What is the 3-Way Match Process in Accounts Payable?

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The process can require a great deal of manual effort, particularly if the invoiced items have to be matched at the line level. You can also use technologies like fuzzy matching to detect invoices from fake companies. For example, in 2019, a Honda employee defrauded the company out of $750,000 by creating multiple purchase orders. Honda could’ve prevented this with an AI-powered AP system and saved $750,000. The PO indicates a total value of $15,000 and includes details like the quantity and price of the ordered monitors, expected delivery date, and internal accounting codes.

• As mentioned before, manual data verification is prone to errors and discrepancies.
• Automating the 3-way match in the accounts payable process brings transparency and consistency to the accounts payable process.
• The accounts payable department then creates an invoice based on the information on the purchase order.

A month later, Harry receives an invoice from Put a Lid On It Manufacturing for $3,187.50 to be paid in the next 30 days. Wanting to verify the accuracy of the payment request, he begins a 3-way matching process, gathering his copy of the initial purchase order, the packaging slip, and the recently-received invoice. It is very labor intensive, and it can be difficult to accumulate the required information, which can result in delayed payments while the accounts https://turbo-tax.org/ payable staff searches for missing information. Delays can annoy suppliers, and also prevent a company from taking early payment discounts. Furthermore, it requires some time to become efficient at three-way matching, so it may be assigned to the more senior payables clerks – which takes them away from other tasks. If this three-way match reveals that the supplier invoice is in good order, then the accounts payable staff processes the invoice for payment.

Advantages of Automating 3-Way Matching

For service-related purchases where a receiving report might not be essential, a 2-way match is preferred over a 3-way match. In paper-based three way matching and invoice approvals approver delays can result https://online-accounting.net/ 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 supplier then sends a receiving report to the buyer once the order is completed. The “match” part of the three-way match refers to comparing the quantities, price per unit, terms, and other information appearing on the three documents. In other words, does the vendor’s https://simple-accounting.org/ invoice detail agree with the organization’s purchase order, and to the goods actually received as shown on the organization’s receiving report? Only if the details on the three documents are in agreement will the vendor’s invoice be entered as an account payable.

It can be laborious to manage 3-Way Matching In Accounts Payable manually; use an automated solution instead

If your 3-Way Matching In Accounts Payable procedure isn’t fully automated, it’s possible that some of the numbers entered into one document may not match those in other papers exactly. Additionally, if you demand that every time, your statistics must match, supplier payments and invoice settlements may be delayed. 3-Way Match In Accounts Payable is a technique that businesses use to cut down on errors, deter fraud, and save money.

Three-Way Matching Explained

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. 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.

Components of a three-way match

3-Way Match Accounts Payable is one of the most popular types of invoice matching in accounting. Before approving an invoice, a 3-way match is performed to ensure that the purchase order, invoice, and goods receipt all match. This makes sure that the information reflected on the customer’s order, the supplier’s delivery, and the goods receipt note (GRN) are all accurate.

Timely notification of issues during the 3-way match of sales, 3-way match of receiving, 3-way PO match, or 3-way invoice match, ensures that payment to suppliers is done on time. Automating 3-way matching is simple when you upgrade to Planergy’s e-procurement system. Without any human intervention, issues are brought to light early so you don’t slow down the payment process. You’ll significantly reduce processing costs and be able to spend more time on valuable work. 3-way matching is a procedure for processing a vendor invoice to ensure that a payment is complete and accurate.

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But there’s innovation here – a way to make that 3-way matching faster, more streamlined. Relying on human involvement to match invoices, POs, and receipts can raise the risk of data entry errors, misinterpretation, and accidental oversights. That in turn can make overpayments, missed payments, and discrepancies that take time to fix. The benefits of implementing an automated solution range from increased efficiency and accuracy to substantial cost savings and improved compliance. The convenience store manager matched the PO, GRN, and Invoice and found all three documents aligned, thus processes the payment. According to a report by ACFE, organizations across the world lose 5% of revenue due to fraud or unauthorized spending.