It can lead to payment delays and be challenging to operate in a timely fashion. Implementation of three-way matching is to create a policy that outlines the procedure for matching the three documents. 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. The PO authorizes the purchase of listed items and includes specifics like the quantity and price (as agreed with the supplier) of items.
Zerocater had a complex, inefficient, and time-consuming invoicing process. AP had trouble keeping track of suppliers, and they spent days on invoicing. Using the Order.co Chrome Extension, the team could shop anywhere, check out across vendors, and consolidate their invoices. three way match accounting Zerocater now has a much more efficient system, with 50x fewer invoices, freeing up their time to focus on what they do best. In theory, it’s an entirely valid solution—however, in practice, the process used to implement this cost-saving system often has glaring flaws.
What is 3-way matching and why do you need to implement it?
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 issues it found, which may result in the issuance of a revised invoice or perhaps a credit memo by the supplier. The process only requires two documents, the invoice and purchase order. Meanwhile, the 4-way match adds another layer for inspection and verification purposes. If the three essential documents (PO, invoice, and receiving report) coincide with the actual delivery, then it’s a three-way match.
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. It ensures there are no discrepancies between a purchase order (PO), an invoice, and other required documents. Matches can be made up to 4 ways, depending on the contract and processing standards.
The Benefits of Automated Payments
The PO is sent to the vendor or supplier so that they can create an invoice which is sent back to the purchaser, and begin fulfilling the order. Traditionally, the PO serves as a promise to purchase goods that are then sourced or manufactured by the supplier based on that PO. For service providers, the PO serves as an agreement to begin scheduling and assigning resources.
A three-way invoice match helps you avoid falling prey to fraudsters claiming they provided goods or services. It identifies illegitimate invoices and enables your accountants to prevent overpayment for purchases that were not authorized for the specified amount. Preventing fraud, detecting overpayment, and managing purchases is an important part of small, mid-size and large corporations that invoice matching can help solve. 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. 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.
What Is Three-Way Matching?
That’s because 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 tax process. Two-way matching is the most basic approval process, where the vendor’s invoice number and details are checked against the purchase order (PO) number to ensure that these documents match. The feature is designed to prevent overpayments and invoice fraud, accelerate payment cycles, boost operational efficiency and reduce the risk of human error, per the release. It replaces the traditional method of using spreadsheets and split screens. Cross-referencing all three documents and their contents suddenly becomes an easier task that doesn’t take days to follow through to the end.
