3-Way Matching in Accounts Payable

Palette matches vendor invoices to internal or external purchase orders and goods receipts. Our Cascading PO Matching engine automatically matches hundreds of lines on a purchase order or invoice – saving you both time and money.

What is PO matching?

So what is PO matching exactly? PO matching (purchase order matching) refers to the process of comparing information on an invoice with documents such as the purchase order, goods receipts, and/or a contract.

  • The goal of PO matching is to assure that the vendor payments are accurate and ensure correct accounting of costs. PO matching enables compliance to purchase contracts and allows for easy detection of fraudulent invoices.
  • It’s a key activity for a company’s accounts payable team that is complex, time-consuming, and resource-intensive when performed manually.
  • Shifting to a digitized process of automated PO matching ensures a quick and easy way to perform invoice matching and will save your accounts payable department both time and effort through touchless invoice processing.

“Palette’s purchase order matching effectively connects a purchase order with an invoice, and it’s easy to establish rules for variances.”

Rene Faurskov, Finance Manager • Sportmaster

What is 3-way PO matching?

There are three different levels of PO matching: 2-way, 3-way and 4-way. These levels refer to how many supporting documents the invoice is matched against:

• 2-way matching verifies the invoice against its corresponding PO
• 3-way matching verifies the invoice against its corresponding PO and goods receipt
• 4-way matching verifies the invoice against its corresponding PO, goods receipt and acceptance or inspection document

3-way PO matching is the most common and the ideal choice of internal control. The three parameters which are compared between the documents in accounts payable three-way match include:

• Name of the items
• Quantity of the order
• Price quoted per unit

Benefits of Palette’s automated PO matching software

• Automated 3-way PO matching
• Matches internal or external purchase orders
• Match at the header or line level
• Match POs and invoices with hundreds of lines
• Exceptions are sent to approvers to validate with one-click approval on mobile or  desktop
• Provides a complete time-stamped audit trail, including messages

Why should you use automated PO matching?

Palette’s PO matching software matches POs, invoices, and goods receipts efficiently. If an invoice matches a purchase order, it assumes the coding and approval from the order and can be sent directly to your ERP for recording – without manual handling.

With business rules a procedure is implemented for invoices that do not match, and acceptable deviation levels are built in. Exceptions are routed to designated approvers in the approval workflow.

• Matching of incoming invoices and purchase orders is done at the header level or line  level
• Matching can also be made to order numbers or delivery numbers and amounts
• An invoice can contain items from several purchase orders, where a purchase order  can be matched to several different invoices, whether they are fully or only partially delivered

How does Palette’s automated PO matching work?

Palette’s integrated AP three-way match automation is an innovative and efficient solution that minimizes workload and maximizes employee’s productivity. It matches invoices and purchase orders according to the variance rules you set.

• For Non-PO invoices or where there is missing information, the invoice is sent to an approver
• For purchase order invoices that contain exceptions as a result of the matching process, the invoice and all corresponding documents are sent to the appropriate person based on the roles you assign
• Once delivered, the recipient views the package of information which includes an invoice image, a copy of the PO, the goods receipt information, and a description of the error

Intelligent 3 Way PO Matching is a module in Palette’s AP Automation and Purchase to Pay software suites.

A PO invoice is an invoice that corresponds to previous purchase order. A non PO invoice is a supplier invoice that has been received, but where there is no document (purchase order) confirming the goods/services that have been invoiced. It might be a phone order without written confirmation, a recurring subscription fee or any other ad hoc purchase that was not confirmed with written or electronic document. Non PO invoices are often referred to as “cost invoices”.

A non PO invoice is a supplier invoice without a corresponding purchase order. Non PO invoices are often referred to as “cost invoices”.

A PO invoice is an invoice that corresponds to a previously created purchase order. That’s a written or electronic document that confirms the order of the invoiced goods or services.

Invoice matching is the process where an invoice or an invoice line are compared with an order document, i.e. a purchase order (PO), a contract or a delivery note of goods receipt.

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