If the invoice, purchase order, and receipt all match correctly, then the accounts payable department approves the invoice for payment. When it comes to matching invoices, there are a few key things you can do to make the process easy and headache-free. With the right tips and tools, you can perfect the invoice matching process and make it a breeze. 3-way matching is a process put in place to ensure that the correct invoice is being paid.
DocuPhase is an industry leading provider of intelligent automation solutions designed for modern finance teams to streamline and optimize their back-office operations. Filing can be very time-consuming for AP clerks and retention of volumes of paper handyman business takes up valuable space. There are several ways for an organization to set up their receiving department. Some companies have a central receiving location while others may simply have a loading dock or even just a reception desk in a lobby.
With the three-way matching process, you won’t overpay because of these issues. Before processing vendor payments, AP teams go over these 3 documents to verify that the product/service received by the company matches the details of what was initially ordered. The goal here is to ensure that financial details (order quantity, order amount, total amount, PO number etc.) match across all 3 documents.
- In the event that they do, you have a successful three way match, which can be carried forward to your accounts payable for fulfillment.
- If an invoice does not match, users can quickly double-check the imported data against the original image or look deeper for the discrepancy.
- This slow pace often applies to processes such as three-way matching in accounts payable departments.
- You can make three-way matching more efficient by excluding small-dollar and recurring invoices from the matching requirement.
- Businesses can track the origin of invoices and ensure their legitimacy to avoid fraud or duplication.
Documents can also get misplaced, perhaps being attached to something erroneously or even thrown away or misfiled. Similarly, pricing discrepancies will need to be investigated and resolved. Once all approvals are received and discrepancies are resolved, the invoice is cleared for payment, as long as the relevant paperwork finds its way back to Accounts Payable. Prices need to be verified against the original purchase order’s negotiated prices and quantities billed for must be confirmed against quantities actually received. Three-way matching helps protect business from unnecessary expenses which, in the long run, adds to your bottom line. It’s always easier turning a profit when you’re not losing money to fraudulent claims.
The fraudster in question simply sent falsified invoices to Facebook and Google, requesting payment for services that were never delivered or even requested. Naturally, managing stacks of paperwork and invoices is an arduous task that is bound to incur its share of difficulties. Human error and inefficiencies can be avoided simply by migrating to automated three way match best practices.
Goods receipt note
Admittedly, these issues may not be nefarious and merely the result of sloppy processes, but that sloppiness begs the question of where else the supplier could be cutting corners. Ideally, any vendor you work with should value your working relationship and your business enough to mitigate and minimize any invoice or shipping issues proactively. Proper documentation is a relative term, particularly across industries and geographies. Not all businesses generate each of the needed documents for 3-way matching in every transaction. The visual form builder enables the accounts payable team to set up the 3-way match workflow easily without the need for coding.
- Companies use this reconciliation method to detect fraudulent invoices, embezzlement, computer glitches, or human error.
- According to a report by ACFE, organizations across the world lose 5% of revenue due to fraud or unauthorized spending.
- When data is readily accessible at all times, businesses can access clear audit trails and pinpoint financial inconsistencies quickly.
- The 2-way matching in the accounts payable process verifies that the information on the purchase order and invoice match.
- Maintaining accurate documentation and sending prompt payments will improve the relationship between your company and your suppliers, potentially incentivizing better pricing and payment terms.
- This document is forwarded to the accounts department once the receiving department has completed their due diligence and recording.
If there are any issues, your business will usually withhold payment until the discrepancy is rectified. Whether an individual, a department, or an organization requires anything, they forward a request that details what they want, the quantity, and why they need it. The purchasing team receives the request and expands it into a purchase order for the supplier, outlining the goods needed quality and quantity, and the cost of the purchase.
An example of 3-way matching in action
Businesses should evaluate the benefits, process, costs, and challenges of each method and choose the one that best suits their procurement process. With the right tools and a little bit of practice, matching invoices can be a breeze. Close your books faster by syncing your 3-way match directly on to your ERP or accounting automation software. This provides visibility and accessibility of all business data in a single organised database.
Three-way matching is a procedure used in accounts payable to authenticate and verify the disbursal of payment to a creditor. This type of match involves matching Purchase Order (PO), Goods Receipt Note (GRN) & Invoice. Various departments work together to check things like price billed, quantity billed, quality & quantity of goods received etc. BILL provides a solution that streamlines the entire payment process, helping you avoid illegitimate invoices and overpayment and save time. Learn more about how your business can benefit from accounts payable automation.
Most Important Small Business Financial Statements
With the three-way matching system in place, companies can confidently issue accurate payments and maintain positive relationships with vendors. However, if there are discrepancies between any of the documents, the accounts payable department will contact the supplier to resolve the issue before making payment. And three-way matching doesn’t only benefit your business—because of the expedited invoice approval process, it also maintains a positive buyer-supplier relationship. Three-way matching creates a built-in check to the vendor payment process, ensuring a positive supplier-buyer relationship.
They will now, however, have to go into the automated system, pull up the PO number and manually confirm on the screen that what was ordered on the PO is what was actually received. When everything is accurate, the line items on the screen become available for payment when AP enters the invoice against the PO. When the invoice is received, AP will only be able to pay for what’s been received based on what the Receiving Department enters electronically. At this point the packing slip can either be scanned and filed electronically or it can be discarded. In order to avoid processing fraudulent invoices, your accounts payable team has to be extra careful. What that means is that you end up spending more time getting invoices fulfilled than you’re supposed to.
Prone to error
The three-way match compares what has been ordered with what has been received. Businesses can track the origin of invoices and ensure their legitimacy to avoid fraud or duplication. Vendor invoices and order receipts are needed during the auditing process.
The first step in the p2p process is placing the order with the supplier. The purchase order (PO) is the document containing complete information on the goods/services required along with pricing information. Order receipts are proof of payment that is included with delivered goods. They contain information on the goods included in the shipment and the payment method. An invoice is a paper or EDI form document that is sent from the vendor to the buyer. Information contained in invoices is unique invoice numbers, vendor contact details, applicable discounts or credits, and the total amount due.
In the event that they do, you have a successful three way match, which can be carried forward to your accounts payable for fulfillment. On the PO, you will need to verify that the quantity and details match those specified on the invoice—in this case, that the order is for 1,500 circuit boards at a rate of $3 each, totaling $4,500 altogether. Let’s say you receive a $4,500 invoice from a vendor for 1,500 computer circuit boards. Now, you will need to cross-check the PO and ensure that it has been approved before fulfilling the invoice. It’s important to prevent overpayments, underpayments, and potential fraud. It may not work as well for service purchases cause it can be more difficult to track and verify.
