The three-way matching process involves comparing the Purchase Order (PO) to the invoice. Three-way matching is an essential part of the Accounts Payable process. It is vital to have a good understanding of how to implement three-way matching. Maintaining a healthy accounts payable process and ensuring accurate payments is essential. The receipt should also be appropriately authorized and include applicable terms and conditions.
- Every aspect and expense of running a business – from hiring and training to purchasing and legal compliance – can heavily influence the financial standing of the company.
- FloQast debuts AI-driven automation features; Settle adds three-way matching for purchase orders; Modern Treasury introduces Professional Services offering; and other accounting tech news.
- Considering how much time we all spend trying to get the best terms on our contracts, a blanket 5% haircut on your business’s revenue in exchange for absolutely nothing is ridiculous.
- One benefit of a three-way match is to help the company save time and money.
- 3-way matching is a secure method of preventing overpayments and, subsequently, monetary losses.
- That’s because the order receipts and vendor invoices are two standard documents needed for audits.
- Imagine that your company has recently placed an order for ten boxes of paper.
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. According to an ACFE report, companies lose up to 5% of their annual revenue on fraudulent or unauthorized spends. That’s why finance teams are increasingly adopting a 3 way match of vendor invoices as an essential step of their accounts payable process. Authorize accounts payable personnel to complete payments for invoices if the figures across the received invoice, purchase orders, and receiving report differ with a small margin of error.
Why automate three way matching?
Audits should include random checks of matched and unmatched invoices, ensuring all documents are appropriately authorized and discrepancies resolved promptly. Consider meeting regularly with all teams involved to identify recurring issues or concerns, improve processes, and ensure everyone remains aware of their roles in the process. Technology is now central to modern business processes, and this three-step process in accounts payable and procurement is no exception. This might involve adjusting the invoice or goods received note, or holding payments until the completion of the order, depending on your organization’s policies. Errors in procurement and accounts payable can cause a ripple effect, leading to financial discrepancies and strained supplier relationships. The buyer receiving the delivered goods must make sure everything matches the PO.
- This lets you digitize the accounts payable process, speeding up invoice processing times and reducing errors.
- Softwares like ClearTech also promise 100% accurate invoice digitization with a combination of OCR technology and tech-enabled human-led managed services.
- Ready to gain greater control and visibility over your company’s finances?
- And the invoice price should match the price quoted in the purchase order.
For example, when a customer orders a product from a business, the business can use 2-way matching to ensure that the customer’s order is accurate and matches the product’s description. 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. An AI-powered AP system can do more than just identify fraudulent invoices. For example, ML-based anomaly detection can monitor employees’ engagement with the AP process. The system flags malicious behavior so you can jump in before it’s too late.
Exchange rate errors
Some AP automation vendors provide a 3-way matching module within their tool. This lets you digitize the accounts payable process, speeding up invoice processing times and reducing errors. With accounts payable automation in place, employees can merely scan the invoice or upload the invoice into the tool. The invoice fields are then automatically extracted using optical character recognition technology. Softwares like ClearTech also promise 100% accurate invoice digitization with a combination of OCR technology and tech-enabled human-led managed services. A 3-way match can then be automatically performed on the extracted data, and any invoice with discrepancies beyond the acceptable threshold will be flagged and raised to the vendor.
AP 3-way matching is the process of taking an invoice for the purchase of goods or services and matching it with the corresponding purchase order (PO) and receiving information (order receipt). This is done to ensure that the details on each document agree with each other. When three-way matching is performed manually, chasing down each document from different team members and cross-referencing each detail can take enormous amounts of time.
Way vs 3-Way vs 4-Way Matching
Manually doing the matches exposes you to mistakes and misinterpretations. Additionally, the documents could be misplaced, lost, or three way match accounting damaged due to poor handling or storage issues. Receiving high-quality goods and services is vital for improving your business.