What is the three-way match?

The result is a more streamlined and accurate process that keeps your organization connected to the goods and services you rely on. The most basic definition of 3-way matching is a comparison 8 questions answered about electronic check payments of data across three documents to make sure that all of the relevant information matches. This is generally done to make sure that payments are issued correctly and on time.

If an item interpreted by AP Essentials or AP Agility is of uncertain accuracy, or if it falls outside of the rules defined by the AP administrator, the program flags the information for review. If an invoice does not match, users can quickly double-check the imported data against the original image or look deeper for the discrepancy. The process involves comparing all these documents for accuracy and consistency. AP only releases matched invoices for payment authorization and works on resolutions for any deviations. Without double-checking that everything is in order, your business could over- or underpay or miss a payment deadline. Most companies do some form of matching of vendor invoices to purchase orders and/or goods receipts.

Avoid Costs of Inaction (COI) by Unlocking the ROI of Automation

Pricing and quantity discrepancies are easily detected because negotiated pricing was entered by Purchasing and quantities received were confirmed electronically by Receiving. A 3 way matching is the process of matching purchase orders (PO), goods receipt note, and the supplier’s invoice to eliminate fraud, save money, and maintain adequate records for the audit trail. 3-way matching is usually done before issuing payment to the supplier post delivery. Manual three-way matching requires a lot of time, especially if you’re using paper documents. Someone from the accounts payable team must review three documents for each invoice.

  • It should include your receiver’s signature, the name of the vendor, date and time of delivery, products delivered, and quantity of each product.
  • A 3-way match in accounting helps determine if the invoice should be paid in full or part and reduces the risk by preventing reimbursement of unauthorized purchases.
  • Sometimes, your AP department might identify errors, like price and quantity issues or product damages.
  • Then, the supplier delivers ten boxes of paper accompanied by the goods receipt note.
  • A company might choose to use this method since it’s less time-intensive than a three-way match.

The purchase order authorizes the purchase and includes information like PO number, payment information, and description of goods and their quantity. In order to keep up with evolving business needs, business owners need to adopt modern methods like 3-way matches in order to safeguard their business from fraud and cheating. Using 3-way matching in accounts payable and accounting is an effective way to improve payment processes. Physical papers don’t need to be pulled from file cabinets, routed interdepartmentally, or potentially lost. It’s that element, the electronic storage of the accounting and the supporting documentation which makes the automated system of accounting the best practice for accounting within an organization. By leveraging 3 way match accounting departments can streamline payment processes, mitigate the risk of human error, and exchange business documents digitally.

What is the difference between a 2-way and 3-way match?

When you should be focused on your bottom line, nothing can take the wind out of your sails like manually matching printed POs with invoices and packing slips. Investigating every invoice can be daunting, and unless systems are highly organized it can take hours to track down the correct documents. As a business owner, the last thing you want to do is pay a fraudulent or inaccurate invoice. Three way matching can help safeguard your accounts payable against incorrect or fraudulently submitted invoices. For the audit process to succeed, it is essential to track internal and external cash flow precisely. A 3 way matching in accounts payable procedure offers a transparent audit trail for confirming the validity of financial transactions in a company.

Ways Virtual Cards Reduce Headaches for Accounts Payable Teams

The 3-way PO, invoices, and GRN matching save the accounting team time by simplifying the invoice validation process. Potential payment discrepancies are immediately flagged down so that the team can investigate the cause and rectify it immediately. The accounts payable department then creates an invoice based on the information on the purchase order. This invoice is then sent to the buyer from the supplier based on the information gathered from the purchase order. The invoice details would be validated against the details mentioned in the PO before approving the invoice.

It’s typically used for more complex purchases, such as expensive equipment or custom-made products. By comparing these documents, a company can confidently issue payments knowing that they are accurate and valid. Delivery receipt or goods receipt note contains data confirming that the goods or services have been received and accepted by the buyer. It’s to prove that the invoices are legit, reduce fraud risks, plus it’s an easy way to manage a large number of supplier invoices. And what’s more, it’s a software add-on that plugs in seamlessly with your existing enterprise resource planning software, to simply make your accounting processes better. Manually doing the matches exposes you to mistakes and misinterpretations.

When it comes to matching invoices, there are a few key things you can do to make the process easy and headache-free. With the right tips and tools, you can perfect the invoice matching process and make it a breeze. It stands to reason, then, that heavy vetting in this area of the business is a crucial element. A 3-way matching process has been in practice in this regard for quite some time.

The Requestor enters their department code into the system with their request. Fields will populate automatically for vendors, products, prices and account codes. Vendor defaults can be established when the vendor is initially set up in the electronic system. This reduces the work on the AP piece when they enter the invoice into the system for payment. Three way matching helps businesses track the origin of invoices and confirm their legitimacy to avoid fraud.

Benefits of the 3-Way Matching Process

Paying twice for the same purchase or full price for an incomplete shipment isn’t the smartest business decision. And while typically, you’ll be able to get this overspend back from your long-term suppliers, some businesses might be less cooperative. Commonly, these issues can be attributed to simple mistakes like transcription errors or shipment delays.

Upon delivery of the purchase, the receiving department completes an order receipt, indicating the items received and the quantity of each. Your AP team will verify the PO number, supplier, items delivered, and quantity received against the purchase order and invoice as part of the three-way matching process. The 3-way match process entails cross-verifying relevant documents for accuracy in purchase orders, goods receipt notes, and invoice numbers. If the information matches, accounts payable staff approves the invoice and the accounting department sends payment.

In this case, it’s the 1,000 masks, which, together, will cost $3,000 dollars. The mask vendor will provide you with a purchase order that will confirm the quantity (1,000) and cost of the items or services ($3,000). XpresSpa had a chaotic list of vendors, products, and carriers, only 70% of which complied with their corporate standards. Using Order.co’s platform, they streamlined their procurement workflow, increased their vendor compliance to 100%, and saved a total of $68,000 in the first year. Considering that the entire purpose of three-way matching is to increase payment accuracy and avoid maverick spending, it’s essential to carry it out as efficiently as possible.

Three-way matching has the added benefit of simplifying bookkeeping and audits. With all your historical ordering and matching data centralized, you surface other purchasing insights, refine your reporting process, and get to the bottom of issues and exceptions more quickly. While this scaled-down matching process might not flag issues as efficiently, it still helps avoid the common problems previously discussed and can capture increased value for your business. The goal of 3-way matching is to compare these documents and identify any discrepancies—inaccurate quantities, wrong prices, damaged or missing goods, twice-submitted invoices—between the records.

When a supplier routinely provides accurate invoices, a trusted relationship develops over time, which enables a company to pay the supplier more quickly. Improved pricing and credit terms may also come from a strong supplier connection. The 3-way match protects your company against unnecessary costs and unauthorized financial activities, which boosts your bottom line over time.

The information on the number of goods, unit price, discounts/rebates, delivery date, etc. are matched across all three documents. The 3-way match increases revenue by protecting enterprises from unwanted, fraudulent financial transactions. The 3-way check helps businesses achieve cost savings and improve the transparency of procurement and accounts payable transactions.

Eliminate Fraud

A 3 way match system incorporates checking an order receipt for the amount issues as well. To ensure that every order is complete, 3 way matching invoices highlights discrepancies or inconsistencies between any of the critical documents listed above. These automated systems are so expensive that they are not a viable solution for smaller businesses. This can put extra pressure on the accounts payable team, forcing them to work overtime, thus increasing costs.

A vendor invoice for 5000 INR for 1000 integrated circuit boards is received by the buyer. The first step is to cross-check whether the PO was approved before fulfilling the invoice. The second step is matching invoices to purchase orders in terms of price and quantity. In this case, the purchase order for 1000 circuit boards at 5 INR each was raised, which totals 5000 INR. The third step would be to match the PO and invoice data with the goods received receipt data.

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