Overall, 3-way matching is a very popular method to ensure you process your invoices correctly while avoiding any costly mistakes or fraud. That’s why three-way matching is used by over 80% of the Fortune 500 companies in the US. By comparing these three documents, you can securely verify that ordered items match what was received, quantities are consistent, prices align with agreements, and invoice calculations are correct. It will help companies identify areas where the process can be improved. It will also ensure that the matching process is as accurate and efficient as possible. Setting up an automation system is a great way to streamline the three-way matching process.
Integrate with existing systems
By incorporating the inspection report, four-way matching verifies not only the receipt of goods but also confirms that they have passed a normal balance quality inspection. This approach is especially beneficial when dealing with new suppliers, less trusted vendors, or for high-value transactions where quality and accuracy are more important. By comparing invoices with purchase orders and receipts, businesses can detect potential fraudulent activities, such as inflated prices or fictitious invoices. After receiving the order and the digital files, the printer completes the job in the agreed time frame. At the same time, it delivers the placeholder cards to the receiving department with a delivery note and a packing slip. Three-way matching is an accounts payable (AP) invoice approval process.
Three-Way Matching Improves Business Relationships
Three-way checking results is an efficient accounts payable process that protects your bottom line and cash flow. Ramp helps you catch discrepancies and enforce controls by automating invoice matching across your AP process. Instead of relying on Grocery Store Accounting manual checks, Ramp compares documents in real time and flags mismatches before they cause delays or overpayments.
Small Businesses
Robotic Process Automation (RPA) is also making significant strides in the realm of advanced matching techniques. RPA involves the use of software robots to automate repetitive tasks, such as data entry and document comparison. These robots can quickly and accurately match purchase orders, goods receipts, and invoices, freeing up human resources for more strategic activities. Additionally, RPA can be programmed to handle exceptions and escalate issues that require human intervention, ensuring that the process remains efficient and error-free. Another innovative approach is the integration of blockchain technology.
- Arjun has since written for investment firms, consultants, and SaaS brands in the Accounting and Finance space.
- You’ll need a team member to audit the quality of service manually and inform the AP team so they can release the payment.
- Airbase automates the three-way matching process to eliminate the downsides of invoice matching.
- This level of accuracy is particularly beneficial for organizations operating on tight margins, where even minor financial missteps can have significant repercussions.
- This is the most important step, where the invoice is compared to the Purchase Order (PO) and Goods Receipt.
To show how three-way matching works, let’s use a scenario where a company needs to purchase 50 chairs for its employees from a vendor called All Office Solutions. You can also use technologies like fuzzy matching to detect invoices from fake companies. Faster payments can also potentially lead to improved credit terms, priority in orders, and early payment discounts. Confirm that the PO has all the order details required at the time of order placement, including the vendor’s name and address, items to order, and quantity and rate of those items.
Understanding Accounts Payable vs Accounts Receivable
Stakeholders in three-way matching are those individuals or entities interested in the three-way matching process. The three-way matching process is a multi-step process used to reconcile differences between a supplier or vendor invoice, a purchasing or procurement requisition, and a receiving or inventory report. The three-way matching process can be done manually or using an automated system.
Financial Accuracy Impact
This helps to reduce any inaccuracies and errors that could otherwise occur. The receiving or inventory department must also ensure that all goods and services are received in good condition. As the complexity of the matching process increases, it is essential to ensure that the appropriate system is in place to ensure accuracy. It could include hiring a specialist to manage the matching process or investing in an automated system capable of handling the complexity of two-way, three-way, and four-way matching. Are you looking for a way to ensure accuracy in your accounts payable process? Three-way matching is used by over 80% of the Fortune 500 companies in the US.
Privacy Policy Terms of Service Refund Policy Cookie Policy XML Sitemap HTML Sitemap
Encourage communication and collaboration between the AP department, procurement, and receiving departments to resolve discrepancies quickly. Establish clear approval workflows with designated approvers for different invoice types or amounts to ensure timely processing. Receiving high-quality goods and services is vital for improving your business. If you don’t get the materials or other goods or services you paid for, your business will suffer one way or another, whether it’s 3 way matching accounting through defective products or impaired internal processes. Without it, your business would have lost money, or you and the supplier would have wasted time trying to unravel the overpayment when it was discovered.
- Where discrepancies do occur, stakeholders are sought out for approval and, where necessary, updated or corrected documentation is requested from the supplier.
- These methods leverage technology and data analytics to streamline the verification process, reduce manual intervention, and improve accuracy.
- To mitigate the invoice fraud risk, many business owners and finance departments use 3-way matching.
- By implementing these strategies, businesses quickly identify discrepancies and process payments faster.
- The main downside of this approach is increased paperwork, which can extend the time required to issue payments to suppliers.
- By comparing the information from all three sources, businesses can identify and correct discrepancies, duplicate payments, and other issues that can lead to costly errors.
Three-way matching is an advanced process that compares the invoice and purchase order to the goods receipt note (GRN). It involves verifying that the goods or services billed in the invoice match both the PO and the GRN, confirming that the items were received as ordered. Advanced OCR technology extracts the important information from invoices and highlights areas that need your attention. The result is faster bill creation, fewer errors, and speedier payments.