What is Purchase Order Line Item Matching?

LearnApril 3, 20243 min read
Caroline Lu, Product Marketing Manager

Line Item Matching: Enhancing Accounts Payable Processes

Many businesses may be already familiar with purchase order matching, or the accounts payable practice of matching and verifying invoices with the corresponding purchase order (PO) and/or shipping receipts. Line item matching takes 2-way or 3-way purchase order matching one step further by comparing the line items for all the documents involved against each other. By conducting purchase order matching at the line-item level, businesses can investigate discrepancies to resolve payment issues and allow for more accurate recordkeeping. This process helps maintain consistency, improves efficiency, and strengthens internal and external relationships. To learn more about the importance of PO line item matching and how it can benefit businesses, continue reading the rest of the article.

What are typical line item details?

Invoices can have different details for their line items depending on whether they are for services or inventory. Typically, line items include:

  • Description of the product or service
  • Quantity of the product or service (e.g. number of hours of service, number of items, weight or volume of the product)
  • Unit price (e.g. hourly rate)
  • Total cost, typically calculated by multiplying the quantity by the unit price

Benefits of line item matching

  1. Enhanced visibility: Line item matching allows operations and accounts payable teams to see all the relevant documents and line item details in one place while investigating discrepancies at a deeper level to understand drivers of those variances such as quantity or price.
  2. Improve vendor communication: Finding discrepancies through the two or three-way matching process can result in payment delays as both the business works to understand the discrepancies to ensure accurate payments and the goods received are properly accounted for. With line item matching, businesses can communicate the details behind discrepancies leading to smoother discussions and faster payment resolution.
  3. Audit preparation: Auditors frequently request purchase orders, goods received notes or shipping receipts, and invoices. Having these documents in one place and matched can help with audit-readiness.]

Automating line item matching with Settle

In the chaos of running your business, scaling your brand's accounts payables may not always get priority, which is why you can count on Settle. Settle's all-in-one platform is designed to streamline AP processes, taking the busywork out of cash-flow management. Plus, Settle automates purchase order line item matching for you by extracting line item detail for your purchase orders, goods received notes (GRNs), and bills while flagging discrepancies between line items for all three documents so you can quickly pinpoint your focus and have smoother vendor communications. Check out the interactive tour of our automatic 3-way matching here or get started for free with unlimited POs and three free matches today.

FAQs

What does line item mean on an invoice?

A "line item" on an invoice simply refers to each individual product or service listed, complete with its corresponding quantity, rate, and price. It helps break down the total cost into specific components for easy understanding and reference.

What is 2 way matching in accounts payable?

Two-way matching in accounts payable ensures that the quantity and price on an invoice align with the corresponding purchase order. It essentially verifies that what was ordered matches what was billed, helping to prevent errors or discrepancies in the payment process.

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