2 Way Matching

2-Way Matching in procurement refers to the process of comparing two key documents—usually the purchase order (PO) and the invoice—to ensure that the information aligns before making a payment to a supplier. This is one of the simplest and most common methods of invoice matching in procurement, helping organizations verify that the goods or services billed by the supplier match what was originally ordered.

The Two Documents in 2-Way Matching:

1. Purchase Order (PO): This document is created by the buyer and outlines the details of the order, including quantities, prices, and delivery instructions. It is issued to the supplier before the goods or services are delivered.
2. Invoice: This document is submitted by the supplier after the goods or services are delivered, and it provides a request for payment based on the terms outlined in the purchase order.

The Matching Process:

• When the invoice is received, the accounts payable team will compare it to the purchase order to ensure that:
  1. The goods/services billed match what was ordered (the correct items, quantities, and descriptions).
  2. The prices on the invoice align with the prices specified in the purchase order.
  3. The total amount on the invoice is in line with the agreed-upon price.

If the details in the PO and the invoice match, the payment can be processed. If there are discrepancies, such as incorrect pricing, quantities, or items, the issue will need to be resolved before payment is made.

Advantages of 2-Way Matching:

• Simplicity: 2-way matching is straightforward and easy to implement, making it suitable for businesses with straightforward procurement processes.
• Cost Control: By ensuring that suppliers are paid only for the goods and services ordered, this process helps prevent overpayment.
• Prevents Fraud: 2-way matching can help detect fraudulent invoices or errors, ensuring that payment is made only for legitimate and correctly priced orders.
• Efficiency: It speeds up the payment process by providing a clear reference between the purchase order and the supplier’s invoice.

Limitations of 2-Way Matching:

• Doesn’t Account for Delivery: 2-way matching only checks the PO against the invoice and does not take into account whether the goods were actually delivered or received in good condition. This could be addressed by adding a third document (the receipt) for 3-Way Matching.
• Manual Errors: If the purchase order or the invoice is incorrect, there may be delays in the payment process as discrepancies need to be resolved.

In summary, 2-Way Matching is an essential part of the procurement process that ensures the company pays for exactly what was ordered, helping to maintain accuracy, control costs, and prevent errors or fraud in the accounts payable process.