What is the 3 Way Match Process in Accounts Payable?

The purpose of the three-way match is to avoid paying an incorrect and perhaps fraudulent invoice. Manual three-way matching requires a lot of time, especially if you’re using paper documents. Someone from the accounts payable team must review three documents for each invoice. 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.

In brief, three-way match accounting is a way to handle payments promised to suppliers while protecting the business from the risk of spending (or losing) money unnecessarily. Proper matching builds confidence in the organization’s supply procedures while minimizing impacts on cashflow outside of the funds authorized for purchasing. Three-way matching saves companies time and money by allowing them to confirm and pay correct invoices quickly.

Components of a three-way match

NLP and ML algorithms can read the payment schedules on the supplier invoice and the purchase order and arrange the recurring payments. If all details match, payment(s) can be made and the three-way matching in accounts payable is considered done. In this article, we will explain what the three-way matching process is, the challenges of a manual three-way matching process, and how three-way match automation works. In the future, AP teams might note that invoices from specific suppliers can be trusted and maybe only require a quick scan. Three-way matching brings undeniable benefits to the company’s procurement, but it also has its challenges and problems – especially when done manually.

Set up touchless AP workflows and streamline the Accounts Payable process in seconds. 3-way matching is integrated in modern AP automation tools, and ERP integrations are also available. how to handle invoice deposits or pre 2020 From the above 2-way and 3-way matching explanation, you might get a clear picture regarding the topic. Here is the difference between the 2-way and 3-way matching in simple terms.

Way vs 3-Way vs 4-Way Matching

Let’s define what documents are required in 2- way, 3-way, and 4-way matches and discuss the scenarios each would be appropriate. A 3-way matching procedure reduces the possibility of unethical workers conspiring with third parties to trick the business. In addition, each type of management in the payment procedure comprises distinct checkpoints along the way to guarantee precision.

• An AP team will need to retrieve the purchase order and receiving report and cross-check the quantities, price and other information across all three documents.
• You can submit a single sample of the common document types you use, and IDC will take it from there.
• As a business owner, the last thing you want to do is pay a fraudulent or inaccurate invoice.
• Let’s use the example of a construction company that is building 20 homes for a new community.

Once the vendor’s contact information is identified, the invoice will be put in their profile on the CRM. Precoro Blog is where Finance and Procurement professionals get advice, tips and news to streamline the business purchasing process. With analytics at hand, AP professionals can get insights into the quality of current documents and partnerships, and they can also offer their input on how to develop the procurement. International transactions are particularly susceptible to tax miscalculations because a vendor in another country might incorrectly calculate tax according to the wrong regulations. The two most common types of matching are two-way and three-way matching.

Which document typically triggers the 3-way match?

Here are some tips about how a company can make three-way matching more efficient. Two-way match is used to compare the invoice received from vendor with the Purchase Order. Nevertheless, having up-to-date documents not only makes the procedure faster but is also a sign of cooperation and transparency in business dealings. The 3-way matching procedure restricts that chance by reviewing the order numbers and dates on all the records and guaranteeing that all three formats for each request are accounted for. Here are some prominent advantages of 3-way matching for your Accounts Payable (AP) automation team.

Only if the details on the three documents are in agreement will the vendor’s invoice be entered as an account payable. The traditional 3 way match process verifies vendor invoice with the corresponding purchase order and the receiving report. Approval of other terms, such as payment details, payment method, or the delivery timeline (if it hasn’t yet been delivered) are as important.