What to Do When an Invoice Does Not Match a Purchase Order

When a business receives an invoice that does not align with its corresponding purchase order (PO), it signals a discrepancy. This occurs when invoice details (quantity, pricing, terms) differ from what was originally agreed upon and documented in the PO. Mismatches can stem from clerical errors, miscommunication, or issues during fulfillment. Addressing these inconsistencies is important for maintaining accurate financial records, managing cash flow, and preserving positive relationships with suppliers.

Identifying Common Discrepancies

Several types of discrepancies can emerge when comparing an invoice to a purchase order.
A quantity mismatch occurs when the invoice lists more or fewer items than specified on the purchase order. For instance, a PO might be for 100 units, but the invoice bills for 110, or only 90 units were delivered. This error can affect inventory levels and lead to overpayment or underpayment.
Pricing discrepancies occur when the unit price or total price on the invoice differs from the agreed-upon amount in the purchase order. This could involve an incorrect unit price, a misapplied discount, or an error in calculating the total. For example, if a PO specifies a unit price of $50, but the invoice shows $55, this variance needs investigation. Such differences can significantly impact a company’s financial outflows.
Item discrepancies arise when the invoice details an incorrect product or service compared to what was ordered. This might mean a different model number, color, or an entirely unrelated item is listed. These errors often indicate a picking or shipping mistake by the vendor.
Discrepancies in terms, such as payment terms or shipping terms, can occur. A purchase order might stipulate Net 60 payment terms, allowing 60 days to pay, while the invoice states Net 30, requiring payment within 30 days. Such a mismatch can affect a company’s cash flow planning and potentially lead to late payment penalties or missed early payment discounts.

Investigating and Resolving Discrepancies

Once a discrepancy between an invoice and a purchase order is identified, a structured approach is necessary. The initial step involves performing a thorough three-way match by comparing the invoice against the original purchase order and the receiving report. This pinpoints the variance (quantity, price, or item). For example, if the invoice shows 100 units but the receiving report indicates only 90 were delivered, the discrepancy lies with the quantity received.
If the internal comparison reveals the error, the next action depends on the source. If the receiving department miscounted, internal adjustments to inventory records may be needed. If the purchasing department entered an incorrect price on the PO, internal documentation should be updated to reflect the true agreed-upon price. Documentation of internal corrections is important for audit trails.
When the discrepancy points to a vendor error, communication with the supplier becomes the next step. This involves clearly articulating the mismatch, providing supporting documentation (purchase order, receiving report), and requesting a resolution. For instance, if the invoice overcharges due to an incorrect unit price, a revised invoice or a credit memo for the overcharged amount should be requested. Vendors process such requests within a few business days.
Maintaining detailed records of all communications, including dates, times, individuals contacted, and actions taken, is important throughout the resolution process. This documentation serves as a reference for both internal purposes and future audits. If the discrepancy involves an overcharge and a credit memo is issued, ensure it is applied against the outstanding invoice or future payments. In cases where the invoice amount is lower than the PO, the invoice can be processed for the lower amount.

Establishing Internal Controls

Proactive measures and controls minimize invoice-PO mismatches. Implementing a robust three-way matching process is a foundational control. This process mandates that accounts payable verifies details across the purchase order, goods receipt, and supplier’s invoice before payment approval. Automated systems can streamline this by flagging discrepancies that exceed predetermined tolerance levels, preventing payment until issues are resolved.
Ensuring clear and consistent communication channels among purchasing, receiving, and accounts payable departments also reduces errors. Regular meetings or integrated digital platforms can help align expectations regarding pricing, quantities, and delivery schedules. This collaboration helps prevent misunderstandings that lead to discrepancies.
Regular review and validation of vendor master data are another preventative strategy. Outdated or incorrect vendor information, such as billing addresses or payment terms, can directly contribute to mismatches. Maintaining accurate vendor records helps ensure that purchase orders and invoices are generated with the correct details.
Accounting software features can significantly enhance control. Many modern systems offer automated matching algorithms that can compare invoices against POs and receiving reports, identifying inconsistencies automatically. These systems can also generate exception reports for items that do not match, allowing for focused investigation rather than manual review of every transaction. This systematic approach aids in minimizing errors and safeguarding financial integrity.