Automating this process can save time, reduce costs, improve accuracy, and strengthen relationships with suppliers. It also speeds up payments, makes audits easier, and helps catch mistakes or fraud. A business might elect to go beyond a three-way match and also verify whether the goods received were of an appropriate quality level. This might require additional documentation by the quality inspection team, which must be sent to the payables staff for inclusion in its analysis. This approach is most useful for high-value items that are subject to quality failures. The main downside of this approach is increased paperwork, which can extend the time required to issue payments to suppliers.
Configurable matching logic
In a three-way procedure, major purchases are controlled using cross verification. If there is a fault at any step, then the amount cannot be taken against the invoice until the error is resolved by receipt of a confirmation or the revised invoice from the supplier. It is also one of the risk management methods as the risk of payment to unauthorized persons or against fake bills is to be controlled. Sometimes it becomes a lengthy procedure, but it is the most effective way of managing the risk.
Three-Way Matching: Definition and Importance Explained
Manual processes that were manageable at a smaller scale become overwhelming and inefficient. Hiring more staff to keep up with volume isn’t always sustainable, and it can introduce even more variability and inconsistency in how invoices are handled. In some cases, the delivery may also include a packing slip from the supplier. Let’s explore how 3-way matching, combined with accounts payable automation, can streamline your financial processes and keep your accounts payable on track. By adopting accounting software with built-in three-way matching capabilities, you can optimise your AP process, reduce risks, and improve overall financial oversight.
Why Should You Automate Your Matching Process?
- As mentioned before, manual data verification is prone to errors and discrepancies.
- AP teams often have to go line by line to ensure that quantities, prices, and item details match.
- By understanding and implementing 3-way matching, you can protect your business from financial discrepancies and streamline your payment processes.
- An invoice is the document sent by the supplier to the buyer after the goods have been delivered or the services have been completed.
- Three way matching helps businesses track the origin of invoices and confirm their legitimacy to avoid fraud.
- The figures from the inventory department are to be collected and verified, and lastly, it is to be verified from accounting entries.
Progressive organizations are turning to automation of the 3 way match in accounts payable. Partner with a http://inrus.com/?langId=2 reliable AI-powered workflow solution like Cflow to build bullet-proof 3 way matching in accounts payable. Building and maintaining strong vendor relationships becomes an issue with manual 3 way matching. Manual cross verification is time consuming, payments to vendors are delayed on many occasions due to the time taken for cross-verification of data across 3 documents. Upon receiving the goods from suppliers, the procurement team verifies the quality of the goods and issues the goods received note.
The matching process
- If these three documents, the invoice, purchase order, and receiving report, agree with each other, you have a three-way match.
- When an invoice, PO, and receipt are all compared, it’s much easier to double check your work.
- If everything matches (quantities, prices, and item details), the invoice is approved automatically.
- Using the three-way match as a procedure to post procurement transactions enables the team to maintain a verified record of suppliers.
In case of discrepancies, the payment against the invoice is kept on hold. If the details are accurate in a 3-way match, the invoice is approved, and the payment is released. As your vendor base and transaction volume grow, automation allows your AP process to scale without hiring more staff or sacrificing accuracy. It ensures consistent performance regardless of volume, seasonal spikes, or business expansion. As a business expands, so does the number of transactions and vendor relationships.
When you match the figures properly, your accounting becomes more accurate. The three-way match is an accounting control that ensures the payments a company makes are accurate and complete. The process involves matching up three documents and verifying them before payments get made to suppliers. Even tech giants like Google and Facebook fell prey to fraudulent invoices. As per CNBC, Google and Facebook were forced to shell out $23 million and $100 million respectively to invoice fraud. The most reliable way to combat invoice fraud is to adopt 3 way matching in accounts payable.
Ways to Make Three-Way Matching More Efficient
Considering alternative methods, like automated processing, can save a large portion of the budget allotted for manual handling. Create acceptable variance percentages for invoice amounts compared to POs. Letting AP staff approve invoices within 2-3% of the PO amount can slash processing delays while maintaining proper controls. The process begins with the issuance of https://construction-rent.com/real-estate a purchase order by the buyer to the supplier.
The purchase requisition and purchase order are usually prepared by this department. The purchase https://rozamimoza2.ru/free-cheats-game-hacks-spoofer-bots-executor-updated-skin-changer/ department inspects the delivered goods and verifies the quality and quantity against the PO. Once the order inspection is done, the goods received note is generated and passed to the accounts department. These systems facilitate and expedite the process with built-in workflows and approval points. They centralize purchasing data, making it easier to track and improving data integrity.
