What Is 2-Way Matching in Accounts Payable?
Discover how 2-way matching strengthens accounts payable accuracy, prevents errors, and ensures financial control in your payment processes.
Two-way matching is a fundamental process within accounts payable that ensures accuracy and control in financial transactions. It involves systematically comparing information from two distinct documents to validate a payment request. This method helps businesses confirm they are paying for legitimately ordered and billed goods or services. By verifying key details, it safeguards against errors in the payment workflow, establishing financial integrity before funds are disbursed.
Understanding the Core Documents
The two primary documents at the heart of two-way matching are the Purchase Order (PO) and the Vendor Invoice. These documents serve as the foundational information inputs that are later compared.
A Purchase Order (PO) is a formal commercial document issued by a buyer to a seller, outlining the buyer’s official offer to purchase specific goods or services. It includes a unique PO number, date of issue, detailed descriptions of items, quantities, unit prices, and payment terms. The PO formalizes the procurement process and helps control spending.
A Vendor Invoice is a formal request for payment issued by a seller to a buyer after goods or services have been provided. This document details what the buyer owes the vendor and serves as a record of the transaction. It contains an invoice number, date, contact information, an itemized list of goods or services with quantities and prices, additional costs, total amount due, and payment terms. It initiates the payment process within the buyer’s accounts payable department.
The Matching Procedure
The process of two-way matching involves comparing specific data points between a received vendor invoice and its corresponding purchase order. This comparison is typically performed by the accounts payable department, often with automated systems. Primary information points compared include the quantity of goods or services invoiced against the quantity specified on the purchase order. Unit prices on the invoice are checked against the unit prices agreed upon in the purchase order. Additionally, vendor information, item descriptions, and overall totals are verified for alignment.
When all compared details align within predefined acceptable limits, known as tolerances, the invoice is considered a successful match and can be approved for payment. If discrepancies are identified, the invoice is flagged for review and placed on hold. Resolution may involve contacting the vendor, consulting the purchasing department, or investigating differences. Once resolved, the invoice proceeds to the payment queue.
Purpose of Two-Way Matching
Two-way matching prevents common accounts payable errors such as duplicate payments, overpayments, or payments for unauthorized purchases. For instance, if an invoice lists a higher quantity or price than originally ordered, two-way matching flags this discrepancy before payment, preventing financial loss. It also serves as a layer of internal control, safeguarding against potential fraud by ensuring all payments are supported by a legitimate and matching purchase order.