Managing accounts payable efficiently is critical for maintaining cash flow, building strong vendor relationships, and ensuring compliance. One of the simplest and most widely used methods for validating supplier invoices is 2 way matching in accounts payable.
This blog explores what 2 way matching is, why it’s essential, and how it compares to other invoice verification processes like 4-way matching in accounts payable. We’ll also look at practical applications within Indian industries and answer frequently asked questions.
What is 2 Way Matching in Accounts Payable?
2 way matching in accounts payable is a basic invoice verification method used by businesses to ensure they only pay for what they ordered and received.
In this process, two documents are compared:
- Purchase Order (PO)
- Supplier Invoice
If the information in both documents matches—such as quantity, rate, item description, and total amount—the invoice is approved for payment.
This helps avoid overpayments, duplicate payments, and fraudulent invoices.
Why is 2 Way Matching in Accounts Payable Important?
For Indian businesses, especially small and medium enterprises (SMEs), managing vendor payments efficiently can be a challenge. 2 way matching in accounts payable offers a practical way to reduce manual errors and automate payment approvals.
Benefits of 2 Way Matching:
- Simple and time-saving
- Cost-effective (ideal for service-based industries)
- Reduces fraud and duplicate payments
- Improves accuracy of accounts
- Can be automated using common accounting tools
It is especially suitable for businesses that deal mostly in services or digital products where goods receipt is not required.
How Does 2 Way Matching Work?
Let’s look at a basic example from an Indian business context:
Scenario:
A Pune-based IT consultancy places a PO with a cloud software vendor for an annual subscription of ₹1,00,000.
Step-by-step 2 Way Matching:
-
The purchase order is created internally with the subscription details.
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- The accounts team compares the PO and the invoice.
- If the data matches, the invoice is approved and paid.
No physical goods are involved, so there’s no Goods Receipt Note (GRN) — making 2 way matching in accounts payable the perfect fit.
2 Way vs 3 Way vs 4 Way Matching in Accounts Payable
Matching types vary based on the complexity of business operations.
| Matching Type | Documents Compared | Ideal For | Example |
|---|---|---|---|
| 2 Way Match | PO + Invoice | Services, subscriptions | SaaS, consulting |
| 3 Way Match | PO + Invoice + GRN | Goods-based businesses | Retail, FMCG |
| 4 Way Match | PO + Invoice + GRN + Inspection Report | Regulated industries | Pharma, manufacturing |
Understanding what is 4 way matching in accounts payable helps finance teams scale processes as business operations become more complex.
When Should Indian Businesses Use 2 Way Matching?
2 way matching in accounts payable is best suited for:
- Service-based companies (IT, media, marketing)
- Startups and SMEs with streamlined operations
- Recurring payments like software subscriptions or retainers
- Government contracts without physical delivery (e.g., consultancy)
It ensures speed and accuracy while keeping compliance in check. In India, many organisations using Tally, Zoho, or custom ERP systems implement this for non-inventory expenses.
Challenges in 2 Way Matching
Though simpler than 3 or 4 way match processes, 2 way matching has its limitations:
- No confirmation of goods received – not suitable for physical inventory.
- Dependency on PO accuracy – if the PO is incorrect, the match fails.
- Risk of missing inspection reports – where quality control is required.
Therefore, businesses dealing in physical goods or requiring quality checks may benefit more from 3 or 4 way matching in accounts payable.
Automating 2 Way Matching in India
With digital accounting tools becoming mainstream, automation of 2 way matching in accounts payable is easy and affordable.
Many platforms now allow:
- Automatic PO-to-invoice matching
- Real-time approval workflows
- Alerts for mismatches
- Integration with payment gateways and bank systems
This helps minimise human errors while accelerating the overall accounts payable process.
Conclusion
2 way matching in accounts payable is a crucial tool for businesses aiming to streamline their invoice processing without unnecessary complexity. Especially in the Indian context—where many businesses are moving towards digital finance operations—it serves as a cost-effective and efficient solution for ensuring payment accuracy.
While 4 way matching in accounts payable provides higher controls for specific sectors, 2 way matching remains the go-to method for service-based, subscription-based, and digitally oriented companies.
Understanding when and how to use it can help your finance team save time, avoid costly errors, and build better vendor relationships.
FAQs
1. What is the key purpose of 2 way matching in account payable?
To verify that the invoice details match the purchase order, ensuring accurate and authorised payments.
2. Is 2 way matching suitable for inventory-based businesses?
No. It’s better to use 3 or 4 way matching in accounts payable for inventory or goods-based businesses.
3. What is 4 way matching in accounts payable?
It is a stricter process where the PO, invoice, Goods Receipt Note, and Quality Inspection Report are matched. It is used in industries requiring strong quality checks and compliance.
4. How can we implement 2 way matching in Indian businesses?
By using accounting software that supports PO and invoice tracking. Tally and many ERPs offer built-in tools for 2 way matching in accounts payable.
5. Can startups and freelancers use 2 way matching?
Yes, particularly when dealing with vendors or clients on recurring terms. It helps ensure payment transparency.
