With the right tools and a little bit of practice, matching invoices can be a breeze. Close your books faster by syncing your 3-way match directly on to your ERP or accounting automation software. This provides visibility and accessibility of all business data in a single organised database. If the hospital has a five percent tolerance, then they might accept 2,850 masks or 3,150 masks. This quantitative info (and qualitative, if it’s appropriate) would come from an inspection report.
The 3-way matching process is conducted to maintain adequate procurement records for the audit trail. The 3-way match process is usually done before issuing the supplier with the payment post-delivery. In the accounting and bookkeeping area of accounts payable, the three-way match refers to a procedure used when processing an invoice received from a vendor or supplier. The purpose of the three-way match is to avoid paying an incorrect and perhaps fraudulent invoice.
Companies can minimize risks by comparing the purchase order, receiving the report, and the supplier’s invoice, preventing overpayment and promoting financial control. By streamlining the invoice validation procedure, the 3 way matching can help the accounting team save much time. Potential payment discrepancies are instantly noted so the team may look into the situation and make the necessary corrections. Besides, you also can ensure on-time payment to suppliers via timely validation and verification. Manually matching documents and checking for discrepancies can be tedious.
To counter the threat of overpaying for goods and services or paying a counterfeit invoice, you should seriously consider using automated 3 way match in accounts payable. In one dashboard, manage and match the details of your POs, GRN, and bill. Our system will validate the quantity and unit cost accurately, so you can improve your inventory management. In conclusion, 3-way matching is a crucial process for businesses to ensure accuracy and prevent errors in their financial transactions. On the other hand, 3-way matching involves an additional step of matching the goods received note (GRN) to the purchase order and supplier’s invoice. If the invoice, purchase order, and receipt all match correctly, then the accounts payable department approves the invoice for payment.
What is 3-way Matching in Accounts Payable?
Most companies use two-way invoice matching, which compares the purchase order information to the vendor invoice to check for discrepancies. Many businesses find this to be a good fit for their current processes, especially those that need to pay for services and don’t use a goods receipt note to record these services. Manual matching of thousands of supporting documents can be time-consuming, expensive and extremely labor-intensive. AP teams end up spending lots of man-hours manually hunting for every invoice, PO and receipt! Delays and errors force the accounts payable team to work overtime and could also bring on penalties for late payments. Verifying the components of the three-way matching process before paying invoices reduces overpayments for duplicate invoices, items not received, or fraudulent invoices.
- This transparency builds trust among stakeholders and enhances vendor-supplier relationships.
- Manual three-way matching requires a lot of time, especially if you’re using paper documents.
- The receiving department should have a packing slip that specifies the cost and quantities of the items ordered.
By verifying that the purchase order, order receipt, and supplier’s invoice match, you know that an invoice is valid and correct before paying it. It benefits your business by ensuring that the supplier invoice matches your ordered goods or services. The goods receipt note validates that a receiving officer has received the goods and services delivered by the supplier. The Goods Receipt Note is forwarded to the accounts department after the receiving officer has done the due diligence.
What Is 3-Way Matching in Accounts Payable?
A few weeks later, the shipment of 100 hats arrives, and after inspecting the packaging slip along with the quality and quantity of the products, Harry accepts the delivery. Conversely, when all three documents align, a buyer can be more confident that the submitted invoice is legitimate and move forward with payment. Among the options of 2-way and 4-way matching, the 3-way match process stands out as the optimal selection for internal control measures. In this blog, we will understand the process of a 3-way match and uncover its importance in fortifying financial integrity within organizations.
Advantages of Automating 3-Way Matching
And three-way matching doesn’t only benefit your business—because of the expedited invoice approval process, it also maintains a positive buyer-supplier relationship. If you’re one of the businesses that use manual matching procedures to track their transactions with suppliers, here are the drawbacks you need to watch out for. Three-way matching creates a built-in check to the vendor payment process, ensuring a positive supplier-buyer relationship. An effective accounts payable process ensures accurate, secure, streamlined payment processing. Sometimes, your AP department might identify errors, like price and quantity issues or product damages.
Cash Flow – Meaning, Types, Formula, Analysis
Businesses that have switched from a manual procurement process with paper invoices to a completely automated system have seen some unbelievable results. They have more than proven the value and efficacy of automating the three-way matching process. The invoices are scanned electronically to extract important purchase data like the PO number, quantities, and prices. The same information is extracted from the PO and GRN and verified against that obtained from the invoice. The verification process is done on each line item on all documents for accurate matching.
It’s always easier turning a profit when you’re not losing money to fraudulent claims. Whenever an individual or department requires anything for their work, they forward a request detailing what they need, the quantity, and why they need it. The purchasing department receives this and expands it to a purchase order for the supplier, outlining the product or service they need, the quantity and quality they desire, and how much they agree to pay. Perhaps, if Google and Facebook had some system for vetting their invoices before paying them out, they wouldn’t have fallen victims in the first place. Similarly, unless your business employs adequate protection to shield against invoice fraud, there’s no telling how much you stand to lose or might have already lost.
Then, they check the goods receipt note to ensure that the delivery matches the request. The first step in the procurement process is to submit a purchase order to the supplier. A purchase order should clearly state the supplier, PO number, ach vs wire transfers requested item, desired quantity, and the agreed-upon price. During the three-way matching process, your AP team will verify that the information on the purchase order matches the details of both the invoice and the order receipt.
Finance workflows like 3-way matching in accounting, invoice approvals, and expense reimbursements can be effectively automated with Cflow. The first step is gathering purchase orders, goods received notes and invoice information. This number is uniform across all three documents pertaining to the purchase. Once the PO, GRN, and invoice are gathered, the information they contain is verified.
Learn what a 3-way match is and how it can benefit your business accounts payable processes.
It can lead to delays in processing payments, issues with tracking and analyzing data, and it’ll be harder for companies to make informed financial decisions. 2-way matching is the process of cross-checking invoices that businesses usually practice. The process only requires two documents, the invoice and purchase order to ensure that the items, quantities, and prices match. With a three-way match, you can confirm that the business’ established purchase approval process was followed.
In paper-based three way matching and invoice approvals approver delays can result from procrastination, heavy workloads, resolving questions with the requester, and holidays/leaves. If the 3 documents don’t match then the invoice is put on hold until the errors/issues are sorted. The 3-way matching process helps track the origin of invoices and verifies them for validity and legitimacy.
Delays can annoy suppliers, and also prevent a company from taking early payment discounts. You can make three-way matching more efficient by excluding small-dollar and recurring invoices from the matching requirement. There’s a way to enhance the task, and it effectively halves time and increases accuracy ten-fold. Smart artificial intelligence (AI) can verify invoices in a 3-way matching process that takes minutes instead of days, and without the need for human interception – reducing error.