Three Way Matching: Three Way Matching: A Pillar of Accounts Payable Accuracy

The three-way matching process involves comparing the Purchase Order (PO) to the invoice. Automatically compares invoices against purchase orders and receives documents using configurable rules, minimizing manual touchpoints and delays. Here, the extra layer of verification ensures payment accuracy and minimizes disputes or financial loss. This reduces manual labor, exception handling, and document storage costs, particularly when integrated with AP automation tools.

Vendor Code of Conduct

• Automated Invoice Matching Software further enhances these benefits, making the process faster and more reliable.
• The supplier then sends a receiving report to the buyer once the order is completed.
• Benefits of 2-way matching include avoiding overpayment and to maintain a strong supplier relation.
• Overpayments and fraudulent invoices are two potential outcomes of data entry errors and data duplication.
• The receiving order specifies that a receiving officer has accepted the goods delivered by the supplier, and records the quantity, the delivery condition, and any other points applicable to note.

Sometimes, your AP department might identify errors, like price and quantity issues or product damages. If there are any issues, your business will usually withhold payment until the discrepancy is rectified. From 3 way matching a management standpoint, implementing robust three-way matching procedures is a strategic move towards financial integrity. By adopting these measures, businesses can significantly reduce the risk of financial errors and enhance the overall integrity of their financial reporting.

Minimize human errors

• For companies attempting to scale operations, automating accounts payable is a necessary step in enabling future growth.
• Those documents are the purchase order, vendor’s invoice and delivery receipt.
• Forward-thinking finance units have begun to automate their 3-way matching processes to prevent potential losses and provide a lifeline to their overwhelmed accounts payable (AP) teams.
• This third document confirms that the company received the goods or services as ordered, both in quantity and quality, before any payment was approved.

Focusing on the topics of purchasing, procurement, P2P, AP, and supply chain efficiency in the context of overall business efficiency. An incoming invoice can be automatically compared and matched with corresponding documents. As with any process, three-way matching will go smoothly if it’s set up and executed efficiently. Let’s see some tips that help you make the most out of the process without getting stuck in the details. Another issue to be found during matching is that the shipment confirmation might be missing. Whether it wasn’t issued when expected, misplaced, or lost, a missing receipt complicates delivery control.

Three Way Matching: Three Way Matching: A Pillar of Accounts Payable Accuracy

The decision depends on the risk level, cost impact, and transaction volume. 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. Effective fraud detection is not the only benefit of automating the 3 way matching process. The construction company issues a PO with complete details on the quantity, price, and expected date of delivery to the vendor. https://www.bookstime.com/ The vendor delivers the goods within the deadline mentioned in the purchase order.

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. What if you discovered that as much as 2% of your business’s payments are duplicates, charged for the wrong amount, or contain some other error? When purchase departments handle complex or recurring orders, 3 way matching simplifies their work greatly. For recurring orders, 3 way matching ensures that consistency and accuracy is maintained throughout. The purchasing or procurement department is responsible for sourcing and purchasing the goods and services requested by internal departments.

• Accounts Payable teams often get stuck chasing down mismatches, checking line items one by one, or emailing back and forth with procurement.
• It also includes intelligent line linking and automatic discrepancy detection, allowing users to easily set custom thresholds for 2-way and 3-way matching depending on specific business needs.
• The AP department at Computer Co. receives a $4,500 invoice from a vendor for 1,500 circuit boards.
• This way, invoices lower than this value will be approved for payment automatically, leaving more time to match more expensive purchases.

Report

You can also establish standardized workflows that work consistently across your growing operation. This creates a structured workflow covering steps from where the problem is documented to investigating the issue to making corrections. Three-way matching offers a practical defense that even small companies can implement to protect their bottom line. According to the ACFE, they experience billing fraud twice as often as larger organizations, with median losses reaching $141,000 in 2024. AP departments must check all three against each other to ensure legitimacy and consistency. Budget monitoring is a crucial process that helps you track and measure your budget performance and…

Problems With Manual Matching for Businesses

The 3 main players in the 3-way matching in accounts payable are purchase orders, goods received notes, and supplier invoices. The 3-way matching process involves cross verification of documents to authenticate the invoice before payout. The 3-way matching in accounts payable Accounting Errors takes the verification further by including the goods receipt note in the matching process.

The process of three-way matching can be pretty demanding and time-consuming, especially when done manually. After all, we’re only human – and sifting through the details of numerous documents eventually results in missed, misinterpreted, or misplaced documents. Managers create guidelines for three-way matching and configure the workflows to ensure that everyone involved is acting within their competencies.