What is Invoice Matching?

Invoice matching refers to the process of cross-verifying the invoice received from the supplier against related procurement documents, such as the purchase order (PO) and the goods received note (GRN), before making payment. It ensures the invoice is correct, as it checks everything, starting from item quantity and price, to terms, etc.

Invoice matching is one type of validation step within the accounts payable (AP) workflow that ensures the business is being billed correctly and that they are paying for the goods or services they have ordered and received.

Why is Invoice Matching Important?

• No Error or Incorrect Info: It reduces the risk of paying for incorrect quantities or prices.
• Relief From Fraud/Scam: Helps detect duplicate or unauthorized invoices, reducing the chance of fraud.
• Regulatory Compliance: Ensures the accuracy of financial records that comply with accounting standards and audit requirements.
• Operational Control: Offers better visibility into cash flow and procurement process.

Where Does Invoice Matching Fit in the Procure-to-Pay (P2P) Cycle?

Invoice matching occurs in the middle-to-late stages of the P2P process, after:

– A purchase order is issued.

– Goods or services are received and verified.

– A supplier sends an invoice for payment.

Before an invoice is approved and processed, the finance or AP team performs matching to ensure consistency between:

• What was ordered (Purchase Order)?
• What was received (Goods Receipt Note)?
• And what is being billed (Invoice)?

If all the data aligns, the invoice is approved for payment. If discrepancies are found, an exception-handling process is triggered, and the issues must be resolved before payment can be made.

Key Elements Verified During Invoice Matching

• • Item descriptions
  • Quantities ordered vs. received
  • Unit prices
  • Total cost
  • Delivery date
  • Tax and discount information

How Invoice Matching Works: The Basic Process

So, how exactly does invoice matching work? What is the process involved?

Let’s assume your business orders 100 laptops from a supplier. Now, when making the payment, ensure that you are paying for the exact 100 laptops you ordered. To confirm this, you will need to look for the documents from both parties; that’s where invoice matching comes into play.

Here’s how the process flows:

1. Create a Purchase Order (PO)

The purchase order document is the beginning of the proceedings. It is a formal document in which your business will list the items you want to purchase, along with their prices, quality, and expected delivery dates. In simple terms, it is your “shopping list” and agreement merged in one.

2. Receive the Goods or Services

Once the supplier ships the order, you must verify the warehouse and delivery, and log a Goods Receipt Note (GRN). This will confirm the order has arrived. Did you get all 100 laptops you ordered? Were they in good condition at the time of receiving? The GRN confirms those details.

3. Receive the Invoice

Once the order is received, the supplier will send an invoice requesting payment. This invoice should cover the same details you mentioned in the purchase order, including the number of laptops, quantity, price, taxes, and other relevant information.

4. Time to Match the Documents

Now comes the matching. In this stage, your accounts payable process team (or accounting software) will compare the invoice with the PO and GRN to ensure:

• You ordered it (PO)
• You received it (GRN)
• You’re being billed correctly (Invoice)

If all three documents match up perfectly, it’s great. The invoice gets approved for payment.

What If the PO and Invoice Don’t Match?

Suppose the invoice sent by the supplier says you were charged for 110 laptops, but you only ordered and received 100. In this case, the invoice will not get approved. The supplier and the receiver will need to schedule a meeting to resolve the payment terms. Once the issue gets resolved, the payment will be made.

Manual vs. Automated Matching

Manual matching is an old-fashioned method. Imagine going through PDFs and spreadsheets every day—slow, tedious, and prone to human error.

Today, many companies utilize automated invoice matching software that extracts data from purchase orders (POs), goods received notices (GRNs), and invoices, matches them in seconds, and flags any discrepancies for review.

Using automated software saves time and makes the process more reliable, especially when processing hundreds or thousands of invoices a month.

Types of Invoice Matching

Invoice matching varies. There are 3 different types of invoice matching to keep your finances on track. Also, it depends a lot on the business type; for example, a complex purchase model requires more refinement than a simple one. Each invoice matching adds a new layer of verification.

Let’s explore these details in more depth.

The three major types of invoice matching are as follows:

• Two-way invoice matching,
• Three-way matching, and
• Four-way invoice matching.

2-Way Matching

This is the most common and easiest invoice matching process compared to the other two. In this two-way matching solution, the business (or person) only verifies with two documents:

• The Invoice
• The Purchase Order (PO)

Think of it like:

You are matching what you are billed, i.e., Invoice against what you have agreed to buy, i.e., PO.

Use case:

2-way matching is suitable for businesses that don’t require physical inspection. It can be applied to office supplies and digital software licenses.

Pros:

• Quick and easy
• Less paperwork
• Good for low-risk or recurring purchases

Cons:

• Don’t verify if you actually received the goods or services
• Can miss delivery issues or partial shipments

3-Way Matching

Among SMEs and established businesses, this is the most preferred method for invoice matching. As the name suggests, it compares three documents:

• The Invoice
• The Purchase Order (PO)
• The Goods Receipt Note (GRN)

In the previous method, the comparison was between the Invoice and the PO; however, here you are also confirming that you have received the order through the GRN. It acts as an extra layer of protection and saves you from paying for something you never received.

Use case:

Perfect for physical goods or inventory-related purchases.

Pros:

• Reduces fraud and overpayment risks
• Confirms delivery before releasing payment
• Provides better visibility and control

Cons:

• Slightly more time-consuming than 2-way
• Can slow things down if documents aren’t synced or available

4-Way Matching

4-way matching is the advanced invoice matching method that includes 4 different documents for verification:

• The Invoice
• The Purchase Order (PO)
• The Goods Receipt Note (GRN)
• The Inspection or Quality Report

Here, the 4th document, i.e., “The Inspection or Quality Report,” will make sure that the quality and specifications of your order are met.

Use case:

4-way matching is critically important in the manufacturing and construction industries, where product quality plays a significant role.

Pros:

• Full transparency and accountability
• Prevents payments for defective or substandard goods
• Ideal for high-value or complex purchases

Cons:

• Most complex and time-intensive
• Requires thorough documentation and workflow coordination

Comparison: 2-Way vs. 3-Way vs. 4-Way Matching

By now, you are aware that there are different levels of invoice matching.

But how do they really stack up against each other? Which one is faster? Which one gives you more control? And which one actually makes sense for your business?

Here’s a comparison table to select the one that best fits your business.

Which Invoice Matching Type is Right for You?

• Use 2-way matching if you’re dealing with low-value or simple services, such as software subscriptions, marketing retainers, or monthly bills, where delivery isn’t an issue.
• 3-way matching is the preferred choice for most businesses. It provides sufficient checks of your payments without slowing down the process.
• 4-way matching is ideal when product quality matters, such as in manufacturing, construction, pharmaceuticals, or any industry where defective deliveries can cause significant problems.

Benefits of Invoice Matching

Do you think invoice matching is worthwhile? You are thinking right – It absolutely is.

Initially, it can feel like another accounting task, but once you start seeing the benefit, it will become a habit. By introducing a simple process in your business, you can save time, money, and a significant amount of headaches.
There are multiple benefits to invoice matching, and we have highlighted some of the major ones that help improve business finances.

1. Stops Overpayments and Catches Errors Early

As a business owner, you are responsible for making payments for every Goods or Services you have received from the supplier. However, mistakes can sometimes occur, such as receiving an invoice that requests payment for items you never received. By matching invoices to Purchase Orders, you can align perfectly with the items ordered and delivered.

You can catch things like:

• Overbilling (charging for more units than delivered)
• Duplicate invoices
• Pricing mistakes

It keeps your books clean and your budget intact.

2. Strengthens Internal Controls and Prevents Fraud

Mistakes happen, and sometimes fraud does too. A strong PO matching process ensures every payment is backed by documented proof. It makes it much harder for unauthorized or suspicious invoices to sneak through.
Finance teams love this because it brings structure, traceability, and accountability to every payment decision.

3. Builds Better Relationships With Vendors

On-time payment to vendors and suppliers builds trust. It makes the business run smoothly without any hassle. With the invoice matching system in use, you are most likely to avoid disputes and delays.
After all, no one likes chasing payments or sorting out invoice issues repeatedly.

Clean Process = Happy Partners

4. Simplifies Audits and Compliance

Auditors love organized records. When every invoice is tied to a corresponding purchase order (PO) and receipt, audits become significantly less stressful. A proper matching system creates a paper trail that proves you’ve done your due diligence.

This also helps your business stay compliant with financial regulations, industry standards, and internal policies.

5. Saves Time with Automation and Integrations

When you combine invoice matching with Online Invoice Payment Processing tools, the whole workflow becomes smoother. Matching can happen in seconds, not hours, when you automate it.

Modern platforms often include features like:

• Auto-flagging mismatches
• Integration with accounting software
• Built-in receipt generator tools to document goods received

That’s less manual work, fewer errors, and more time your team can spend on strategic tasks instead of paperwork.

7 Common Challenges in Invoice Matching

Invoice matching sounds great in theory, but how does it work in practice? It can become messy, especially when dealing with high volumes of invoices or outdated systems.

While the goal is to streamline and safeguard payments, businesses often encounter a few roadblocks along the way. Here’s a look at some of the most common challenges that can turn invoice matching into a headache.

1. Too Many Manual Processes

If you’re still matching documents manually – comparing spreadsheets, PDFs, and printed papers – you already know how time-consuming (and error-prone) it can be. These manual processes slow everything down, increase the chances of mistakes, and often result in delayed payments or missed issues.

Automating the process is key to avoiding these bottlenecks.

2. Inconsistent or Incomplete Supplier Invoices

Sometimes the mistake can be due to the supplier’s invoice and not your process. There can be mistakes, such as missing the invoice number, an unordered items list, or the totals not adding up. When key details are missing in the invoice, matching becomes a hectic task. It also becomes time-consuming to settle payments.

3. Overlooking Early Payment Discounts

When invoice matching takes too long, businesses often miss out on early payment discounts offered by vendors. These discounts can add up to significant savings over time, but only if invoices are verified and approved quickly.

Delays in matching = lost opportunities.

4. Handling Multiple Purchase Orders

Matching a single invoice to a single PO? Easy. But what happens when one invoice is linked to multiple purchase orders? That’s when things get tricky. Sorting and matching line items across different orders can be confusing and increase the likelihood of errors or mismatches.

5. Variations in Invoice Amounts

It’s not uncommon for the invoice amount to differ slightly from what’s listed on the purchase order (PO) due to taxes, shipping charges, or rounding differences. These small variations can lead to mismatches that trigger unnecessary exception handling, even when everything is technically correct.

6. Strained Supplier Relationships

Delays or disputes caused by matching issues can frustrate vendors and damage supplier relationships. If they don’t get paid on time (or get paid the wrong amount), trust starts to erode – and that can hurt your reputation and future negotiations.

7. Lack of Compliance and Audit Readiness

When your matching process is disorganized or undocumented, it becomes a nightmare during audits. Good compliance and audit readiness require a clear trail of documents and approvals—but that’s hard to achieve if things are scattered or poorly tracked.

Automating Invoice Matching: Tools and Best Practices

Invoice matching can be a time-consuming process, especially when done manually. If you feel that it will be a never-ending chore, you are not alone. Sometimes it becomes frustrating to verify each detail manually, and that is where automation comes into play.

With the right tools in use and smart practices in the pipeline, you can turn invoice matching into a smooth automated process. The following provides a brief explanation of how automation can be a valuable ally in your invoice matching journey.

Why Invoice Automation Makes a Big Difference?

Gone are the days when matching the purchase order and the invoice to physical receipts was sustainable. Current market standards require faster processes, particularly as businesses expand.

When you use automation tools like Moon Invoice in your workflow, you can streamline the entire invoicing and invoice matching process. The tool is capable of checking dates, quantities, and identifying mismatches between documents. It not only helps reduce accounting errors but also makes your accounts payable team work faster and smarter.

Integration with Your Accounting System

One of the biggest advantages of using a tool in the workflow is that it directly integrates with your accounting system. Every business transaction, from purchase to payments, can be managed in one place. No need to switch between different applications or rush through files. Integration simplifies the accounting work.

Benefits of Integrating Moon Invoice

1. Go Paperless with OCR

To take automation even further, smart software often uses optical character recognition (OCR) to read and extract data from PDFs, scanned receipts, or emailed vendor invoices.

2. Automate Invoice Approvals

Once the invoice is matched and validated, it doesn’t stop there. A clean approval process is key. Automating invoice approvals ensures that the right people sign off at the right time, without chasing them around.

3. Avoid Duplicate Payments

One common issue businesses face is the occurrence of duplicate payments. With automation, the system automatically flags any repeated invoices or duplicated data entries.

4. Match More Than Just POs

Advanced automation doesn’t just stop at the PO and invoice. It can also verify supporting documents, such as delivery receipts or an inspection report, if your business requires that level of detail.

5. Utilize Accounts Payable Automation

To fully reap the benefits, consider invoice matching as part of your comprehensive accounts payable automation strategy. When everything—matching, approval, and payment—is automated, your team can focus on more strategic tasks instead of drowning in paperwork.

Wrapping Up!

Managing your accounts payable process with a clean record is necessary, and without invoice matching, it is not possible.

As a business owner, you need to keep in mind how invoice matching plays such a large role in the finance department. The business workflow can be enhanced significantly by using tools that support touchless invoice processing. After all, it is about doing tasks in a smart way.

So, are you looking forward to introducing automation software in your business?

Try our invoice template, which offers a 7-day free trial, and organize your billing process efficiently.

FAQs