You’ll need to notify the vendor about products delivered in unacceptable condition so they can send a fresh delivery or adjust the total amount in the invoice. Book this 30-min live demo to make this the last time that you’ll ever have to manually key in data from invoices or receipts into ERP software. This payment verification technique validates the information across the trio of related documents. Before making invoice payments, employees must confirm the request and delivery of goods and services.
A good supplier relationship may also result in better pricing and credit terms. Unfortunately, fraud happens, and it’s up to your business to have a system in place to prevent it, internally and externally. Three-way matching serves as a checks and balances to make sure an invoice is legitimate.
Way Matching: Definition & How It Works
3 way matching helps approve AP invoice payments faster and also help the procurement management team flag any inconsistencies, errors or potential fraud. An accountant may spend upto twenty minutes per invoice rectifying manual errors made in the process of accounting for invoices. This can lead to payment delays and fewer invoices being processed daily. A 3-way match ensures that manual errors or discrepancies are caught before the invoice is routed for the 5 step approach to revenue recognition approval, speeding up the invoice processing process. The three-way matching process will verify if the supplier is asking for the correct amount of money.
One effective way to improve payment processes and supplier relationships is to adapt the three-way matching process to your supply chain. 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. The process is even more demanding for businesses with many suppliers. With three-way invoice matching, it is easy to identify discrepancies between the goods and services ordered, delivered, and invoiced. Since all these documents are compared, the accounts payable team can determine if they should make a payment, make only a partial payment, or wait until an issue is resolved.
Not Ideal for Services
Did you know that one in seven large corporations commits fraud every year? A three-way invoice match helps you avoid falling prey to fraudsters claiming they provided goods or services. It identifies illegitimate invoices and enables your accountants to prevent overpayment for purchases that were not authorized for the specified amount. Preventing fraud, detecting overpayment, and managing purchases is an important part of small, mid-size and large corporations that invoice matching can help solve.
The three documents this process requires are also critical in internal and external audits. The 3-way match process ensures consistency of purchase orders, invoices, and order receipts. Savvy finance departments know there are plenty of vulnerabilities that come with manual invoice matching and processing. From lost invoices to late payments and less-than-stellar payables visibility, manual 3-way invoice matching can put any finance department in jeopardy.
What is three-way matching?
Plus, the 3-way matching process can help catch invoice discrepancies. Otherwise, these can result in overpaying or making duplicate payments. Simply put, this straightforward process benefits the business’s bottom line. Verifying the details across three distinct documents helps catch discrepancies that could lead to overpayment and identify fraudulent invoices. Three-way checking results is an efficient accounts payable process that protects your bottom line and cash flow.
way vs. 3-way matching
As an AP professional, the last thing you want to do is pay a fraudulent or inaccurate invoice. Today, an increasing number of businesses are using 3-way matching processing to mitigate this risk and reign in company spending. While three-way matching does require an extra step, you can streamline your processes if you’re using automation. With automation, you’ll get all the benefits of three-way invoice matching without the need to devote valuable AP resources to manual matching. Three-way matching creates a built-in check to the vendor payment process, ensuring a positive supplier-buyer relationship.
Understanding what your company needs and how you can improve, especially with invoice processing, can be a good starting point for gaining long-term traction. AP innovations are vital elements for a sustainable and centralized global business solution, one payment at a time. Manual data processing and invoice matching is laborious and may be prone to errors and misinterpretation.
Invoice matching also prevents payouts against fraudulent invoices. beer is proof 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. Judiciously matching invoices with their purchase orders and receiving reports generates a strong paper trail for all cash flow out of your company.
NEW: Our Supplier Network Portal makes it easy to track invoice and payment status.
Also called a receiving report or delivery receipt, the GRN confirms that the receiving department has received the delivery. It contains information about the delivered items and states whether the delivery was full or partial. Three-way matching is your key to preventing invoice fraud and overpaying due to invoice errors.Here’s why you need it, how to do it, and what software can help with. A variation arises when the line items, quantities, extended amounts, or total due on a vendor invoice don’t match the purchase order or receipt of goods or services. Handling variations or exceptions manually can be extremely tricky and hard to document.
- If the information from the document coincides with the actual delivery, there is a three-way match.
- Set up touchless AP workflows and streamline the Accounts Payable process in seconds.
- The three documents this process requires are also critical in internal and external audits.
- As a result, it will pay them faster, which often leads to better pricing and credit terms.
- They can decide if they want to pre-pay the amount, or reach out to the vendor for credit, or find another possible solution.
When trying to scale for growth, manual AP processes can be a major deterrent. By migrating to automated matching processes, you can streamline your accounts payable procedures and handle an increased workload without missing a step. As much as companies want to pay their suppliers promptly, manual processing may cause delays because of backlogs or misplaced documents. Late payments tarnish a company’s reputation and may affect future transactions. In the world of accounts payable (AP), one of the most challenging jobs is managing the onslaught of supplier invoices that arrive.
An accounts payable (AP) department creates an invoice based on the PO. Thus, a three-way match should be utilized as often as possible (for a business of any size) when the necessary paperwork and resources are available. Additionally, the AP team can be empowered to determine the best course of action when they encounter a discrepancy. They can decide if they want to pre-pay the amount, or reach out to the vendor for credit, or find another possible solution. You can also use technologies like fuzzy matching to detect invoices from fake companies. This approach compares various aspects, including the invoice amount, invoice number, and order quantities, with the corresponding purchase order (PO) and GRN.
Barbara Cook is a freelance writer and former CFO with subject matter expertise in financial and accounting topics and automation software. To illustrate how three-way matching works, let’s look at a hypothetical situation. An event-planning agency has ordered 1,000 copies of placeholder cards for a client. Our software provides automated account validation, detailed risk analytics, and customized workflows. The difference in matching methods refers to the number of times that orders are matched.
When an invoice, PO, and receipt are all compared, it’s much easier to double check your work. It also increases visibility, because it is more clear where company money is being spent. And when you find discrepancies, you can act on them as needed, such as by reaching out to the supplier to correct the price. Before processing vendor payments, AP teams go over these 3 documents to verify that the product/service received by the company matches the details of what was initially ordered.
