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Automated Payables Matching
Traditional Payables Matching
The traditional approach to handling accounts payable is to match the supplier’s invoice to the authorizing purchase order to verify pricing and payment terms, while also matching against receiving documents to ensure that the correct items were received. This is a painstaking process that requires inordinate amounts of staff time. Some techniques can be used to avoid matching entirely, such as using procurement cards or avoiding matching for small-dollar invoices. It is also possible to pay based on what is received, and not bother with supplier invoices at all.
Automated Payables Matching
The path to full automated payables matching requires a combination of document management, data capture, and 3-way matching systems. Document management systems that digitize paper documents are relatively common, while 3-way matching is available in most ERP systems. The key component of this solution is data capture, whereby information is extracted from scanned images. A data capture system uses advanced business rules to determine where key information is located on a supplier invoice, convert the scanned image to text, and store it. When properly configured, the result is complete automation of supplier invoice handling, with the software identifying billed line items on invoices, correctly charging them to various accounts, conducting three-way matching, and setting up payments.
This combination of systems requires a high degree of customization, since it requires that information be extracted from the in-house receiving and purchasing systems, matched against the output from the document management and data capture systems, compared to each other and possibly sent out for authorization, and then merged back into the accounting system for payment. Thus, this extremely high level of automation is only cost-effective in environments dealing with very high supplier invoice volumes.
Automated payables matching works best when used primarily on invoices received from those suppliers issuing large numbers of invoices to the company, since tables can be built into the data capture software, identifying exactly where key information is located on invoices from these suppliers. The accuracy of data capture is somewhat reduced when used to scan invoices from occasional suppliers, since there may be no pre-stored templates, but accuracy rates are still quite high.
Podcast
A discussion of accounts payable matching is available on Episode 82 of the Accounting Best Practices podcast. Listen Now.
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