3 Way Match for Accounts Payable

 

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

When business owners increase their investments and endeavors, the business landscape begins to alter. Changes in the business' overall process, including accounts payable process, financial gains, and losses, might result from actions like adding new employees or acquiring new suppliers.

It may be challenging to manage a large number of transactions involving customers and suppliers if the business is still using traditional payment procedures. However, the three-way matching process can be modified to improve vendor invoice Management.

The last thing a businessman wants to do is pay an incorrect or illegal invoice. Your accounts payable can be protected from submitted invoices that are inaccurate or fraudulent with three-way matching.

Many business owners and financial departments already use three-way match processing to reduce risk and control spending. However, it would be best if you gave automated three-way matching considerations for your accounts payable process to avoid the risk of overpaying for products and services or paying a fake invoice.

What is a 3-way match?

To prevent fraud and verify that the financial information in the supporting documentation is accurate, all payments must undergo some verification. For example, an internal controlling function known as a "3-way match" analyzes the purchase order, the goods received, and the invoice from the relevant supplier.

In contrast, a two-way match merely contrasts the PO and the invoice. Therefore, the quantity billed should correspond to the quantity ordered on the invoice. Additionally, the purchase order price should be included in the invoice price. The standard method for confirming invoices across organizations is the two-way matching process. However, businesses use three-way matching more frequently to add an extra verification level and avoid overspending.

Faster invoice payment approval is made possible by 3-way matching, which identifies discrepancies, mistakes, or probable fraud. Purchase orders (PO), receipts for goods, and vendor invoices forwarded to the client are all compared for line item specifics and totals.

An invoice satisfactorily confirmed invoice must match the PO and receipt within allowable tolerance ranges. When an invoice doesn't fit the tolerances, it's put on hold and forwarded for the proper evaluation.

How Does 3-Way Matching Work?

Invoices, order receipts, and PO are the three forms of documentation essential for tracking payments through accounts payable. Accounts Payable carefully examines the three papers before fulfilling the order to ensure that the delivered item is the same as what was ordered via the order receipt. We'll discuss each of these and how it relates to the matching process below:

1.      Invoices: An invoice is a request for payment from the seller to the buyer, and it can be in paper or EDI form. A unique invoice number, vendor contact information, any applicable credits or discounts, and the total amount owed are all included on invoices to simplify the transaction.

2.      Order receipts: Included with delivered goods as proof of payment, order receipts list the items that were shipped as well as the method of payment.

3.      Orders for Goods: A PO is a formal acknowledgment that the buyer has given the vendor an order. This form, which is used to approve purchases, contains a PO number, payment details, descriptions of the products or services sold, and the quantity.

Three-way matching of invoices reveals discrepancies or inconsistencies between any of the crucial papers mentioned above, ensuring that every order is complete. Payment will be withheld if issues or errors are found, such as an inaccurate price or damaged goods, until the problem has been resolved and the invoice has through three-way matching validation.

What Benefits Do Three-Way Matches Offer?

Eliminating any anomalies in the purchasing process is one of the three key advantages of the three-way matching method.

1.     Saves time and money

One of its advantages is a three-way match that can help the business save time and money. In every payment procedure, data accuracy and consistency are crucial. Duplication and incorrect data might result in false vendor invoice management and overpriced transactions. The three-way match promptly flags down overpayment and other potential payment issues even before delivery, preventing them from happening.

2.    Favorable supplier-client relations

A three-way match improves supplier relationships as well. Suppliers are made to feel influential and respected when required documentation is completed and presented on time. In addition, they view the organization as a respectable and reliable business partner.

3.     Making Auditing Simple

Additionally, a three-way match might simplify bookkeeping and auditing. Compiling documents becomes simple if they are accurate and comprehensive. Further, it won't be difficult for auditors to verify the information.

The Matching Process Automation Solution

Integrating AP automation is a creative and effective option for businesses looking to reduce effort and increase employee productivity.

All of the AP issues faced by businesses with manual matching processes may be automated with Skyscend. Due to the ease of sending and receiving invoices via email or a web portal, processing payments is essentially straightforward. In addition, invoices can be sent in batches to facilitate a more streamlined business process.

They are still being processed. Additionally, it repeats the entire payment process and gathers the pertinent paperwork for a quicker process.

Why Should Your Matching Process Be Automated?

Saving time, money, resources, and energy can be achieved by automating the matching process. In addition, switching to a digital procedure guarantees on-time payments, accurate data encoding, and platform accessibility.

Without adding more people, AP automation services like those provided by Skyscend can cut the accounting department's burden by 80%. Automated matching procedures shorten the time needed to complete a task. There are no backlogs or late payments anymore because it automatically generates and sends invoices without error.

Discover Your Ideal Automation Solution

You now understand that three-way matching is a thorough, effective procedure that saves time and money while also assisting in preserving good relationships with suppliers and vendors.

Finding the ideal technology for automating accounts payable might be challenging. Best-in-class technology is available from Skyscend to manage your operations and make all documents—especially those required for three-way matching—easily accessible. In addition, Skyscend's solution offers straight-through processing on top of this structure.