3-Way Match for Accounts Payable: A Smart Way to Do Business

manual invoice matching

The accounts payable department then creates an invoice based on the information on the purchase order. This invoice is then sent to the buyer from the supplier based on the information gathered from the purchase order. The invoice details would be validated against the details mentioned in the PO before approving the invoice.

manual invoice matching

Ensuring that these documents are matched before paying an invoice saves businesses from overpaying or paying for an item that they did not receive. 3-way matching is a procedure for processing a vendor invoice to ensure that a payment is complete and accurate. The goal of 3-way matching is to highlight any discrepancies in three important documents in the purchasing process.

The Drawbacks of Manual Matching

This allows more time to work with those transactions that have problems or that need research. As with any process, three-way matching will go smoothly if it’s set up and executed efficiently. Let’s see some tips that help you make the most out of the process without getting stuck in the details.

The accuracy and consistency of invoice-PO matching are greatly improved through automation. There will be no delays or bottlenecks in the invoice payments when the 3-way matching process is automated. Let us understand the 3-way matching process with the following example.


Fake invoices are often made well to resemble the real ones, which makes it difficult to distinguish them at first glance. Still, if there’s no related purchase order or receipt, it’s easy to recognize fraud. It’s a legally binding document sent from the buyer to the vendor specifying the details of the intended purchase. Each PO typically has a unique number assigned to it for easier filing. For more information, see our articles on accounts payable software features to look for and how to automate accounts payable for your business.

The main benefits of using a 3-Way match in the P2P process are:

Consistency and accuracy of data are essential in any payment process. Any wrong information and duplication can lead to fraudulent vendor invoices and overpaid transactions. With the three-way match, overpaying and other potential payment problems are immediately flagged by the payable department, even before delivery. 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. While this is great news of course, there are still many things that can go wrong if the invoice matching process is done manually.

People can only work so quickly, and taking the https://1investing.in/ to track down all the approved versions of the documents from suppliers creates a lot of back and forth. Here are some reasons why manual matching can be a problematic process. 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. You’ll also avoid any potential payment problems that can create costly headaches and time sucks down the line. Even though there are many ways tocheck your accounts payable process, three-way matching is a best practice of all good accounts payable departments. Here are some reasons why three-way matching is the best way to check your payment process.

  • The three-way matching process is critical for keeping a business’s finances healthy.
  • Using the Order.co Chrome Extension, the team could shop anywhere, check out across vendors, and consolidate their invoices.
  • No holds are placed on the invoice and the invoice is approved for payment.
  • If other problems arise, an automated solution offers immediate visibility into the process, allowing your team to quickly pinpoint the cause of the problem.
  • In order to simplify the three-way matching process, you might consider excluding smaller value invoices and recurring invoices from the three-way matching process.
  • A good supplier relationship may also result in better pricing and credit terms.

An automated 3-way matching solution virtually eliminates human touch points such as manual data entry, paper receipts, and physical signatures for approval. The 3-way matching process requires accurate verification and matching of information in the invoice, purchase order, and goods received in the note. Gathering all these documents and verifying the data is a time-consuming process when done manually. As mentioned before, manual data verification is prone to errors and discrepancies.

The Accounts Payable 3 Way Match: An In-depth Guide

In addition to picking up on criminal activities, three-way matching can benefit an organization in other ways, especially when the process is automated. It’s especially important for growing businesses, as manual processes simply can’t be effectively scaled. But with an automation solution, a higher quantity of invoices won’t incapacitate teams. It ensures that the quantity and price of items are the same across three documents. These documents are the purchase order, the delivery receipt, and the supplier’s invoice.

The difference between 2-way and 3-way balance sheet example for accounts payable is the number of documents that are compared to ensure that they match before a payment is made. In addition, accountants also ensure that all the financial data is accurate and up-to-date. This will provide transparency and ensure timely and accurate payment to vendors.

  • It indicates payment details and which goods the shipment includes.
  • Plus, if you run into any errors during the matching process, you will have to backtrack and start from scratch.
  • A) Centralize the receiving of items so that there are fewer people who need to create the receipts.
  • According to a 2021 report, best-in-call AP teams are twice as likely to automate invoices, which results in higher efficiency workflows and fewer exceptions.
  • This is especially important for publicly traded companies, as non-compliance can lead to penalties and fines.

When three-way matching is done regularly and quickly, it’s easier to build trusting relationships with vendors and suppliers. Confirming documents on time and paying invoices promptly makes business partners feel valued. Three-way matching can boost a company’s bottom-line by preventing financial losses due to duplicate payments, fraudulent invoices, or human errors. It contains the details of the shipped items or provided services. As a part of the invoice approval process, a three-way match is typically conducted by the accounts payable department.

BILL and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on, for tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. BILL assumes no responsibility for any inaccuracies or inconsistencies in the content. Certain links in this site connect to other websites maintained by third parties over whom BILL has no control.

Large Organizations purchase the inventory by the standard operating procedure per the organization’s policies. Hence double control is necessary for restricting unauthorized transactions. In a three-way procedure, major purchases are controlled using cross verification.

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So far we talked about understanding your current processes and design of a 3-way process. B) Verify invoices and in case of exceptions, follow up with stakeholders. If you have siloed systems, you first need to identify the data integration touchpoints. Similar to shipping exceptions, the tax exception occurs when the invoice amount is greater than the Purchase order amount because of taxes. If you don’t know the shipping amount in advance, the vendor would add the shipping amount on the invoice. You have a different unit price in your system as compared to what is in the vendor system of record.

Three-way matching definition

Upon receipt, a receiving clerk will verify the quantity of the product received, and give the packing/receiving slip to the accounting department. They protect your company or organization from over payments, under- delivery as well as outright fraud. While full accounts payable automation doesn’t stop there, it’s a great start to taking some tasks of the hands of the ap department. You send the invoice for payment only if the information on the documents match.

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Investigating every invoice can be daunting, and unless systems are highly organized it can take hours to track down the correct documents. An automated digital-first approach ensures that all records are consistent and provide a single source of truth. When data is readily accessible at all times, businesses can access clear audit trails and pinpoint financial inconsistencies quickly. If errors are flagged in the 3 way matching process, the invoice is put on hold and payment is withheld. Once the issue is investigated and resolved, the invoice can be processed for payment.

According to industry survey data, that’s the case for many businesses. Is not authorised by the Dutch Central Bank to process payments or issue e-money. An application under Electronic Money regulations 2011 has been submitted and is in process. We are not permitted to carry out regulated business activities. Automation helps bills get paid quicker, which means you can save money through discounts; increasing profitability. All the documents are cross-checked and inspected before finally accepting the goods or services.

If you feel like this process doesn’t offer your company enough security against invoice fraud, you could also opt for different types of invoice matching. Because three-way matching calls 4 different departments to action, false positives should be minimized to avoid operational disruptions in their workflows. The Purchase Order Invoice Processing Module performs a 3-way match of the purchase order, the receiver, and the vendor invoice. If all three documents match, the vendor invoice is flagged as “Ready to Pay”. If there are discrepancies between the three documents, the vendor invoice is flagged as “Needs Manual Review”. The process of three-way matching can be pretty demanding and time-consuming, especially when done manually.