliers. Unlike RPA that uses rules and templates with OCR, which has high exception rates, our hyperautomation system can accurately read line items and match purchase orders to other documents for accurate AP reporting. 

Whether you are looking for efficiency or accuracy gains, Vic.ai can streamline your workflow and reduce errors at scale.

Streamline invoice processing the right way with Vic.ai. Let’s avoid invoice processing errors — together. Download our 7 ways to unlock faster and more accurate accounting e-guide to free your finance department from manual guesswork and take actionable steps to simplify your approval flow. 

7 ways to unlock faster & more accurate accounting

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