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Feb 15, 2014

What is 'Matching Level' in Purchasing?

When you are configuring Oracle Purchasing, there is a configuration called 'Invoice Matching'. What is it?

Matching Level determines the various documents that you check and match before you make the payment to the supplier. Just to refresh your 'Procure To Pay (P2P)' flow, the steps involved in the P2P flow are shown in the diagram below. 

As you can see above, the last step before making payment is to match the documents. In this step, the finance manager verifies various documents and ensures that everything is ok before making the payment to the supplier.

The process of checking the documents is called 'Matching'.

So what are the documents to be matched?

1. Purchase Order
2. Receipt
3. Inspection Certificate
4. Supplier Invoice.

The various matching options are: 

1. 2-Way Matching: In this matching option, the payables accountant matches that the Item, Quantity, Terms and Price match between Purchase Order and the Supplier Invoice. Since the accountant is not checking if material is received, this kind of matching option applies in the following situations.
1. There is a lot of trust between the Company and the Supplier
2. The value of the items received is very low
3. The order is a Service order and Items are not available for these PO.

2. 3-Way Matching: In this matching option the following documents are matched. PO, Receipt and Invoice

3. 4-Way Matching: In this matching option all the four documents vis. PO, GRN, Inspection Certificate and Invoice are matched.

Many organizations get into the mistake of using 4 way matching where they need only 3-Way matching. 'We inspect the materials before we receive the items into inventory', they say. The issue in configuring matching option in ERP is not if you do a physical inspection (Everyone does a physical before receiving the material into inventory) but whether the payables accountant has to match Inspection Certificate before he makes payments to the supplier. Looking from that perspective, most of the organizations do not use 4-Way matching, but they have configured the same in ERP.

What is the issue of configuring 4-Way Matching? 

If you use 4-Way matching, you have to have an additional step of 'Inspection' to be completed in the system before you complete the receipt process. This additional step can add up to a lot of wasted effort in the Organization.

Normally Matching Option goes along with another option in Oracle known as 'Routing Method'. They go hand in hand. More about 'Routing Method' later.

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