Invoice matching is important for maintaining accurate accounts payable (AP) records in . By comparing supplier invoices against purchase orders and goods receipts, you can catch discrepancies before approving payments, reduce manual data entry, and avoid costly errors. With Rillion's AP automation solution integrated with Business Central, you can take this process further by automating invoice capture, matching, exception handling, and approval workflows.
Key Highlights
- Invoice matching verifies supplier invoices against purchase orders and delivery records before payment.
- Two-way, three-way, and four-way matching provide different levels of financial and operational control.
- Automated invoice matching reduces manual work, improves accuracy, and helps prevent duplicate payments and overbilling.
- Integrating invoice matching software with Dynamics 365 Business Central connects AP activities with the company's financial and purchasing records.
- Automated exception handling and approval workflows help keep invoices moving while maintaining visibility and accountability.
What Is Invoice Matching in Accounts Payable?
Invoice matching is the process of comparing a supplier's invoice with purchasing documents to confirm that the company is being charged correctly for the goods or services it ordered.
For businesses using Dynamics 365 Business Central, this process helps ensure that vendor invoices correspond to legitimate purchases and that the amounts being paid are accurate. Before approving an invoice, accounts payable teams typically verify several details:
- Vendor and recipient names and addresses
- Purchase order number
- Description of goods or services
- Ordered and invoiced quantities
- Unit prices and total amounts
- Delivery dates
Verifying this information helps prevent overpayments, incorrect charges, and payments for goods or services that were never received. It also provides a more reliable record of purchasing activity.
What Are the Different Types of Invoice Matching?
Invoice matching generally falls into three categories: two-way, three-way, and four-way matching. The appropriate method depends on the nature of the purchase and the level of verification the business requires.
Two-Way Invoice Matching
Two-way matching compares a supplier invoice with the original purchase order. The goal is to confirm that the products or services, quantities, and prices on the invoice agree with what the company ordered.
This approach works well for straightforward purchases and service-based transactions where a physical delivery receipt isn't necessary. Software subscriptions, for example, may only require confirmation that the invoiced service and price agree with the purchase order.
Three-Way Invoice Matching
Three-way matching adds a goods receipt to the comparison. The system checks three documents:
- The purchase order, which identifies what the company ordered.
- The goods receipt, which confirms what was delivered.
- The supplier invoice, which identifies what the vendor is charging.
This additional verification is particularly useful for manufacturing, distribution, and retail businesses that purchase physical goods. It helps ensure that the company pays only for the quantities actually received and that the prices agree with the original order.
Three-way matching is also a common choice for AP automation because it provides a practical balance between financial control and processing efficiency.
Four-Way Invoice Matching
Four-way matching adds another verification step by including an acceptance or quality inspection document.
This method is useful when meeting specific quality standards is just as important as confirming quantities and prices. Construction and high-end manufacturing businesses, for example, may need to verify that delivered materials meet established specifications before authorizing payment.
How Does Automated Invoice Matching Work with Dynamics 365 Business Central?
Automated invoice matching reduces the manual effort involved in processing supplier invoices. When an AP automation solution such as Rillion works alongside Dynamics 365 Business Central, invoice information can be captured, validated, matched, routed for approval, and transferred into the ERP for recording.
The process typically involves six stages.
1. Invoice Capture
The process begins when a supplier invoice arrives, whether as a PDF attachment, an email, or a paper document that needs to be scanned.
Automated invoice capture uses AI technology to recognize and extract important information, including vendor details, invoice numbers, purchase order references, amounts, and tax information. This eliminates much of the repetitive data entry associated with manually processing invoices.
2. Data Validation
Once invoice information has been captured, it must be checked for accuracy and completeness.
The system verifies vendor information, purchase order references, descriptions, and amounts against available company records. This helps identify missing information or incorrect details before the invoice moves further into the approval process.
3. Purchase Order and Receipt Matching
The next step is to compare the invoice with its corresponding purchase order and, when required, the goods receipt.
Automated matching can check individual invoice lines against purchasing records and identify differences in quantities, prices, or other details. Rillion's integration with Dynamics 365 Business Central supports both two-way and three-way purchase order matching, including complex orders with multiple pages and numerous line items.
Instead of requiring someone to review every line manually, the system identifies discrepancies that need attention.
4. Exception Handling
Not every invoice will match perfectly. Partial deliveries, incorrect quantities, pricing differences, and missing documentation can all create exceptions.
Automated exception handling identifies these problems and directs the invoice to the appropriate AP team member or other responsible person. Providing the relevant documents along with the flagged invoice makes it easier to investigate the issue and work with the vendor or purchasing department to resolve it.
5. Invoice Approval
Once discrepancies have been resolved and the invoice has been validated, it moves through the appropriate approval workflow.
Approval rules can direct invoices to managers or other authorized employees based on established responsibilities and requirements. With Rillion, approval workflows can include mobile approvals, notifications, and reminders, allowing authorized employees to review invoices without relying on paper documents or being in the office.
After approval, the invoice is sent to Business Central for recording and payment processing.
6. Digital Archiving
The final step is maintaining a record of the processed invoice and its supporting documentation. Digital archiving makes invoices, purchase orders, and goods receipts easier to retrieve when questions arise or an audit is required. Searchable records and transaction histories also provide greater visibility into the approval and payment process.
What Are the Benefits of Automated Invoice Matching?
For companies using Dynamics 365 Business Central, automated invoice matching can improve both the accuracy of financial records and the efficiency of everyday AP operations.
Some of the most important benefits include:
- Improved accuracy: Comparing invoices with purchase orders and receipts helps identify incorrect quantities, pricing discrepancies, and other errors before payment.
- Reduced processing time: Automating data capture, verification, and matching eliminates repetitive manual tasks, allowing AP employees to concentrate on more valuable work.
- Stronger financial controls: Matching requirements and approval procedures help prevent unauthorized payments, overbilling, and potential invoice fraud.
- Better cash flow management: Faster invoice processing makes it easier to meet payment deadlines and take advantage of available early-payment discounts.
- Improved vendor relationships: Consistent, accurate payments help avoid unnecessary disputes and support stronger supplier relationships.
- Greater flexibility: Digital invoice processing and remote approval capabilities allow AP teams to keep work moving even when employees are working from different locations.
What Challenges Can Affect Invoice Matching?
Although automation can simplify accounts payable, businesses still need to address several common challenges when establishing an effective matching process.
Complex invoices: Detailed invoices with multiple line items, different formats, or complicated purchasing requirements can take considerable time to review. Automated data capture and centralized document storage help make this information easier to manage.
Partial deliveries: A supplier may deliver an order in several shipments, creating multiple goods receipts that need to be matched against one purchase order. Partial matching capabilities help keep these transactions organized.
ERP integration: When invoice matching software doesn't communicate effectively with the ERP system, information can become fragmented or inconsistent. A reliable integration with Dynamics 365 Business Central helps maintain accurate records across the purchasing and financial processes.
High invoice volumes: Businesses processing large numbers of invoices need a solution that can accommodate current workloads and future growth without creating processing bottlenecks.
Complex approval requirements: Multiple approval levels can delay payments when invoices become stuck waiting for authorization. Automated routing and reminders help ensure that invoices reach the right people at the right time.
What Are the Best Practices for Invoice Matching in Business Central?
A successful invoice matching process requires more than simply introducing automation. Businesses should establish consistent procedures and review them regularly to ensure they continue to meet operational needs.
Consider these best practices:
- Standardize purchasing information. Use consistent vendor names, item descriptions, and purchase order references to make matching easier and reduce errors.
- Establish discrepancy tolerances. Define acceptable differences in pricing or quantities. For example, a company might allow a 2% price variance before requiring additional review.
- Integrate with your ERP. Connect invoice matching software with Dynamics 365 Business Central so purchasing, invoice, and financial information remain consistent.
- Account for partial deliveries. Make sure the matching process can accommodate multiple shipments against a single purchase order.
- Use automated exception alerts. Notify the appropriate employees when an invoice contains discrepancies or requires additional documentation.
- Maintain digital records. Archive processed invoices and supporting documents in a searchable format for easier retrieval and auditing.
- Review procedures regularly. As purchasing activity and invoice volumes change, revisit matching rules, approval requirements, and tolerance levels.
How Should You Implement Invoice Matching Automation?
Implementing an automated invoice matching solution requires an understanding of existing AP procedures and the company's purchasing requirements. A structured approach can help ensure that the technology supports the way the business actually operates.
Step 1: Evaluate your current process. Review invoice volumes, vendor relationships, purchasing complexity, and the amount of manual work involved. Determine whether two-way or three-way matching is appropriate for different types of transactions.
Step 2: Define your matching workflow. Establish where invoices enter the process, which documents need to be compared, how discrepancies will be handled, and who is responsible for approvals.
Step 3: Identify key stakeholders. Include AP employees, purchasing personnel, department managers, and other individuals involved in reviewing or approving invoices. Clearly define responsibilities at each stage.
Step 4: Select an appropriate automation solution. Look for software that meets your matching requirements, integrates with Dynamics 365 Business Central, and can accommodate increasing invoice volumes. Consider capabilities such as automated data capture, line-item matching, exception handling, and approval routing.
Step 5: Configure the system. Establish data capture rules, matching criteria, discrepancy tolerances, approval workflows, and the integration with Business Central.
Step 6: Monitor and improve. Once the system is operational, gather feedback from employees and review processing times, recurring discrepancies, and approval delays. Adjust workflows and provide additional training as needed.
Bringing Invoice Matching and Dynamics 365 Business Central Together
Dynamics 365 Business Central provides a foundation for managing purchasing and financial transactions, but businesses with complex purchasing requirements or high invoice volumes may benefit from extending their accounts payable capabilities through automation.
Rillion integrates with Business Central to support automated invoice capture, two-way and three-way purchase order matching, exception handling, and flexible approval workflows. It helps connect supplier invoices and goods receipts with purchasing records while reducing the amount of manual intervention required from AP employees.
The result is a more consistent approach to invoice processing, with better visibility into discrepancies, approvals, and supporting documentation.
Frequently Asked Questions About Invoice Matching in Business Central
Q: What is the difference between two-way and three-way invoice matching?
A: Two-way matching compares a supplier invoice with its purchase order. Three-way matching adds a goods receipt to verify that the invoiced items and quantities were actually delivered.
Q: Why is three-way matching important for manufacturing and distribution companies?
A: These businesses frequently purchase physical goods and need to verify that the quantities and prices on supplier invoices agree with both the original purchase order and the goods received.
Q: Can invoice matching be automated in Dynamics 365 Business Central?
A: Yes. Business Central can support purchase order matching, and an integrated AP automation solution such as Rillion can extend those capabilities with automated invoice capture, complex PO matching, exception handling, and approval workflows.
Q: How does automated invoice matching help prevent payment errors?
A: By comparing invoice details with purchasing and delivery records, automated matching identifies discrepancies before an invoice is approved. This helps reduce incorrect payments, overbilling, and duplicate processing.
Q: What should businesses look for in an invoice matching solution?
A: Important capabilities include automated invoice capture, two-way and three-way matching, discrepancy alerts, flexible approval workflows, ERP integration, and searchable digital records.
Take the Next Step Toward More Efficient Accounts Payable in Business Central
Improving invoice matching doesn't have to mean replacing existing financial systems or completely redesigning purchasing procedures. For businesses running Microsoft Dynamics 365 Business Central, integrating Rillion’s automation solution can reduce manual processing while strengthening financial controls.
Review your current workflow, identify the areas where invoices routinely require manual attention, and explore how Rillion’s integrated solution can help make invoice processing more accurate and manageable.
our experts at Rillion for more information or to see our solution in action.
By Rillion,