Two-Way PO Matching

Two-Way PO Matching Definition

Two-way PO matching is the process of comparing, or “matching” an invoice to a purchase order for goods or services acquired during procurement. In the procure-to-pay cycle, two-way PO matching is the first step of accounts payable invoice processing, which should ultimately result in the payment of the supplier.

In accounts payable, invoice matching is the reconciliation of documentation to identify discrepancies and ensure that invoices submitted for payment fall within the acceptable thresholds defined by accounts payable. Two-way PO matching is the action of comparing two documents: the purchase order (PO) and the invoice. Two-way PO matching verifies what the PO and invoice state, specifically that:

  • Quantity billed is less than or equal to quantity ordered
  • Invoice price is less than or equal to purchase price

The two-way PO matching process typically follows these steps:

  1. Invoice is received from supplier (aka vendor) for payment of goods or services procured through a purchase order.
  2. The invoice is created in the accounts payable system of the business or organization that acquired the goods or services.
  3. The invoice quantity and amount is compared to the purchase order quantity and amount, verifying that both are equal to or less than the thresholds set by accounts payable. (An example of a threshold can be 5% or $50.00 over the PO amount.)
  4. If the PO and invoice match, then no holds are placed and the invoice is approved for payment. If the PO and invoice thresholds are not met, then a hold is placed and must be resolved before the invoice can be approved for payment.
  5. Payments for approved invoices are released by accounts payable and sent to the supplier.

Two-way PO matching is just one of many invoice matching methods, which also include three-way PO matching and four-way PO matching. In three-way PO matching, the process matches three documents: the purchase order (PO), the receipt, and the invoice. In four-way PO matching, the process matches four documents: the purchase order (PO), the receipt, the invoice, and the inspection document.

Best Practices

In the procure-to-pay cycle, it is important to understand the relationship between the purchase order (PO) and the invoice. Integrating and streamlining the invoice matching process through accounts payable automation can translate to return on investment — both in cost and time savings.

Perhaps the most important KPI (Key Performance Indicator) for a procurement and accounts payable department to measure is the First-Time Match (FTM) rate. This indicates how often the invoice quantity and amount “matches” — or is equal to or less than — the quantity and amount on the purchase order (PO). If two-way PO matching is a success on the first try, it can reduce the amount of time and effort needed to resolve discrepancies and release payment to vendors. Automating the procurement process streamlines the matching process, and removes the manual matching need and the chance for human error or negligence.

Other best practices for two-way PO matching include:

  • Monitoring and improving the First-Time Match (FTM) percentage
  • Tracking the number and type of invoice discrepancies to identify trends and new ways to reduce resolution time
  • Define a set amount of time to address invoice discrepancies
  • Tracking number of days it takes to go from invoice to payment
  • Track cost to process an invoice; find ways to increase efficiency


 Two Way Matching

Source: Oracle Purchasing – Invoice Matching Methods (Oracle) 

Match Invoices to Purchase Orders

Source: Next Practices for Accounts Payable Automation (Basware)

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