3-way matching can be performed manually by physically comparing the data included in all three documents, or using automated software that can extract and compare data without direct human touch points. With Kofax AP Automation solutions, you can not only fully automate the invoice capture process but also create custom validation rules and make matches smoothly up to a four-way match. When small businesses are starting out, essential processes and related workflows undergo a slow evolution. With a small workforce, most early efforts involve staff members handling paperwork and entering information manually. This slow pace often applies to processes such as three-way matching in accounts payable departments.

In order to keep up with evolving business needs, business owners need to adopt modern methods like 3-way matches in order to safeguard their business from fraud and cheating. Using 3-way matching in accounts payable and accounting is an effective way to improve payment processes. The automated system for the Receiving Department may be slightly more labor intensive. The Receivers will still need to verify the contents of packages against what’s printed on the packing slip.

• The automated matching system needs to be configured such that goods received are rechecked on an ongoing basis until the entire order is complete.
• A held invoice operates as a sort of fail-safe that prevents the payment of an unmatched and unverified order.
• This matching process is crucial for maintaining financial control, preventing overpayments or underpayments, and ensuring transparency.
• Manual matching of thousands of supporting documents can be time-consuming, expensive and extremely labor-intensive.
• The three-way match process provides better internal control over the accounts payable and purchase process.

AP doesn’t have to file and pull purchase orders or packing slips for matching. Verification of correct GL account codes and department codes is still an AP task, but in most instances, modification of default information will be infrequent. The pre-populated fields that Purchasing entered initially for each vendor are typically unchanged with any new order placed.

An automated three-way matching solution helps businesses –

Order receipts are proof of payment that is included with delivered goods. They contain information on the goods included in the shipment and the payment method. An invoice is a paper or EDI form document that is sent from the vendor to the buyer. Information contained in invoices is unique invoice numbers, vendor contact details, applicable discounts or credits, and the total amount due. To understand the three-way match in accounting better, let us first understand what invoices, purchase orders, and goods receipt notes are.

In other words, does the vendor’s 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. The co-working unicorn WeWork faced significant challenges in streamlining ordering and payments across their 800 global office locations.

Thus, automating the 3-way matching process yields transparency and accountability in the accounts payable processes. This process enables your AP department to detect different kinds of payment errors, including fraudulent invoices, duplicate invoices, and even minor errors in supplier invoices. Before AP can issue a payment to a supplier, the three-way matching process requires verification of three component documents to check that each contains the same data. This ensures that your company is only paying for items it has actually received. It allows your AP department to identify any inconsistencies that could indicate a supplier error or fraud, and ensures that there are no overpayments.

• If your company’s balance sheet is not portraying an accurate picture, you’re shooting in the dark.
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• 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.
• Then, they check the goods receipt note to ensure that the delivery matches the request.
• Although 2-way matching is the default for many invoice verification processes, 3 way invoice matching is becoming more widely adopted to save businesses from overspending on larger, non-recurring orders.

Anytime you are subject to an audit, a solid audit trail that monitors the flow of money into and out of a corporation is essential. It’s a perfectly reasonable approach in theory, but in fact, the method for putting this cost-saving mechanism in place frequently has obvious problems. Manually checking payments might be more expensive for many businesses than simply paying the odd incorrect invoice.

SAP Business One

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 to calculate sum of year digits depreciation 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.

Human error

Paying invoices without proper verification results in paying far more than the agreed price or paying for more than what you receive or paying multiple times for the same product. Authorize accounts payable personnel to complete payments for invoices if the figures across the received invoice, purchase orders, and receiving report differ with a small margin of error. Before processing vendor payments, your accounts payable (AP) team reviews the purchase order to ensure it matches the goods or services listed on the invoice. Then, they check the goods receipt note to ensure that the delivery matches the request. The 3-way match process in accounts payable is a process of matching the purchase order PO, supplier’s invoice, and the receiving report to validate the invoice before disbursing the payment. The 3-match process achieves validity, accountability, and transparency in procurement planning and management processes.

Why Accounts Payable Should Use Three-way Matching

For example, you don’t typically receive a separate delivery notice for commonly recurring charges, such as a software subscription or utility payment. Any relevant or necessary approvals are obtained electronically and even remotely. An AP manager, Accounting Manager, Controller, or perhaps CFO will review the cash requirements journal before checks are cut. One of the largest problems with the Three-Way Invoice Match process is the routing of paper. Documents mistakenly get sent to the wrong person, to someone who is on vacation, or to someone who doesn’t make invoicing their priority. Develop and implement standardized procedures for creating and issuing purchase orders.

Learn what a 3-way match is and how it can benefit your business accounts payable processes.

Additionally, informing your suppliers of discrepancies enables them to deliver the correct goods and services in the future, saving both your time and money. The 3-way matching process helps track the origin of invoices and verifies them for validity and legitimacy. 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 an accounts payable employee encounters a one-off matching error, they will need to investigate the problem to solve it.

Proactive Detection & Prevention of Accounts Payable Fraud: A Detailed Guide

Today, an increasing number of business owners and departments in charge of finances are using three way match processing to mitigate risk and reign in company spending. 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. Eliminating fraud and ensuring that all incoming invoices are thoroughly reviewed before payments are made are the two main goals of 3-Way Matching In Accounts Payable. While it is the optimal course of action, an organization’s Accounts Payable staff may run into difficulties that prevent them from performing at their best and ensuring that all suppliers are paid on time.

Once the invoice is received, the purchase order and receiving report data are retrieved and cross-checked with the invoice data. All the information on all three documents needs to match for the invoice amount to be paid. Automated 3-way invoice matching ensures prompt payments, accurate encoding of data, and easy accessibility in ERP and SAP platforms. As much as 80% of the accounts payable workload can be reduced by automating the invoice matching process. The time spent on matching invoices against PO and GRN data can be reduced drastically through automation. The accuracy and consistency of invoice-PO matching are greatly improved through automation.