What Is 3-Way Matching: Benefits And Process

To mitigate these challenges, many organizations are turning to automated solutions, which not only expedite the process but also reduce the likelihood of human errors. The choice between 2 way, 3 way, or 4 way matching depends on various factors, including the organization’s industry, transaction volume, risk tolerance, and the need for quality control. Suppose a company issues a purchase order (PO) for 100 units of a product for $1,000. Upon receiving the shipment, the receiving department identifies a discrepancy – only 90 units were delivered.

Example of Three-Way Matching Process

Serrala has been at the Partnership Accounting forefront of transforming financial process efficiency for 40 years. This incredible experience releases the office of the CFO from the burden of making digital transformation and automation happen within their organizations. Today, Serrala’s multi award-winning finance automation suite is AI-driven, SAP-embedded, cloud extensible, and S/4HANA and RISE ready. Let’s take a look at a company called ABC Software, who decided to return all their employees to a central office. To do so, they needed to order 50 office chairs from XYZ Office Supplies for $100 each.

Design Invoices in

An AI-powered AP system can do more than just identify trial balance fraudulent invoices. For example, ML-based anomaly detection can monitor employees’ engagement with the AP process. The system flags malicious behavior so you can jump in before it’s too late. Three-way matching is your key to preventing invoice fraud and overpaying due to invoice errors. Here’s why you need it, how to do it, and what software can help with.

Case studies: 3-way match automation in the real world

• Adding three-way matching to the mix throws another step into the process.
• For services, the person ordering the services would verify that the services they received were in accordance with contract deliverables.
• The PO indicates a total value of $15,000 and includes details like the quantity and price of the ordered monitors, expected delivery date, and internal accounting codes.
• 3-way matching is a critical process in accounts payable that ensures accuracy, prevents fraud, and improves financial efficiency.
• This makes it easier to review each document and identify any discrepancies quickly.
• Once the issue is investigated and resolved, the invoice can be processed for payment.
• A business can form a strong bond with partners who always send accurate vendor invoices.

A 2 way matching, in comparison, only compares the PO with the invoice. The quantity billed (in the invoice) should match the quantity ordered (in the purchase order). And the invoice price should match the price quoted in the purchase order. Deskera Books allows you to manage your accounts and finances better. It helps maintain good accounting standards by automating billing, invoicing, and payment processing tasks. By implementing these strategies, businesses quickly identify discrepancies and process payments faster.

• Learn spend control practices, track expenses, and streamline procurement workflows with Vendr’s solutions.
• Automated 3 way matching software operate on preset rules/workflows based on tolerance levels and approvals.
• Automated approval routing ensures invoices with no discrepancies are processed instantly, while flagged invoices go directly to the appropriate team for resolution​.
• The matching process helps resolve discrepancies promptly, reducing the likelihood of disputes with vendors.
• It helps reduce the time and effort required to manage the supply chain and makes tracking and monitoring the flow of goods easier.
• Two-way, three-way, and four-way matching are all vital parts of accounting within the procurement process.

Goods Receipt Note/Delivery Receipt

With all the transactions a company must handle, it’s essential to know how to improve accounts payable processes. Comparing the three documents and ensuring that there are no discrepancies is a surefire way to make sure that everything is accounted for. Therefore, 3-way matching can catch any fraudulent activity and attempts of theft before they happen. Since the main goal of 3-way matching is to ensure accuracy and legitimacy, it forms a trusted bond between the supplier and the buyer, which is especially important when they make regular purchases. When there’s a solid relationship between the two parties, it could also result in better pricing and terms. Three-way matching adds the receiving report or receipt of goods as a further verification method.

While matching these documents seems easy, manually doing so is time-consuming and prone to error. Luckily there are a few safeguards companies can put in place to ensure a more accurate process, including utilizing software solutions. Three-way matching is a method used to ensure that purchase orders, invoices, and delivery receipts all contain the same information. The benefit of using three-way matching is that businesses can be confident they pay only legitimate invoices. By applying consistent matching rules and compliance checks, automated systems reduce the risk of non-compliance with company policies or regulatory requirements.

A supercharged 3 way matching AP workflow ensures timely vendor payments. Thus automation can help save costs while establishing a stable supply chain. Automated 3 way matching software operate on preset rules/workflows based on tolerance levels and approvals.

Based on the purchase order, the vendor will create an invoice for the items or services. The invoice will include the quantity ordered (1,000) as well as the cost per unit ($3) with the total cost owed ($3,000, plus any taxes or service charges). DocuClipper is trusted by over 10,000 professionals for accurate and quick data extraction from financial documents what is a 3 way match in accounting such as bank statements, invoices, receipts, purchase orders, and tax forms. In case any error or discrepancy is found, the invoice is held and not approved for payment. An invoice management personnel must manually address and resolve the issue with the vendor before the process can continue. By comparing these three documents, you can securely verify that ordered items match what was received, quantities are consistent, prices align with agreements, and invoice calculations are correct.