This slow pace often applies to processes such as three-way matching in accounts payable departments. The goal of this approval process is to ensure that each invoice is consistent with the products and amounts ordered, as listed on the purchase order. Then, it ensures this matches the goods delivered to the receiving department and listed on the corresponding receiving report.
In paper-based three way matching and invoice approvals approver delays can result from procrastination, heavy workloads, resolving questions with the requester, and holidays/leaves. In a manual invoice approval workflow, the invoice literally gets pushed from one desk to another until final approval. It is hard to keep track of which level of approval a document is currently stuck at, and who the approver is. If an accounts payable employee encounters a one-off matching error, they will need to investigate the problem to solve it.
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This AP process guarantees that what is delivered matches the original order every time. When it comes to B2B payment methods, two widely used options are ACH checks and physical checks. Once a buyer submits an order to a supplier, the Purchase Order is used to track the purchase from beginning to end. This document is created by the supplier and may be sent to the buyer to confirm that the order has been received. Any relevant or necessary approvals are obtained electronically and even remotely.
What if you discovered that as much as 2% of your business’s payments are duplicates, charged for the wrong amount, or contain some other error? According to industry survey data, that’s the case for many businesses. Three-way matching is a detailed paper trail between supplier and buyer.
Which document typically triggers the 3-way match?
They have more than proven the value and efficacy of automating the three-way matching process. Two-way matching is the most basic approval process, where the vendor’s invoice number and details are checked against the purchase order 3 way matching accounting (PO) number to ensure that these documents match. All of the details from these three documents must match prior to a buyer completing payment. Item names, quantities, and unit costs must match line item costs and total cost.
- This is where a good deal of time and space are saved in the AP department.
- Any discrepancies are investigated and resolved before payment is made, ensuring financial accuracy and accountability.
- Fields will populate automatically for vendors, products, prices and account codes.
- In accounts payable three-way matching is a procedure used to verify disbursal of payment to a creditor.
- This way you can be certain that you only end up paying for the goods ordered and received.
Physical papers don’t need to be pulled from file cabinets, routed interdepartmentally, or potentially lost. Interdepartmentally shared databases and advanced implementation of controls make it more important than ever to safeguard against errors in payments and accounting reports. Meanwhile, the stack of papers (Invoices matched to PO and packing slip) awaits the check run. Once the checks are cut, they’re routed to the person who signs the checks, usually the Controller or CFO. The check stub is attached to the supporting document (invoice, PO and packing slip), and then filed. Vendors and suppliers submit invoices to Accounts Payable (AP) for processing and payment.
Accounting Process Best Practices: Three-Way Match
It’s an important tool to safeguard your organization’s payments and receipts. By 3 way matching supporting documents, companies can detect duplicate, erroneous, or fraudulent payments to vendors. Three way matching is best performed as an automated financial workflow powered by AP automation solutions such as Nanonets.
