The three-way matching process happens automatically when you upgrade to an e-procurement system like PLANERGY – no human intervention required. Issues are brought to light early, so you don’t bottleneck or slow down the payment process.

But the three way match process is not complicated and does not actually require much added time or man-power. Performed correctly, it’s a very smooth procedure that provides huge benefits when weighed against the effort it takes to carry out. One of the best ways for personnel in accounts payable to verify a payment is with a three-way matching (3-way matching) system. Three-way refers matching a vendor invoice received from a creditor or supplier with both the information on your company’s purchase order and the customer’s goods receipt or packing slip/receiving report.

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It might be that a faulty computer system or a huge workload is preventing your employee from doing good work. In other words, three-way matching can help troubleshoot a bottleneck in the workflow. To understand the three-way match in accounting better, let us first understand what invoices, purchase orders, and goods receipt notes are. The purchase order is an official confirmation receipt of the order sent by the buyer to the vendor. The purchase order authorizes the purchase and includes information like PO number, payment information, and description of goods and their quantity.

• 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.
• Third, we’ll discuss handling variances through parking invoices and MIR6.
• The supplier then sends a receiving report to the buyer once the order is completed.
• Automation software and spend management solutions can help companies streamline complex workflows within the finance team and beyond.
• When it comes to supplier invoices, a paper or emailed invoice is received by Accounts Payable, frequently before the delivery of the goods, which causes a delay in the matching process.
• Two weeks later, the supplier delivers the siding and sends its invoice to the construction company.

The 3-way PO, invoices, and GRN matching save the accounting team time by simplifying the invoice validation process. Potential payment discrepancies are immediately flagged down so that the team can investigate the cause and rectify it immediately. Timely validation and verification ensure on-time payment to suppliers. The 3-way match accounting entries need to be in sync for a successful 3-way matching. If any of the 3 documents fail to match, the invoice payment is put on hold until the discrepancy is resolved. The 3-way match process in accounts payable can be used in SAP, ERP, and Odoo implementations.

The Drawbacks Of Manual Matching

From the standpoint of a vendor, a three way match by the customer is delayed by the time required for the vendor to review and approve the invoice and print and mail it (plus mail in-transit time). Try Nanonets™ and get the benefits of automating Three Way Matching through an AI-based OCR technology. Put all that together and you get a smarter three-way matching solution that eliminates error 100 percent at a fraction of the time and at even lesser cost. A great way to eliminate fraud is by automating your procurement process. For the supplier, outlining the product or service they need, the quantity and quality they desire, and how much they agree to pay. Manual data processing and checking is laborious and may be prone to errors and misinterpretation since everything is done by hand.

• This is reflected in Levvel Research’s Payable Survey, with 31% of respondents naming manual invoice matching among the top AP pain points.
• The matching process can be mapped through a detailed 3-way match flow chart, which is the basis for effective automation.
• DocuPhase’s blog provides valuable insight into how your company can benefit from implementing automation & document management into existing processes.
• We match these data points to your contracts, invoices and any other documents to verify everything is correct.
• You should check the math on the invoice to make sure the number of units times the unit cost is correct.
• After collecting and comparing bids, a printer is selected and the order is placed.

Once the PO, GRN, and invoice are gathered, the information they contain is verified. Storage and retrieval of documents in manually managed invoice processing is a challenge. Paper documents require huge storage areas that need to be kept safe from damage due to human handling and nature’s forces. When documents are not organized properly, retrieval for reference becomes a headache. Once the hold is resolved or released, the invoice approval process must be repeated and if all tolerances are met, the invoice is approved for payment. In Deloitte’s 2016 Global CPO Survey, Chief Procurement Officers indicate that they are investing increasingly in innovation and digital technologies in an effort to shift their teams towards more strategic tasks.

Prone To Error

This is done to make sure the invoice is not a rogue request from a third party trying to be paid for a phony order. They see that 20 pallets of brochures https://www.bookstime.com/ were, in fact, delivered by the printer. Each pallet contains 5,000 brochures, so that matches both the PO quantity and the supplier invoice.

Prevent fraud – 3-way matching helps prevent, or reduce the risk of, fraud by preventing payment for purchases that were not authorized or that did not comply with vendor terms. The intent of the 3-way matching is to ensure that the goods ordered, goods received, goods billed, order price and the billed amount are consistent across the PO, GRN, and invoice.

In the world of accounts payable , one of the most challenging jobs is managing the onslaught of supplier invoices that arrive each month. One technique AP teams use to make sure invoices are legitimate is called three-way matching. In addition to picking up on criminal activities, three-way matching can benefit an organization in other ways, especially when the process is automated.

The Benefits Of Using A 3

Three-way matching in accounts payable also serves as an excellent method of validating different parts of the supply chain. If the quantity updates to reflect the correct amount, the invoice will automatically validate, requiring no further action on your part—a major time-saver. While the purchasing department creates and issues POs, the receiving department creates the reports regarding what physically arrives at the warehouse.

• In other words, three-way matching can help troubleshoot a bottleneck in the workflow.
• You can counter this problem by establishing a three-way matching process for all of your expenditures.
• If everything checks out, then we can click Register Payment, add in our payment details and finally Create Payment.
• If there are discrepancies, the invoice is put on hold and investigation takes place.
• The purchasing department requests multiple bids before selecting a vendor or supplier for a substantial order.
• This is done to make sure the invoice is not a rogue request from a third party trying to be paid for a phony order.

Shifting to a digitized process ensures promptness in payments, accuracy in encoding data, and accessibility in various platforms. The primary purpose of 3-way matching is to prevent any incorrect and fraudulent invoice or payment from happening in a company. The 3-way match helps companies avoid problems what is 3 way matching in accounting related to AP by resolving any possible mismatches on bills and orders before payments are processed. The order receipts and vendor invoices are two standard documents needed for audits. Requiring these two documents before the completion of a transaction contributes to a straightforward process.

Why Is Invoice Matching Important?

You’ll make sure that invoice is uploaded to your ERP, which also stores receipts and purchase orders. In other words, invoice matching is an important safeguard for companies. And in the case of companies that spend heavily on direct materials, the sheer volume of transactions they have to review elevates the risk. Even if the three-way match works fine for your purchasing department, it won’t catchemployee expense reports, which are processed through their own system, completely separate from AP. The average enterprise deals with thousands of expense reports each quarter, often overwhelming human auditors who may miss high-risk expenses and common misconduct like duplicate charges and mileage padding.

• The firm’s accounting department then conducts an invoice approval process.
• After this, finally, the invoice is given for authorization and then to the cashier or cash department for payment to the supplier.
• 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.
• This document covers 3-Way Matching in the Odoo 15Purchase application and is intended to help understand the different billing states.
• Take a look at some findings of several industry studies and reports regarding the cost of choosing to manually implement the three-way match process as a cost-saving method.

Gathering people, such as suppliers and supervisors, to sign documents may take time. Once AP has matched the receipt, invoice, and purchase order, they are likely to face one of two different scenarios. In the first, everything matches within their company’s tolerance threshold and they can voucher the invoice in the ERP and begin the payment process. In this scenario, when things go according to plan, they may also be able to take advantage of early payment discounts—an incentive many suppliers offer. Let’s look at a hypothetical example of three-way matching — that of a boutique hotel chain whose marketing department has prepared a new full-color brochure and needs 100,000 copies.

Doing this can help companies root out fake or unauthorized transactions, which can cost a company an estimated 5% of its annual revenue, according to the ACFE report. Three-way invoice matching means that data is verified consistently throughout the process. Keeping close tabs on POs, GRNs and invoices ensure that organizations are not overpaying or paying for duplicate items or invoices. The process also protects against fraudulent or non-authorized purchases. Any inconsistencies will be flagged and will then need to be manually approved. The perils of manual invoice matching will have become all the more apparent for AP working remotely in recent times. Improve supplier relations, reduce human error, lower processing costs and improve control and visibility by automating three-way matching.

Three-way matching may be labor-intensive and time-consuming because both the supplier and the buyer will allocate time and resources to accomplish the necessary paperwork. The process also requires both parties to check and send documents back and forth to each other. The printer, which gladly accepted this lucrative assignment, receives the hotel’s PO along with the digital files needed for printing the brochures. The traditional three-way match is a tried-and-true, yet often arduous, method for accounts payable to reduce the risk of fraud from unauthorized payments. Automating this process lets finance teams quickly and accurately identify and flag suspicious transactions, as well as process and approve authorized payments–all in a fraction of the time it would take manually. Auditing is no fun for any business, but automating the three-way match process will make life significantly easier when it comes around.

Accounts Payable Records Payments

A flag is only thrown if the vendor sends less or charger more than the amounts agreed upon. The firm’s purchasing department receives a $ 20,000 invoice after ordering the computers from the supplier. Download this checklist to facilitate glitch-free implementation and execution of your AP Automation solution and help your organization maximize and achieve the ROI from automation. A query is performed in the purchasing module, receiving form to find the appropriate purchase order. No holds are placed on the invoice and the invoice is approved for payment. His business was expanding, but with every new location came a new list of products to order and an extra logistical issue to address. He started using Order and within a day he was up and running on the platform.

Seamless interactions between an organization and its suppliers lead to an improved relationship. A good relationship with a supplier can lead to preferential pricing and improved credit terms. CoreIntegrator systems can automatically compare the three critical PO documents (PO, Receipt/Packing Slip and Invoice) and highlight any discrepancies between them using OCR technology. No more waiting, no more misplaced work, and no more strong-worded arguments that place blame between departments when some part of the matching goes awry. The invoice is on the basis of the PO sent by the purchaser to the supplier.

The care and attention that the process demands can mean that the entire department slows down when processing and matching invoices. As a result, you could lose early payment discounts or incur late fees due to missed invoices. Ensures optimal vendor relationships – Professional vendors respect the importance of purchase orders, invoices, and receipts to the accounts payable process. Frequent mistakes on receipts and invoices can be a sign of a broader business issue, and may indicate that it’s time to begin shopping around.