What Is 2-Way Matching in Accounts Payable?
Learn about 2-way matching in Accounts Payable, a core financial control that ensures invoice accuracy and prevents payment errors.
Two-way matching is a fundamental control mechanism within accounts payable, designed to verify the accuracy of invoices before payment is authorized. This process helps ensure an organization only pays for goods and services that were genuinely ordered. It acts as a safeguard against potential errors and unauthorized expenditures.
The Documents in Two-Way Matching
The two primary documents involved in two-way matching are the purchase order and the supplier invoice. A purchase order (PO) is an internal document created by the buyer, serving as a formal request to a vendor for specific goods or services. It details the items, quantities, and agreed-upon prices, representing the buyer’s intent to purchase.
The supplier invoice is an external document generated by the seller, requesting payment for the goods or services provided. This document typically includes item descriptions, quantities, and prices, serving as the seller’s formal demand for payment. Both documents contain critical financial data that must align for accurate payment processing.
The Matching Process
Two-way matching involves comparing key data points between the purchase order and the supplier invoice. An accounts payable clerk, or increasingly an automated system, cross-references details such as item descriptions, quantities ordered versus quantities invoiced, and unit prices. This comparison ensures that billed amounts align with terms established in the purchase order.
When a perfect match is identified, the invoice can be approved for payment. If a discrepancy is found, such as an incorrect quantity or an inflated price, the invoice is flagged and held. This flagged invoice is routed for further investigation and resolution, which may involve contacting the supplier or the internal purchasing department to clarify and correct the mismatch.
The Purpose of Two-Way Matching
Two-way matching is implemented in accounts payable as an internal control to safeguard organizational assets. It helps ensure a business only pays for goods and services that were legitimately ordered and at pre-approved prices. This verification process is a direct measure against errors, such as duplicate payments or incorrect pricing.
The process also prevents payments for items never received or authorized. By requiring a match between the invoice and the internal purchase record, it contributes to fraud prevention. This system validates the legitimacy of payment requests, helping to maintain the financial integrity of the organization.
Beyond Two-Way Matching
While two-way matching is a foundational method, other types of matching provide additional layers of verification. Three-way matching introduces a third document, typically a receiving report or proof of delivery. This allows for verification that goods or services were not only ordered and invoiced but also physically received by the organization.
Four-way matching expands upon the three-way process by including a fourth document, such as an inspection report or acceptance document. This method provides the highest level of scrutiny, ensuring that items meet quality standards or specific contractual terms before payment is approved. These advanced matching methods offer increased control depending on the complexity and risk associated with the procurement.