Trim the overhead in your AP process with Rossum as the universal translator between all your suppliers and internal ERPs. DocuPhase automatically keeps detailed audit trails for all transactions, making audits faster and easier. What’s more, you can also grant limited access to auditors instead of giving them access to your entire ERP system.
Without 3-way matching, your AP team may end up wasting time processing an invoice and getting the necessary approvals only to realize it’s a duplicate. However, if there are any discrepancies like mismatched quantities, incorrect amounts, or duplicate items, then the payment is put on hold. Once any discrepancies are resolved, the invoice is sent through the approval process again. If the details don’t match or if there are any discrepancies, you can put a hold on the payment until the issue is resolved. This prevents your company from paying duplicate, inflated, or fraudulent invoices. 3-way matching is the process of matching a vendor invoice against a purchase order (PO) and a goods receipt note — a document that confirms the delivery of goods.
In a 4-way match, the invoice is compared with the purchase order, then with the receipt of goods, and finally with a quality inspection document. This addition to the matching process ensures that a business only pays for items of acceptable quality. Thus, the « three-way match » concept refers to matching three documents – the invoice, the purchase order, and the receiving report – to ensure that a payment should be made.
Internal controls are the processes and procedures that a company puts in place as safeguards against fraud and errors in the accounting department. With software that can automate this process, like Rossum, 3-way matching can be performed for every invoice a company receives without requiring an excessive amount of time from employees. Simply put, the Google and Facebook accounting departments needed the proper procedures to prevent scams like this. While they might have approved these fake invoices for a myriad of reasons, there is one step that companies can take to ensure that this does not happen to them. These three documents are the invoice itself, the purchase order, and the receipt for the goods. This means that one invoice will have three separate documents that must be verified before the payment can be made.
The supplier’s invoice is essentially a formal request to pay money owed to the supplier. Training programs should cover document handling, data entry standards, and familiarity with the matching process. Keeping staff well-informed and up-to-date on best practices and industry standards is vital. In 2-way matching, the primary matching factor is comparing the purchase order with the supplier’s invoice.
It involves matching the corresponding fields from three different documents to ensure that everything is correct. The automated system for the Receiving Department may be slightly more labor intensive. The Receivers will still need to verify the contents of packages against what’s printed on the packing slip. 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.
With three-way invoice matching, it is easy to identify discrepancies between the goods and services ordered, delivered, and invoiced. Since all these documents are compared, the accounts payable team can determine if they should make a payment, make only a partial payment, or wait until an issue is resolved. The reality is that a lot can go wrong, so it’s essential to have a process to check that your business is never losing money to inaccurate or fraudulent invoices. With the three-way matching process, you won’t overpay because of these issues. No matter which level of matching your business will implement, robust AP automation software and invoice processing tools will make your teams more efficient and accurate. Accurate 3-way matching prevents overpayments and errors in financial transactions.
This can mean losing out on early payment discounts and even incurring late fees due to delayed payments. When your company receives an invoice, your AP team will need to enter the data into your ERP or accounting system. Your accounts payable team is undoubtedly busy, so they don’t want to spend more time on a task than they need to.
The receiving report, also known as a goods receipt or delivery note, is generated when the ordered items are physically received by the company. It details the actual quantity and condition of the items received, ensuring that they match the information specified in the purchase order. The 3-way matching concept is based on the idea that if the data for the invoice, purchase order, and receipt of goods lines up, then the invoice can be approved and paid. While the 3-way matching process can reduce fraud and highlight discrepancies, performing the steps manually is inefficient and prone to errors. It also takes your AP team away from more productive work like sourcing new vendors and following up with existing ones. With these three documents, the accounts payable team can perform a 3-way match to verify an invoice.
Procurement and invoicing, while essential, can be hectic due to varying terms, discounts, and international regulations. Prices need to be verified against the original purchase order’s negotiated prices and quantities billed for must be confirmed against quantities actually received. It’s a good idea for the person doing the receiving to make notations directly onto the packing slip, of missing or damaged items. The packing slip should be marked with the date the items were received and by whom. It then gets routed to the Accounts Payable department where the form gets filed, awaiting a match to the incoming invoice. Manually checking individual line items on an invoice against a purchase order and a goods receipt is a labor-intensive process.
The stringent validation process of 4-way matching helps detect anomalies and irregularities, making it difficult for fraudsters to exploit the system. 4-way matching provides clear visibility into the entire procurement and payment cycle. Any discrepancies, such as incorrect quantities or pricing, can be identified and resolved during this step. Knowing 2-way matching in Accounts Payable and 3-way matching can help companies understand the best matching process for their unique needs. In addition to these two forms of matching, there is another called 4-way matching. General ledger accounting codes are entered at the inception of the order, saving time by eliminating redundancy.
Reconciliation should include a thorough review of matched and unmatched transactions, as well as any outstanding discrepancies. Identify and address discrepancies promptly to prevent prolonged payment delays or disputes with suppliers. Invest in training and education for personnel involved in the 4-way matching process. Ensure that employees understand the importance of accuracy, compliance, and timely processing.
Fixing these errors (if someone catches them) will only cost your company more time and money. A 3-way matching process can help prevent instances of payment fraud by ensuring that only invoices for goods and services that were actually received are paid. Automating 3-way matching in accounts payable enhances accuracy, fraud what are the best invoice payment terms for your small business protection, and efficiency, while also lowering cost and staff demands. Automating the AP workflow and seeing these benefits all starts with automating data extraction. The ordered, accurate nature of automated data extraction in three-way matching is very useful to any business that wants to be better prepared for auditors.
A completed three-way match makes record-keeping easy, as well as making it easier to track payments and keep more accurate records overall. If there are ever discrepancies, or an audit needs to be conducted, it will be easy to look back and verify invoices when documents match. As organizations grow and more purchases are made, it naturally becomes harder to keep track of all the important information between buyers and vendors. This purchasing information, such as itemized invoices, shipping and delivery confirmations, and confirmation of receival is vital to maintaining accurate records and properly managing business spend. Conduct periodic audits to ensure that the 4-way matching process is functioning effectively.
That fact is true not only because it ensures a consistent supply of vital goods and services that meet the company’s needs but also because it protects against overpayment. In some cases, an effective three-way match can even expose potential fraud, as not all vendors operate above board. A systematic 3-way matching system aids businesses in maintaining accurate and comprehensive records. By documenting and cross-referencing each step of the procurement process, companies can create a reliable audit trail. This not only supports internal control but also facilitates compliance with regulatory requirements and external audits. Three-way matching is critical because it verifies the data on the PO, GRN, and invoice.
Using cognitive data capture tools, Rossum can read the data from these documents and match them with little human effort. Three-way matching accounting solutions can include manual methods and automation. Manually performing a 3-way match requires repetitive work subject to human error. Automating the 3-way matching process with software like Rossum is the most efficient way. In a 2-way match, the invoice is matched with the purchase order to ensure that the number of goods purchased and the amount to be paid are the same on both documents. A 3-way match will include the receipt of the goods and these two documents.