In the landscape of AP processing, different processes can be implemented to prevent invoice errors that result in overcharges. Each style of oversight in the payment process includes different checkpoints along the way to ensure accuracy. Two-way matching, a default verification process, reviews purchase information against final invoice. Four-way matching Grocery Store Accounting on the other hand includes a quality control step on top of purchase data information verification. Three-way matching is an accessible middle ground to two-way and four-way.
Utilize exception management
For service providers, the PO serves as an agreement to normal balance begin scheduling and assigning resources. At times, suppliers or vendors use the PO to obtain financing for the goods. POs are legally binding agreements between the buyer and the seller. When all three elements match perfectly, it validates that the organization has received the expected goods and services at the agreed-upon price. This practice prevents paying for something you didn’t order, or paying more than you agreed to pay, paying for substandard goods and services, or even paying a fraudulent invoice.
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Item names, quantities, and unit costs must match line item costs and total cost. The buyer’s AP department will scrutinize these details and flag any discrepancies. Where discrepancies do occur, stakeholders are sought out for approval and, where necessary, updated or corrected documentation is requested from the supplier. Finally, the supplier’s invoice arrives, ready to be matched against the PO and receipt. If all aligns, payment is authorized, safeguarding the company’s coffers. Next, they check the PO and invoice against the order receipt (or receiving report).
Automating Your 3-Way Matching Process
If this three-way match reveals that the supplier invoice is in good order, then the accounts payable staff processes the invoice for payment. If not, the staff contacts the supplier regarding any 3 way matching accounting issues it found, which may result in the issuance of a revised invoice or perhaps a credit memo by the supplier. Matching involves comparing two documents to find matches in the data. For example, three-way matching involves comparing the invoice with the PO and GRN to ensure all details are aligned. Manual 4-way matching often creates bottlenecks—especially when AP teams must cross-check data across different systems or request missing documentation from other departments. The process is slow, error-prone, and easy to bypass without proper controls.
- The two most common types of matching are two-way and three-way matching.
- The system extracts key information from the invoice, such as vendor details, invoice number, line items, and amounts.
- Additionally, the AP team can be empowered to determine the best course of action when they encounter a discrepancy.
- This is especially important if the business received only a part of the order.
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- Strategic bookkeepers provide real-time financial intelligence, track key performance indicators (KPIs), and ensure businesses remain audit-ready and investor-friendly.
- Accurate and timely payments, facilitated by invoice matching, contribute to stronger vendor relationships, leading to better terms, potential discounts, and improved collaboration.
- A three-way match process adds another step in verifying the delivery of the purchased products.
- Keeping in mind its pros and cons will help you make an informed decision about whether it’s right for your business.
- These robots can quickly and accurately match purchase orders, goods receipts, and invoices, freeing up human resources for more strategic activities.
- The invoice includes details such as supplier contact details, a unique invoice number, applicable credits or discounts, the total amount due, and available payment methods.
It also helps to ensure that all the required steps are taken and that the correct goods are delivered, the right quantity is received, and the right price is paid. It helps reduce the time and effort required to manage the supply chain and makes tracking and monitoring the flow of goods easier. The first step in the three-way matching process is to verify the purchase order. It involves checking the order to make sure the quantity, price, and delivery date are all correct. The purchase order should include the supplier’s contact information.