Since manual matching takes so much time, it can often delay payments to suppliers, which can hurt your relationship with vendors. As hard as your employees may try to get payments in on the due date, manual matching can just be too tedious. People can only work so quickly, and taking the time to track down all the approved versions of the documents from suppliers creates a lot of back and forth. By keeping secure records and checking each payment, you’re making sure you’re not over- or underpaying invoices, missing discounts, or potentially subjecting the company to fraud. You’ll also avoid any potential payment problems that can create costly headaches and time sucks down the line. After the vendor sends the invoice and your accounts payable department approves and pays it, the vendor will then send a receipt.
- An AP team will need to retrieve the purchase order and receiving report and cross-check the quantities, price and other information across all three documents.
- Plus, it helps ensure your company isn’t subject to fraud and is ready and organized for audits.
- A company might choose to use this method since it’s less time-intensive than a three-way match.
- The auditor needs to follow the purchase process from requisition to payment to verify accuracy, completeness, cut-off, occurrence, and classification.
But when you receive the invoice, you notice that the supplier billed you for eleven boxes. Now, while Facebook and Google managed to get their finances back, fraudulent invoices are a serious problem in the world today, costing enterprises billions in losses. Perhaps, it can be assumed that if Google and Facebook had systems of vetting out purchases and invoices, they wouldn’t have fallen victim to invoice fraud. 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. Automate invoice data capture, build workflows and streamline the 3 way match process in seconds.
Pain points in manual 3 way matching
In addition, matching creates a watertight procurement system that’s free from financial fraud. An automated 3-way matching solution virtually eliminates human touch points such as manual data entry, paper receipts, and physical signatures for approval. A company might choose to use this method since it’s less time-intensive than a three-way match. However, they could be paying too much or too little for the goods and services rendered, as they have no way to cross-check the receiving information. For as useful as the matching process can be, it is a labor-intensive effort that is susceptible to human error—especially if your AP team must handle a significant number of invoices regularly.
Keeping these documents together will streamline the audit process, saving countless hours for audit personnel. The AP department receives an invoice from the supplier once the purchase has been shipped. A supercharged 3 way matching AP workflow ensures timely vendor payments. Thus automation can help save costs while establishing a stable supply chain. A manual matching process requires all documents to be collected, stored and maintained for future reference.
Product Features
In order to simplify the three-way matching process, you might consider excluding smaller value invoices and recurring invoices from the three-way matching process. Recurring payments can be verified at setup, leaving zero room for fraud. Similarly, it’s counterintuitive for fraudsters to try defrauding an organization of small-dollar micro transactions. By leveraging 3 way match accounting departments can streamline payment processes, mitigate the risk of human error, and exchange business documents digitally. Upon migration, automated invoice management processes won’t suffer nearly as much from the long delays, bottlenecks, and processing costs that plague manual matching. Traditionally, an accountant in the accounts receivable department would have to gather all the relevant paper documents in a transaction in order to satisfy their matching procedures.
It can lead to delays in processing payments, issues with tracking and analyzing data, and it’ll be harder for companies to make informed financial decisions. Manually managing, tracking, and reconciling a 3-way match can be time consuming, prone to mistakes, and can result in either late invoice payments or potential account suspensions. 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. The reality is that a lot can go wrong, so it’s essential to have a process to check that your business is never losing money to inaccurate or fraudulent invoices.
The invoices are scanned electronically to extract important purchase data like the PO number, quantities, and prices. The same information is extracted from the PO and GRN and verified against that obtained from the invoice. The verification process is done on each line item on all documents for accurate matching. The accounts professional payable department then creates an invoice based on the information on the purchase order. This invoice is then sent to the buyer from the supplier based on the information gathered from the purchase order. The invoice details would be validated against the details mentioned in the PO before approving the invoice.
The 3-way matching process requires accurate verification and matching of information in the invoice, purchase order, and goods received in the note. Gathering all these documents and verifying the data is a time-consuming process when done manually. As mentioned before, manual data verification is prone to errors and discrepancies. A great way to eliminate fraud is by automating your procurement process. The automated 3-way matching process can help to prevent fraud and errors in accounts payable. By matching all three documents independently of human input, it ensures that the correct invoice is being paid for the correct purchase.
Three-Way Invoice Match
The Association of Certified Fraud Examiners (ACFE) estimates that companies lose 5% of their revenue every year due to fraud. In the accounting and bookkeeping area of accounts payable, the three-way match refers to a procedure used when processing an invoice received from a vendor or supplier. The purpose of the three-way match is to avoid paying an incorrect and perhaps fraudulent invoice. Businesses must ensure their accounts payable (AP) departments verify the legitimacy and accuracy of every invoice they pay.
Harry initially verifies that the business name and payment details are consistent across the documents, making it unlikely that a rogue fraudster is attempting to misdirect a legitimate payment. He then verifies that the inventory total of the 100 hats that he requested in the initial purchase order is matched by the packaging slip and invoice. The market is flooded with several workflow automation solutions for automating key business workflows. Businesses need to choose solutions that work best for their business needs. Cflow from Cavintek is a comprehensive workflow automation solution that provides fully customizable automated workflows for various business functions.
A Business Case of the 3-Way Match Process
In addition, some industries, such as healthcare and government contracting, may be required by law or regulation to use the three-way matching system. If all other sites open fine, then please contact the administrator of this website with the following information. We faced problems while connecting to the server or receiving data from the server. Three way matching includes Purchase Order, Goods Receipt Note and Invoice. The two most common types of matching are two-way and three-way matching. AP departments must check all three against each other to ensure legitimacy and consistency.
Way Match Invoice Processing
The 3-match process achieves validity, accountability, and transparency in procurement planning and management processes. The premise of the three-way match process is to reduce the risk of financial fraud by preventing the reimbursement of unauthorized purchases. Not only can your employees easily overlook transposed numbers or unintentionally miss process steps, but they also might cause transcription errors on the original documents. It is very labor intensive, and it can be difficult to accumulate the required information, which can result in delayed payments while the accounts payable staff searches for missing information. Delays can annoy suppliers, and also prevent a company from taking early payment discounts.
The three documents that are matched are the purchase order, the goods receipt, and the invoice. It stands to reason, then, that heavy vetting in this area of the business is a crucial element. A 3-way matching process has been in practice in this regard for quite some time. But there’s innovation here – a way to make that 3-way matching faster, more streamlined. There’s one corporate organism within an enterprise’s ecosystem, though, that perhaps relies more heavily on processes that are more focused, carefully managed, and systematic – the accounts payable department.
The 3-way check helps businesses achieve cost savings and improve the transparency of procurement and accounts payable transactions. Vendors and suppliers submit invoices to Accounts Payable (AP) for processing and payment. Once the AP clerk receives the invoice, it’s physically matched to the PO form and the packing slip. This means that the clerk must go to the file cabinet and pull both forms that they previously filed when Purchasing and Receiving routed them to AP. Whatever the process is for receiving goods, it’s imperative that when a package is received, the contents are checked against what’s printed on the packing slip. The packing slip indicates what the vendor believes they’ve placed into the package and shipped.
The 2 way matching process is the default approach to verify invoices across organizations. But companies are increasingly adopting three way matching to add an additional layer of verification and prevent overspending. Since you won’t have to compensate a larger team to manually handle matching, you’ll be able to put that money toward other things in your budget. Plus, timely and accurate payments mean you won’t be charged any late fees or have to account for any time-consuming and costly errors. The team that physically receives, records, and distributes the goods your organization receives is responsible for important details that are essential to a successful invoice matching process. In the world of accounts payable, there are a slew of steps and checks to ensure that a company pays its bills quickly and accurately.
The purchase order also has a unique reference number for company tracking purposes. 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.
This guide will walk you through exactly what three-way matching is, how it works and which departments work on it, why it matters in the AP process, and how to streamline it with AP automation software. As a best practice, the accounts payable department is responsible for handling the three-way match process. However, because AP is often separated from the team responsible for raising purchase orders, these teams are in a position to coordinate between the areas of the business. Order.co gives you one platform for purchasing, vendor management, and automating your AP processes to save you the time and expense of manual data entry and human error.
