By The PaperLess Team
AP Automation Specialists | 1000+ Invoice Processing Implementations | Experts in Purchase Order Management and Invoice Control
PO matching is how you prevent overpayments. But most companies do it wrong, or don’t do it at all. You get an invoice, you match it against your purchase order, you verify everything lines up. If it doesn’t, you don’t pay it until the problem’s solved. Simple concept. Disaster in execution.
We’ve helped over 1,000 companies set up PO matching processes that catch fraud, prevent duplicate payments, and reduce payment processing time. This guide answers the questions we hear most often about how PO matching actually works.
Understanding PO Matching
Q: What exactly is PO matching?
A: PO matching means comparing an invoice to the purchase order to make sure they line up. Invoice says fifty units at two pounds each. PO says fifty units at two pounds each. Match. Pay it.
If invoice says seventy-five units or three pounds each, it doesn’t match. You’ve got a problem to solve before you pay.
That’s it. It’s not complicated conceptually. The challenge is doing it at scale when you’ve got hundreds of invoices and most of them need matching.
Q: What’s the difference between two-way, three-way, and four-way matching?
A: This is terminology that confuses people but it’s actually straightforward.
Two-way matching: compare invoice to PO. That’s it. Does the invoice match what we ordered?
Three-way matching: compare invoice to PO to goods receipt. We ordered it, we received it, we’re being invoiced for it. All three need to match.
Four-way matching: compare invoice to PO to goods receipt to purchase order change order. Accounts for instances where the PO was changed after ordering. Most companies either do two-way or three-way. Four-way is rare.
Q: Why does PO matching matter? Isn’t that what suppliers are for?
A: Because suppliers make mistakes. Or sometimes they intentionally overbill. Sometimes it’s honest error. Sometimes it’s deliberate.
We’ve seen companies discover they were being overbilled by fifty thousand pounds a year because they weren’t matching invoices. No one caught that the supplier was charging different prices than quoted.PO matching catches these problems. You don’t need to suspect fraud. Just need to verify that what you’re paying matches what you ordered.
Q: What percentage of invoices should match their POs?
A: Ideally 95 percent. Some will legitimately not match because the PO changed or goods were partial shipment. But most invoices should match their PO.
If you’re seeing 80 percent match rate, that’s a problem. Either your PO process is broken or your invoicing process is broken. Usually both.
Q: What are the most common PO matching problems?
A: Quantity mismatches are most common. You ordered fifty, they’re invoicing for seventy-five.
Price mismatches are second. You agreed on ten pounds per unit, they’re invoicing at fifteen pounds per unit.
Partial shipments? Yeah, that causes confusion too. You ordered a hundred units in one PO, they delivered fifty now and fifty later. Two invoices show up. Both are technically correct but they’re both against one PO. Makes matching a nightmare until you understand what’s actually happening.Then there’s duplicate invoices. Same invoice invoiced twice. That’s less common but catastrophic when it happens. We’ve seen companies pay the same invoice twice because no one caught it.
How PO Matching Works
Q: What’s the actual process of matching an invoice to a PO?
A: Right, so basically here’s what happens. Invoice arrives. System kicks in and looks for a matching PO based on the invoice data. If a PO exists for that vendor, right, the system then compares them.If amounts match, brilliant. Invoice can be approved and posted. Done.
If there’s a discrepancy though, that’s where it gets interesting. Invoice gets flagged. Someone has to actually look at it and figure out what’s going on. They decide whether to approve anyway, reject it, or ask the supplier for clarification.Basic workflow, yeah. But the details really depend on how automated your system is and how sophisticated your matching rules are. Some systems are pretty clever. Others are quite basic.
Q: How does the system find the matching PO?
A: Usually it’s by PO number. Invoice comes in and says ‘PO number 12345.’ System looks that up in your system and compares.
But here’s where it gets tricky. Not every invoice has a PO number. Which happens constantly, honestly.
Q: What tolerance levels should we set for matching?
A: Most companies set tolerances that are pretty tight. Maybe allow two percent price variance. Something like that.
Why? Because the real world is genuinely messy. Supplier might charge two pounds versus two pounds three pence due to currency conversion or rounding. Invoice comes in for forty-nine units when you ordered fifty because they couldn’t fulfil the full order. These things happen.But you can’t make tolerances too wide or you’re basically not catching real problems. Set them based on your actual experience. Look through past invoices, see what variance you’re actually seeing, then set tolerance slightly higher than that. Makes sense?
Q: What happens when an invoice doesn’t match the PO?
A: Invoice gets flagged. Someone needs to look at it. Not gonna lie, this is the manual work part.
They compare the invoice to the PO and figure out what’s actually going on. Maybe the PO was updated after ordering. Maybe it’s a partial shipment. Maybe supplier made an error. Whoever’s reviewing makes a call: approve anyway, reject the invoice, or ask the supplier for more information.The key bit is that invoices aren’t blindly posted when they don’t match. Someone actually has to look at them. That’s where the control is.
Types of Mismatches
Q: How do we handle quantity variances?
A: First, understand why they happened. Partial shipment? Supplier couldn’t fulfil full quantity so they sent ninety percent.
If that’s the case, invoice is correct for what was actually shipped. Post it for that amount, leave the PO open for the remaining quantity.
If it’s an error though (they’re invoicing for more than we ordered), that’s a problem. Reject the invoice or ask for clarification.
Q: How do we handle price variances?
A: First thing, check whether the PO was updated. Sometimes prices change after the PO is issued and before the invoice shows up. Fair few things can cause that.If price matches the current PO, invoice is correct. If price is higher than the PO, don’t just pay it without checking why. Maybe there was an approved change order. Maybe supplier made an error. Maybe they’re testing to see if you’ll notice.Most variances are honestly just mistakes or approved price changes. Still need to verify though.
Q: How do we catch invoice duplicates through PO matching?
A: Right, so if the same invoice number gets matched to the same PO twice, system flags it as a potential duplicate. That’s the magic bit.This is actually one of the most valuable things PO matching does. Catches accidental duplicate payments before they happen. And it does happen more often than you’d think.
Q: What about invoices with multiple line items from one PO?
Invoice must match the PO total amount otherwise it just gets too complex.
Q: How do we handle goods receipt if we don’t use a GRN system?
A: Three-way matching technically requires goods receipt (GRN). But if you don’t have a GRN system, you do two-way matching between invoice and PO.
Not ideal, but better than no matching. Eventually you should implement goods receipt tracking because it’s more accurate.
PO Matching and Fraud
Q: Can PO matching catch fraud?
A: It can catch common fraud attempts, yeah. Not sophisticated fraud, but the everyday stuff.
Fraudster sends fake invoice hoping no one notices. Proper PO matching catches it because there’s no matching PO. Fraudster tries duplicate invoice. PO matching flags it as duplicate.Won’t catch a supplier who’s hacked your email and changed their banking information. But it catches a lot of the low-hanging fruit.
Q: What about invoices from vendors we work with constantly?
A: Still match them. Just because you trust a supplier doesn’t mean you don’t verify their invoices.
Actually, long-term suppliers are sometimes the ones that start overcharging because they think you won’t notice. Matching keeps everyone honest.
Q: Can we flag unusual invoices even if they match the PO?
A: Yeah, some systems can, yeah. If you get an invoice from a regular supplier at twice their normal price, with PO matching you can easily find a discrepancy.
Catches price gouging or unusual situations. Less common than straight mismatch flagging but useful.
Implementation and Process
Q: How long should PO matching take?
A: For invoices that match automatically? Seconds. System handles it. For invoices with discrepancies? Could take hours if someone needs to contact supplier.
Most companies see 80 to 90 percent of invoices matching automatically. Remaining 10 to 20 percent require manual review.
Q: What information do we need in the PO for matching to work?
A: Accurate line items, quantities, prices, GL codes. PO needs to reflect exactly what you ordered, not approximations.
Also need unique PO numbers so invoices can be matched correctly. If you’ve got two POs with the same number, system gets confused.
Q: Who should review mismatches?
A: Whoever created the PO ideally. Or whoever manages that category of spending.
Procurement Manager knows if prices changed. Department Manager knows if quantities changed. Let them review their own mismatches.
Q: How do we handle PO changes after the PO is issued?
A: Create change orders in your PO system. If the quantity needs to change, issue a change order. If the price changed, issue a change order.
Then when invoice comes in, it matches against the changed PO, not the original. Keeps everything in sync.
If you don’t track changes formally, matching becomes a nightmare because there’s no record of what the PO actually should be.
Q: What if a supplier invoices for a partial shipment?
A: That’s normal. Partial shipment invoiced separately from remaining shipment. Each invoice should match the quantity actually shipped.
The original PO stays open until the full quantity is received. Then the PO is closed. Each partial invoice gets matched to the original PO but only for the quantity in that shipment.
PO Matching and Systems
Q: Do all accounting systems do PO matching?
A: Most have some capability, yeah. But honestly, it’s usually pretty basic. Sage has matching capabilities but they’re not designed for high volume processing. Not really built for that.
Systems built specifically for AP automation? They tend to have more sophisticated matching rules. Can handle the complexity that generic accounting systems genuinely can’t. Makes a difference.
Q: How does PO matching work with Sage?
A: Sage has built-in PO matching for invoices, yeah. But here’s the thing, it works best when it’s integrated with a proper invoice processing workflow. On its own? Not brilliant.Available on Sage UK Marketplace and Sage Intacct Marketplace.
Q: Can we match invoices for inventory purchases versus service purchases?
A: Service purchases usually don’t have POs. Or if they do, matching gets complicated pretty quickly because it’s not just quantity and price, is it?
You can still do matching for services, but it’s more nuanced. Might require matching deliverables instead of quantities. Genuinely different logic.
PO Matching Performance and ROI
Q: What’s the ROI on proper PO matching?
A: Usually it’s catching overpayments. If proper matching catches even two to three percent of invoices as mismatches, and half of those are actual errors, you’re paying for the system through fraud prevention alone.
Add in time savings from not having to manually verify invoices, and ROI is solid. See our case studies for real examples of companies catching tens of thousands through proper matching.
Q: How many matching errors are typical?
A: We see about 5 to 10 percent of invoices have some kind of mismatch. Most aren’t fraud, just honest errors or miscommunication.
But 5 to 10 percent adding up over months can be significant money. Catching those saves real money.
Q: How do we measure if PO matching is working?
A: Track the percentage of invoices that match automatically. Track the percentage flagged for review. Track what percentage of flagged invoices had legitimate issues.
If 85 percent match automatically and 80 percent of flagged invoices had real issues, your matching is working well.
Advanced PO Matching
Q: Can we do predictive matching based on historical supplier data?
A: More sophisticated systems can, yeah. If a supplier usually varies by two percent on price, system learns that and accepts variances within that range.
Over time, system learns what’s normal for each supplier and flags actual anomalies.
Q: How does PO matching integrate with invoice approval workflows?
A: Matching happens before approval. Invoice is matched to PO automatically. If everything matches, invoice goes to approval as normal. If there’s a mismatch, it gets flagged and goes to approval with a note that something’s not right.
Approver sees the mismatch and decides whether to approve anyway or reject. Our Invoice Approval software provides workflow controls over how mismatches are handled during the approval process.
Getting Started with PO Matching
If you’re not currently matching invoices to POs, you’re leaving money on the table. Talk to us about how to set up PO matching that catches errors and prevents overpayments. Download from Sage UK Marketplace, Sage Intacct, or the Xero App Store.
About This Article
These answers come from PaperLess Europe, an AP automation specialist with over 1,000 implementations of invoice processing systems including PO matching. We’ve helped companies across Sage, Xero, Orderwise, and SAP Business One set up matching processes that prevent overpayments and catch fraud.
Need help with PO matching? Book a free demo or contact us.
Download PaperLess from: Sage UK Marketplace, Sage Intacct Marketplace, or the Xero App Store.
