A Faster and More Accurate Accounts Payable: The Impact of Invoice Matching Software

What is invoice matching?

Invoice matching is a critical process in accounts payable (AP) that ensures the accuracy and integrity of financial transactions. It involves comparing supplier invoices with relevant documents such as purchase orders (POs) and goods delivery receipts (GDRs) to verify that the goods or services received align with what was ordered and billed. This process is essential for preventing errors, detecting discrepancies, and maintaining financial control.

Most companies typically use 3-way matching, which compares the invoice, purchase order, and goods receipt. This method requires seamless synchronization of master data across ERP systems and AP automation solutions. However, the complexity of invoice matching can vary, especially when invoices bundle multiple purchases, requiring meticulous line-level matching. For organizations with more intricate purchasing processes, particularly those dealing with complex goods or services, 4-way matching may be necessary. This advanced approach incorporates an additional step, often involving inspection or quality control documents, to ensure that the received goods or services meet specified standards before payment is authorized.

What is invoice matching software?

Invoice matching software is an automated solution that simplifies and accelerates the matching process. It uses advanced technologies to automatically group invoices with their corresponding purchase orders, receipt reports, and other relevant documents. This technology eliminates the need for AP clerks to manually retrieve documents from file rooms or sift through emails for PDF attachments.

In a study by Ardent Partners, the market average for the percentage of invoices linked to a PO is 44.3%, but “best-in-class” companies with high levels of automation have an average of 80.2% of invoices related to a PO.

Modern invoice matching software leverages artificial intelligence (AI) and machine learning (ML) to improve accuracy and efficiency. For instance, these systems can use computer vision technology to read invoices without human intervention, automatically extracting data from PDFs and image files. They can also handle various invoice formats, including electronic file formats, EDIs, emails, and handwritten invoices.

Benefits of invoice matching software

Implementing invoice matching software offers several significant advantages:

1. Increased efficiency: According to a study by IOFM, automated systems can process invoices up to five times faster than manual methods, allowing AP teams to handle a higher volume of transactions.

2. Improved accuracy: AI-powered software can achieve a high rate of data processing accuracy, surpassing human levels. Ardent Partners’ State of ePayables Report found that AI-driven invoice processing software can achieve an impressive 97 to 99% accuracy rate in data extraction and GL coding.

3. Cost savings: By reducing manual labor and minimizing errors, organizations can save on processing costs and avoid potential financial losses due to overpayments or duplicate payments.

‍4. Better vendor relationships: Faster, more accurate invoice processing also leads to timely payments, fostering positive relationships with suppliers. Late payments are a constant challenge for AP teams, with an astounding 55% of invoices in the US paid late alone, according to Atradius. A faster, more accurate invoice process can reduce these late payments and potential fees.

‍5. Enhanced compliance: Automated systems provide a clear audit trail and ensure consistent application of matching rules, supporting better compliance with financial regulations.

‍6. Scalability: As businesses grow and invoice volumes increase, automated systems can easily scale to meet increased demands without a proportional increase in AP staff.

How to select invoice matching software - important considerations

When selecting invoice matching software, keep these key factors in mind:

• Integration capabilities: Verify the software can seamlessly connect with your current ERP system and other financial tools.

• AI and machine learning features: Seek solutions that utilize advanced AI and can adapt to your unique invoicing patterns and improve over time.

• Customization options: The platform should offer flexibility to tailor matching rules and tolerance levels to your organization's specific requirements.

• Multi-way matching: Look for solutions capable of 2-way, 3-way, and even 4-way matching to handle various transaction types.

• Exception handling: Assess how the software manages exceptions and routes them for human review when needed.

• Reporting and analytics: Select a solution offering insightful reports and analytics to help refine your AP processes.

• User-friendliness: Ensure the interface is intuitive for your AP team to navigate with minimal training.

• Vendor support: Evaluate the level of support and training provided by the software vendor during implementation and ongoing use.

The role of AI in invoice matching

AI is transforming invoice matching by introducing capabilities beyond traditional rule-based automation. AI-powered systems can learn and adapt from historical data and user interactions, continuously improving their matching accuracy and reducing the need for manual intervention. These advanced systems can handle complex scenarios, including multi-line invoices and partial deliveries, which often challenge rule-based systems. 

AI excels at intelligent data extraction, accurately extracting and interpreting data from various invoice formats, even when layout or content varies. By analyzing patterns in invoice data, AI can predict potential issues or discrepancies before they occur, allowing for proactive management. 

Additionally, AI's natural language processing capabilities enable it to understand and process text in invoices, leading to more accurate interpretation of line items and special instructions. These combined capabilities make AI an invaluable tool in modernizing and optimizing the invoice matching process.

AI invoice matching software solutions

Leading AI-powered invoice matching solutions offer features that address the complex needs of modern businesses:

• Autonomous processing: Some advanced systems can achieve an 85% no-touch rate by month six of implementation, significantly reducing manual workload.

‍• Intelligent coding: AI can learn and replicate how your team codes invoices, regardless of the ingested format, maintaining consistency across all transactions.

• Proactive error detection: AI systems can flag discrepancies such as duplicate invoices or problems with a PO, helping AP teams prioritize their efforts.

• Multi-dimensional matching: Advanced AI can match multiple invoices to a PO, and multiple POs to an invoice, handling complex purchasing scenarios.

• Continuous learning: The AI models improve over time, adapting to new vendors, invoice formats, and business rules without requiring manual updates.

• Mobile accessibility: Some solutions offer mobile apps for reviewing and approving invoice matches on-the-go, facilitating faster processing.

The transition to AI-powered solutions represents a significant opportunity for AP Directors and Managers grappling with traditional, manual invoice matching methods. As businesses grow and invoice volumes increase, manual processes become unsustainable, leading to bottlenecks, errors, and inefficiencies. AI invoice matching software addresses these challenges and positions the AP department as a strategic asset capable of providing valuable financial insights.

By embracing AI-powered invoice matching, AP directors can transform their operations, freeing their teams from mundane tasks and allowing them to focus on more strategic initiatives. The result is a more efficient, accurate, and scalable AP process that can support organizational growth, financial control, and compliance.