What is payment matching?

A customer transfers money to your account, with only an invoice number in the description. You see the payment at the bank, while the books still show an open invoice. Only when you link the payment to the invoice is that invoice closed. The same applies to the invoices you have to pay yourself.

It is simple when one payment belongs to one sales invoice. In practice a customer sometimes pays two invoices in one transfer, pays only part, deducts a discount or a credit note, or forgets the invoice number. Someone then has to work out which items belong together.

Without careful matching you get a wrong picture. Customers seem to pay late when they have already paid, and a reminder goes to someone who owes nothing. On the supplier side you risk paying an invoice twice. The balances in your accounts receivable and your accounts payable are then wrong too.

Going through bank statements by hand takes a lot of time. A bank connection loads the transactions automatically, so part of the matching can happen on its own and you only have to resolve the exceptions. That helps most when you have many small payments.

Agree a fixed way of working for payments you cannot place. Do not let them sit on a suspense account for months, because their origin gets harder to trace. Ask customers to put the invoice number in the payment reference, which makes matching straightforward in most cases. Review the open items regularly, so that small differences do not grow into a pile that nobody wants to touch.