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Automated invoice matching

By Annapoorna

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Updated on: Oct 19th, 2023

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5 min read

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A key activity in the accounts payable function of any organisation is the process of invoice matching. Invoice matching is the comparison of data between key documents in the procure-to-pay process. It aids the quick settlements to vendors and mitigates the risk of fraud.

What is invoice matching

Invoice matching is the process of comparing the information appearing in the purchase order with the information available on vendor invoices, goods receipt notes, and inspection slips to ensure there are no errors or inconsistencies. In the invoice matching process, key data such as the line items, list price, quantity, tax amounts, and other such details are compared. If any errors or inconsistencies are observed, the payment for such invoice is put on hold until the issue is resolved with the respective vendor.

Methods of invoice matching

There are three methods of invoice matching that enterprises generally follow

  • 2-way matching is the most simple one where invoices are matched to purchase order to check for discrepancies
  • 3-way matching is quite popular where details in the invoice are checked with the information in purchase order and receipt of goods
  • 4-way matching is where invoices are matched with a purchase order, receipt of goods, and inspection slips. Upon delivery of goods, the department receiving the goods checks for quantity and issues an inspection slip acknowledging that the quantity of goods received is accurate.

Once the payables function satisfies itself under carrying out the above checks, the invoice is considered suitable for payment.

The concept of Automated Invoice Matching

The age-old approach for invoice matching may involve a good amount of time and human effort. The adoption of innovative technologies and automated toolsets would help save time and optimise the entire process of invoice matching. Digitising the process of invoice matching with the help of advanced tools and technology, where invoices can be automatically processed with minimum human intervention, is called automated invoice matching. 

This process would encompass scanning invoices, thereby, converting them to digital form, matching them with documents on hand such as purchase orders, goods received notes, inspection slips as the case may be, using algorithms and checking against tolerance settings. Once such matching is done, these would get automatically approved and processed for payment without human intervention.

Extensive use of Artificial Intelligence in Automated Invoice Matching

  • Optical Character Recognition (OCR) aids in reading and extracting details from digital documents. OCR converts the structured, semi-structured and unstructured data from invoices and documents into human-readable format. Such data would then be routed for carrying out the routine matching exercise using one of the three processes discussed above. This technology is a boon for enterprises dealing with huge data in terms of a high number of vendor invoices monthly and annually.
  • Robotic Process Automation (RPA), combined with OCR, carries out the invoice matching process with speed and accuracy. Robotic Process Automation carries out scanning, extracts information viz. details of items sold, sale quantity, invoice value etc., initiates matching, checks for tolerances that have been internally set and indicates invoices either for correction or processing.
  • AI-based reconciliation tools facilitate super-fast, accurate, and automated data reconciliations in accounts payable, helping enterprises detect and correct anomalies much faster than with using manual or semi-automated recon tools like Excel. Further, AI-based tools also enable the matching of vendor invoices with the input tax credit (ITC) details available on the GST portal to ensure that every vendor invoice is uploaded and that accurate ITC is claimed. 

To understand the power of AI and data analytics in the accounts payable process, you can download our free whitepaper here.

Benefits of Automated Invoice Matching

Some key benefits of automated invoice matching have been highlighted below:

Saves time – It is a given that manual invoice matching consumes time. Further, manual checking in enterprises, having settlements made in large volumes, becomes extremely tedious. This is when such automation comes to their rescue. It also allows the employees to dedicate their time towards other key activities to help improve the enterprise’s overall productivity.

Ensures accuracy – The more the involvement of humans in handling huge data, the more is the scope for errors. According to research conducted by Clear, 3-4% is the average error rate while punching vendor invoices and creating invoice entries. Automation significantly reduces the scope for the occurrence of errors. Further, it becomes easier to identify discrepancies and allows immediate corrective action. 

Mitigates risk of fraud – Automated invoice matching brings consistent validation between invoices and supporting documents present in the systems or ERP. Discrepancies are easier to identify and can be flagged for corrective action. This controls the risk of fraudulent activities or duplication of invoices. 

Supports audits – Audits mandate under various laws require enterprises to maintain supporting documents like invoices, purchase orders, goods receipt notes, inspection slips, etc., either in hard or soft copies. These documents can be stored in a digitally centralised location with automated invoice matching. This compliance, in turn, helps make such documents easily available during audits, thereby expediting the audit process and enabling smoother closure of the same.

About the Author

I preach the words, “Learning never exhausts the mind.” An aspiring CA and a passionate content writer having 4+ years of hands-on experience in deciphering jargon in Indian GST, Income Tax, off late also into the much larger Indian finance ecosystem, I love curating content in various forms to the interest of tax professionals, and enterprises, both big and small. While not writing, you can catch me singing Shāstriya Sangeetha and tuning my violin ;). Read more

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