2-way matching guide: How to speed up invoice approvals

Invoice matching is a crucial part of your accounts payable process, helping you reduce errors, improve vendor relationships, and maintain accurate records. While there are several invoice matching techniques, 2-way matching is the most common.

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What is 2-way matching in accounts payable?

Two-way matching is a validation technique that compares an invoice to its corresponding purchase order (PO) to ensure accuracy. This involves verifying details like quantity, price, fees, and delivery terms to ensure the invoice you received matches the order you submitted.

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Here’s an example: You place an order with your vendor for 200 items totaling $1,000. You receive those 200 items five days later, along with an invoice for $1,000. In a 2-way matching exercise, you’d confirm that the quantity and total cost on the invoice match the quantity and total cost on your purchase order. Only if those items match up would you make the payment.

How 2-way matching works in accounts payable

The 2-way matching process should be a non-negotiable part of your AP process. But how does 2-way matching work? It’s simpler than you might think.

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Let’s outline the steps from start to finish:

1. Buyer initiates purchase: A buyer wants to make a purchase, so they generate a purchase order and send it to their vendor
2. Vendor approves purchase: The vendor approves the purchase and signs off on the purchase order
3. Vendor completes purchase: The vendor ships the items and delivers the invoice
4. Receipt of goods: The buyer receives the ordered items and the corresponding invoice. The buyer’s accounts payable department inputs that invoice information into their AP system.
5. Buyer performs 2-way match: The buyer ensures the invoice details match the PO. If the two figures don’t align, they place the invoice on hold until they resolve the discrepancy with their vendor. If they do align, the invoice verification is complete, and they can schedule the payment.

Why 2-way matching matters for your AP process

Two-way invoice matching minimizes payment errors by reducing risks from manual data entry, invoicing mistakes, fraudulent invoices, incorrect line items, and other manual processing issues. Matching errors occur when the vendor invoice doesn’t completely match the PO.

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If you want to see why 2-way matching is important, let’s look at an example of how mismatches could occur.

2-way matching example: Price discrepancy

Say you’re a builder. You have a trusted HVAC vendor who mentions that three of the units you regularly order were slightly damaged in their warehouse. They offer these units to you at a 10% discount, reducing their price from $3,000 to $2,700 per unit. You place the order immediately.

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When you receive the invoice, you match it to the PO and notice that the discount wasn’t applied. Thanks to your 2-way matching process, you catch this error and contact your vendor for an updated invoice before making the payment.

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Lesson: When you receive an invoice, you should check that all numbers on the invoice match the PO. This includes the price of each item, service charges, taxes assessed, discounts applied, and even the total amount.

When 2-way matching is best used

Two-way matching is the simplest form of invoice matching. Therefore, it’s best used for simple, recurring purchases from trusted vendors. This means 2-way matching would be a good fit if you: repurchase office supplies from the same vendor on a regular basis; have recurring software subscriptions; repurchase the same food items every month to restock snacks in the break room; and more.

Benefits of 2-way matching for businesses

Two-way matching is a simple but essential step in maintaining proper checks and balances. The benefits of 2-way matching include:

• Reduces the likelihood of errors: This includes both overpayments and underpayments
• Helps you make sure all transactions are accounted for: 2-way matching is one part of the invoice tracking process, which helps ensure completeness in the invoice processing cycle
• Helps maintain good supplier and vendor relationships: When you catch errors, your suppliers gain confidence in you as a reliable customer. Over time, this could lead to priority treatment or potential discounts.
• Ensures financial records are correct: The more errors you catch, the more accurate your financial records will be
• Improves operational efficiency: Your AP cycle can be lengthy—according to the Institute of Financial Operations & Leadership, 52% of AP teams spend over 10 hours a week processing invoices. Two-way matching can shorten that cycle by reducing time-consuming errors. This is true whether you perform manual matching of invoices, but the benefits are compounded when you automate this task.

2-way vs. 3-way match: Which is right for your business?

Two-way matching is the simplest form of invoice matching. There is also a 3-way matching process:

• 2-way matching compares the purchase order (PO) to the invoice
• 3-way matching compares the PO, the invoice, and the receiving report (e.g., the delivery receipt, packing slip, etc.)

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The two methods are similar, but 3-way matching adds an additional check. When performing a 3-way match, you should be comparing three reports, making sure the data on each report matches the other two.

Examples of 2-way and 3-way matching

The goals of 2-way and 3-way matching are the same: to verify the invoice is correct.

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But 3-way matching adds an extra level of assurance. Because 2-way matching is the lowest form of invoice matching, it’s best used for recurring purchases. 3-way matching is great for one-off purchases or high-dollar invoices.

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Let’s say you’re a coffee shop. You regularly order coffee beans from your local roaster. Those recurring purchases would be perfect for 2-way matching. However, you might be better off with 3-way matching when you purchase an expensive new espresso machine or order special merchandise for a one-off event you plan to hold.

4-way matching

4-way matching takes 3-way matching one step further: It compares the PO, the invoice, the receiving report, and the quality inspection report from the receiving party. Four-way matching is best used when you order custom items that need to be inspected before they’re accepted into your warehouse.

Which invoice matching method should you choose?

The more matching checks you make, the more accurate your AP process will be. But keep in mind that more matching requires more resources from your AP department. As a business owner, you must determine whether the benefits of performing more checks are worth the additional cost and effort. Here are a few things to think about:

• How robust are your internal controls for AP? Invoice matching is a type of internal control. What other internal controls do you apply to your AP process?
• How complex is your procurement process? Companies with extensive procurement processes may want an additional layer of checks.
• How expensive are your purchases? If your purchases are low-value or low-volume, 2-way matching should suffice.
• Do you make recurring purchases? 2-way matching is ideal for recurring purchases, especially when you use automation software to help.

Optimizing your 2-way matching process with Ramp

Many businesses automate 2-way matching because it requires you to look at only two documents—the PO and the invoice. 

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With Ramp Bill Pay, you can integrate PO workflows with your AP workflow, giving finance and accounting teams more speed, time, and control while processing AP. At the same time, Ramp Bill Pay can also:

• Extract data with optical character recognition (OCR)
• Flag discrepancies for manual review
• Automatically log and categorize transactions to support cleaner audit trails

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Start automating your 2-way matching process with Ramp Bill Pay.