And with the help of 3-way matching, you go with the one step further and can make your certain data on the purchase order, invoice, and the sales receipt the same. The vendor/supplier will send an invoice for the goods/services payment ordered via the purchase order. The invoice should meet the required tolerance matching or the invoice is on hold, where you cannot make the payment until they resolve the hold. Three-way matching involves multiple time verification and collection of various documents; hence the process is lengthy and time-consuming. A Purchase Order serves as a legal document between buyer and seller, wherein, the buyer sends this contract that details the goods and services, date of delivery, payment terms as per the contract etc.

Verification of the goods received against the goods ordered and billed should be done at the end of the order. Storage and retrieval of documents in manually managed invoice processing is a challenge. Paper documents require huge storage areas that need to be kept safe from damage due to human handling and nature’s forces. When documents are not organized properly, retrieval for reference becomes 3 way matching accounting a headache. Tracking cash flow accurately both inside and outside the business is indispensable for the audit process. The 3-way match process in accounts payable provides a clear audit trail for verifying the legitimacy of financial transactions in a business. Using the three-way match as a procedure to post procurement transactions enables the team to maintain a verified record of suppliers.

Prone to error

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. This process is still seen as an effective business process for both suppliers and buyers.

Proper matching builds confidence in the organization’s supply procedures while minimizing impacts on cashflow outside of the funds authorized for purchasing. Switching to an electronic payable software solution, like Tipalti, can eradicate the disadvantages of manual matching processes.

Why Organizations Are Automating the 3-Way Match Process

Automated matching processes reduce time spent on tasks; this generates and sends invoices automatically without errors, backlogs, and delayed payments. 3- way matching accounts payable highlights discrepancies or inconsistencies between any of the critical documents. This helps detect issues or errors such as incorrect prices or damaged products, and payment will be withheld pending issue reconciliation. A 3-way matching accounts payable process identifies issues early on, preventing bottlenecks and slowing down the payment process. You will save money on processing and will also be able to spend more time on meaningful work. A 3-way matching is an internal control that allows AP departments to ensure that they are paying suppliers the proper amount for items received rather than underpaying or overpaying.

Keeping accurate documents submitted in a timely manner adds a trustworthy nature to the relationship between buyer and vendor. Successfully delivered goods without any late payments supports this as well. Business growth comes with expanding operations, and these operations can be well managed with 3-way matching in accounts payable. Using the proper accounts payable procedures is essential to a business’s success. Process improvement and efficiency lead to better time management and save company costs. All of the details from these three documents must match prior to a buyer completing payment.

Benefits of automated 3 way matching

The 3-way match saves companies from overspending, paying for something not received, and helping detect potential fraud. Cloud procure-to-pay automation handles matching quickly, efficiently, and without human intervention. AP professionals recognize the 3-way match and 2-way match are crucial to ensure accuracy in the purchase order invoice https://www.bookstime.com/ process. With that in mind, a 2-way match matches the invoice quantity and price to the purchase order and price. A 3-way match adds a goods receipt to ensure the company receives the same number ordered and invoiced. Consider the differences between a 2-way and 3-way match in accounts payable and how it impacts the bottom line.

• Automating the 3-way match in the accounts payable process brings transparency and consistency to the accounts payable process.
• A flag is only thrown if the vendor sends less or charger more than the amounts agreed upon.
• Within this application, users can acknowledge receipt of goods and services at the point of delivery and track the progress against the Purchase Order to eliminate one step within the three-way match process.
• By ditching the manual matching and approval workflow, you can rid your accounts payable of the extra work.
• MHC offers best-in-class technology to manage your processes and make all documents—especially those necessary for three-way matching—easy to access.
• Still, the three-way match process is an effective business practice for both suppliers and buyers.
• It involves the close examination and comparison of three forms that occur throughout the buying transaction process.

To learn more about implementing automated three-way matching in your procurement process, schedule a demo of Order today. Since manual processes are run by people, the chances of misplacing or damaging documents, data oversight, and misinterpretation are very high. Not all companies need or will use an inspection report, so this fourth step isn’t always possible. Plus, the additional step can add valuable person-hours to the process. However, some companies might choose this process just to be more thorough in their accounting.