3 Way Invoice Matching

[Michele Firmasyah]

Whenmatching documents, 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 on the Vendor invoice page and on the Invoice history and matching details page.

For example, you enter a purchase order with one line item for 1,000 batteries at a price of 1.00 each. The purchase order is approved and submitted to the vendor. The vendor ships 1,000 batteries, and you enter a product receipt for 1,000 batteries at a price of 1.00 each. The inventory cost for the batteries is updated with this price.

An invoice arrives for 1,000 batteries at a price of 1.10 each. Your legal entity policy allows a 5 percent net unit price tolerance for this category of item. A price of 1.05 would be acceptable, but 1.10 is not. When you enter the invoice information, a price matching discrepancy is identified and you can save the invoice until the discrepancy is resolved.

Typically, invoice matching calculations are automatically performed when you edit vendor invoices on the Vendor invoice page. Alternatively, invoice matching can be performed on demand, as needed. Invoice matching on demand is controlled for the legal entity by the Automatically update invoice header status on the Accounts payable parameters page on the Invoice validation tab. Invoice matching can also be performed as part of an invoice review process. You can view the results of invoice matching on the Vendor invoice page and related invoice matching pages.

You can use invoice totals matching to help make sure that total invoice amounts do not deviate from expected amounts by more than an acceptable variance. Six totals are compared on the Invoice totals matching details page, as shown in the following table. If the allowable tolerance for invoice totals matching is 20%, the 100% variance percentage for the total discount amount is considered a matching discrepancy.

Invoice totals matching is controlled for the legal entity by the Match invoice totals toggle on the Accounts payable parameters page. Matching is performed on the expected invoice totals and the actual invoice totals. The expected invoice totals are calculated based on the prices, charges, and sales tax information from the purchase order and the quantities from the invoice.

Use two-way matching to help make sure that the variance between the price information on the purchase order and the invoice is within acceptable tolerances. You can compare 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. This is called price totals matching.

If a purchase price total tolerance percentage is specified, five fields are compared, as shown in the following table. Because the purchase price total tolerance percentage is 10%, the price total variance percentage of 50% represents a matching discrepancy.

If a purchase price total tolerance amount is specified, five fields are compared, as shown in the following table. Because the purchase price total tolerance amount is 100.00, the price total variance amount of 105.00 represents a matching discrepancy.

If price totals matching is set up with a percentage tolerance and a tolerance amount, sometimes referred to as a not-to-exceed amount, both tolerances are considered when evaluating whether a line has a matching discrepancy. If either the percentage or the amount exceeds the tolerance, as shown in the 150.00 and 205.00 lines in the following table, the line has a matching discrepancy.

Two-way matching is controlled for the legal entity by the Line matching policy field on the Accounts payable parameters page. Depending on the selection in the Allow matching policy override field, you can select two-way matching for a specific vendor, item, or item and vendor combination on the Matching policy page, and for a specific purchase order on the Purchase order page.

Price totals matching is controlled for the legal entity by the Match price totals field on the Accounts payable parameters page. The purchase price total tolerance percentage and tolerance amount (not-to-exceed amount) are also specified on that page.

Use two-way matching to help make sure that the variance between the price information on the purchase order and the invoice is within acceptable tolerances. You can compare price information for the net unit price of each item on the invoice. This is called net unit price matching.

Nine line amounts are compared on the Invoice matching details page, as shown in the following table. If the allowable price tolerance for net unit price matching is 10%, the 22.61% variance for the net unit price is considered a matching discrepancy.

Net unit price matching is controlled for the legal entity by the Enable invoice matching validation field on the Accounts payable parameters page. The net unit price tolerance percentages can be configured for items, item groups, vendors, vendor groups, item and vendor combinations, or legal entity by using the Price tolerances page.

Three invoices are entered, as shown in the following table. There is an invoice matching discrepancy for Invoice 3 because the variance of 1,880.00 exceeds the purchase price total tolerance amount of 500.00. For price totals matching, the invoice net amount includes all previously posted invoices in addition to the invoice that you are currently working with.

Use three-way matching to help make sure that the variance between the price information on the purchase order and the invoice is within acceptable tolerances, and to make sure that the quantity on the invoice matches the quantity on the corresponding product receipts.

The same line amounts are compared on the Invoice matching details page as for two-way matching. In addition, the quantity on the invoice is matched to product receipt quantities that have been received. If the invoice quantity differs from the matched product receipt quantity, a quantity matching error exists.

Three-way matching is controlled for the legal entity by the Line matching policy field on the Accounts payable parameters page. Depending on the selection in the Allow matching policy override field, you can select three-way matching for a specific vendor, item, or item and vendor combination on the Matching policy page, and for a specific purchase order on the Purchase order page.

You can use charges matching to help make sure that charges amounts do not deviate from expected amounts by more than an acceptable variance percentage. The total amounts for each charges code that applies to the invoice and purchase order are compared in the Compare charges values - Invoice: page, as shown in the following table. If the allowable tolerance for the charges code is 25%, the 99,999,999,999.99% variance percentage for the License charges code is considered a matching discrepancy.

Charges matching is controlled for the legal entity by the Match charges toggle on the Accounts payable parameters page. You can set up variance tolerance percentages for charges on the Charges tolerances page.

Vendor invoices are often based on product receipts that represent actual shipments, instead of on purchase orders. Sometimes, the invoiced amounts don't match the purchase order amounts, and sometimes the shipped quantities don't match the invoiced quantities. You can help manage this information in the following ways:

An invoice is a document generated by a business that provides a product or service to a customer. It provides the details of the transaction so the customer has a record to support payment for the services or goods received. These items include:

Typically, invoice matching occurs when a purchase requisition is generated. A purchase requisition is an internal document that is created by an employee who wishes to acquire goods on behalf of the business. The requisition is submitted for approval by a supervisor and the purchasing department.

After it is approved, a purchase order is created. The purchase order will provide the details of the purchase, such as quantity and price. The purchasing department will send the order to the vendor who will then fill the order, create an invoice, and send it to the customer. This is the point at which matching occurs.

Finally, 4-way matching includes all of the above. Additionally, the invoice is compared to the acceptance or inspection document, prepared by the receiving department once the order has been received by the business.

The three different tiers of invoice matching are tailored to find discrepancies in one or both of the deviations. For example, 2-way matching can identify discrepancies in price and quantity. Because it incorporates matching of the invoice to the receipt, 3-way matching is focused on price deviations. Finally, because it looks at acceptance or inspection documents, 4-way matching is tailored to find discrepancies in quantity.

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