A two-way match is a process of matching the invoice with the purchase order to ensure the invoice is ready for payment.
As the name suggests, it is a two-way match between the following two documents:
1. Purchase order that the buyer issues to the supplier.
2. An invoice that the supplier issues to the buyer.
The two-way match is common for services because there is no physical receipt.
The vendor delivers the service, and if the buyer is satisfied with the service, the buyer pays the amount mentioned on the invoice.
Now you might be wondering why you need a two-match process.
Why can’t we simply pay the invoice?
The answer is that two different departments are dealing with purchase orders and invoices.
A buyer or the procurement department issues the purchase order to the vendor. At the same time, the invoice is received and processed by the AP(Accounts Payable) department.
The AP department is responsible for processing the invoice, but they don’t know anything about the purchase order.
Implementing a two-match process matches the invoice to the respective purchase order.
1. The AP team receives the invoice. You can import the invoice into an AP automation software or enter the invoice in your accounting system.
2. Assuming that the vendor has mentioned the purchase order number on the invoice, the AP team should be able to match the invoice with the purchase order.
3. In a two-way match process, you are checking the following:
a) Does the unit price of the invoice matches what you have on the purchase order?
b) Vendor’s invoice amount is under or equal to the purchase order amount?
c) Suppose you have a service purchase order with a software development firm. They charge you $50/hour, and the estimate is for 100 hours, which is a total of $5,000. When you match the invoice with the purchase order, you can check the actual unit price and the total amount.
4. No further action is required if the unit price and the amount matches the purchase order.
5. However, the invoice needs further review if the price and amount don’t match the purchase order.
6. Many AP teams want a sign-off on the invoice before the AP team can pay it. The sign-off is in the form of an invoice review.
7. The person who ordered the services reviews the invoice and signs off for payment.
There are two main benefits of a two-match process:
By matching the invoices with the purchase orders, you ensure that the invoice review complies with the set purchasing policy.
For example, An approver should approve the invoice if the invoice amount exceeds the purchase order amount.
With the help of a two-way match, you can ensure that compliance.
Suppose the invoice amount is greater than the overall amount. In that case, you need approval from the appropriate manager.
But if the invoice amount is less than the purchase order amount, you can ask for an invoice review from the person who ordered the service, but a manager’s approval is not required.
You should automate the accounts payable process to speed up invoice processing. Automating the process lets the system do the match and automatically route the invoice for further review or approval.
You can speed up the invoice approval and review by implementing a two-way match process.
When you don’t have a 2-way match process, every invoice approval needs a review at the organization’s appropriate level, drastically slowing down the process.
By implementing a 2-way match process, you can choose only to send the exceptions for approval.
If you are implementing an AP automation tool, then this process is completely automated.
Who manages the two-way match process?
In most companies, the AP department manages the 2-way match process.
The AP team processes the invoice and then routes it for approval to the appropriate person.