Purchase ledger invoice matching is the process of matching a supplier invoice, purchase order, and product receipt information. Differences among these documents are called matching discrepancies. Matching discrepancies are compared with the tolerances that are specified. If a matching discrepancy exceeds the tolerance percentage or amount, match variance icons are displayed to alert users to review.
Types of invoice matching validation
Four different types of matching validation are available.
- Line level matching – The most common type of matching is line matching. Line level matching can be two-way or three-way matching. Two-way matching compares the unit price of the invoice to the unit price of the purchase order. Three-way matching additionally compares the invoice quantity to the matched product receipt quantity.
- Invoice totals matching – Match the total amounts on the invoice to the total amounts on the purchase order. This type of invoice matching includes the least amount of detail, so you can use this option to set up controls that minimize the staff time that is required to review invoice matching information. Six totals are compared, including Subtotal, Total discount, Charges, Sales taxes, Round off, and Invoice amount. The system will validate if any of these values on the invoice deviate from expected amounts by more than an acceptable variance.
- Charges matching – Match the charges information (amounts) on the invoice to the charges information (amounts) on the purchase order.
- Price totals for line item matching – This type of matching is useful for companies that typically receive multiple invoices for a single purchase order line. If you typically receive only one invoice per purchase order line, this type of matching is not necessary. This matching requires that two-way or three-way matching is enabled and serves as a not-to-exceed net amount validation, based on a tolerance percentages and amounts. This type of matching compares price information for the net amount of each line on the invoice, and all pending and previously posted invoice lines, with the net amount of the corresponding purchase order line. The net amount is determined by the following formula: (Unit price * Line quantity) + Line charges – Line discounts. When matching price totals by percentage, the system compares values using the transaction currency. When matching price totals by amount, the system compares the values using the accounting currency.
Invoice matching removes errors in documentation and ensures timely and accurate payments are managed and made between companies.
Matching tolerances define the amount or percentage that are acceptable when matching invoices.
For example, a tolerance of 2% means that invoices that match with discrepancies of 2% or less will be accepted.
Alternatively, a tolerance of £20 means that invoices that match with discrepancies of £20 or less will be accepted.
Invoice matching is managed by defining key settings within the purchase ledger parameters. This controls what the system is and is not allowed to by defining key settings such as tolerances and accepted procedures.
Once in place, the system will react and apply matching to documents in accordance with the settings defined. Some settings will exist as default and others will be user defined. However settings can be adjusted at any time.
Please find below the relevant PCF ID’s.
Level 1 Category: 17058
Level 2 Process Group: 10733
Level 3 Process: 10756