The accounts payable (finance) department triangulates the invoice, purchase order, and receipts. Then, the accounts payable team uses a three-way match to approve the invoice for payment and make the payment according to the payment schedule. Alternatively, a software program takes on automated matching processes. After receiving a report, the team will look into the flagged invoices manually. Invoice fraud is a serious issue that affects businesses of all sizes.
- It can lead to payment delays and be challenging to operate in a timely fashion.
- A three-way match allows the buyer to submit payment to the supplier for the goods delivered confidently.
- Three-way matching is a process used in accounts payable departments to ensure that the amount, quantity, and description of an invoice are correct.
- There could be a Unit of measure mismatch between purchase order and vendor’s sales order system.
The process automation saves 40-50% time your team spends processing the invoices. This is a common problem if the vendors are submitting the invoices manually and the purchase order is a multi-line purchase order. Start with your key vendors and setup catalogs in your purchasing process and see the immediate reduction in exceptions generated because of the 3-way match process. Now the system is fully automated, there is no way to check if the invoice is correct before it is sent and that leads to data issues. Purchase orders are generated as a part of the request process and invoices are submitted by your vendors. Even if the data is imported correctly, you could have data mismatch issues.
Why You Should Use The 3-way invoice matching?
The purchase order (PO) outlines the type of item or items, the quantity requested, and prices according to the terms agreed upon between the buyer and seller. For example, if a falsified invoice requests payment for a purchase or services that were never requested, it would be caught when no purchase order for that request was found. Put all together, and you get a procurement automation tool that simplifies the entire process so you can process invoices faster and safely.
A business can form a strong bond with partners who always send accurate vendor invoices. As a result, it will pay them faster, which often leads to better pricing and credit terms. The number of items delivered should match the quantity on the purchase order. Different Types of Revenue and Profits for Startup Accounting This payment verification technique validates the information across the trio of related documents. The fraudster in question simply sent falsified invoices to Facebook and Google, requesting payment for services that were never delivered or even requested.
Way vs 3-Way vs 4-Way Match
This step is where the fraudulent invoices, coming from unknown vendors without previous supplier relationships, are sniffed out. In Australia, for instance, 1 in 5 small businesses lose an average of $15.5K to invoice fraud. Accounting Advice for Startups Establish procedures for verifying the accuracy of incoming invoices, including comparing them to purchase orders and delivery receipts. This ensures that invoices accurately reflect the goods or services received.
An automated three-way process sends invoices digitally, and the purchase order and delivery details are automatically added to the database. This makes it easy for procurement and accounting teams to prevent fraud, promote accuracy, and operate more efficiently. An automated three-way matching process also ensures companies avoid late payment https://accounting-services.net/accounting-for-startups-the-ultimate-startup/ fees and opens the possibility of potential early payment discounts. The goal of the 3-way match is to ensure that the details on these documents align and match, confirming that the company received the correct quantity of goods or services at the agreed-upon price. A great way to eliminate fraud is by automating your procurement process.
What Are the Components of a 3-Way Match?
ProcurePort is cognizant of dynamic changes in your procurement and extends a one-time solution to your workflow demands. And now, with industry-leading service support, ProcurePort transforms into an ideal procurement solution to all your workflow needs. Put all that together and you get a smarter three-way matching solution that eliminates error 100 percent at a fraction of the time and at even lesser cost. Whenever an individual or department requires anything for their work, they forward a request detailing what they need, the quantity, and why they need it. If you believe you’re ready to automate a financial process in your business, we have data-driven of FinTech solution providers.
As the complexity of the matching process increases, it is essential to ensure that the appropriate system is in place to ensure accuracy. It could include hiring a specialist to manage the matching process or investing in an automated system capable of handling the complexity of two-way, three-way, and four-way matching. All relevant documents are checked and verified as per the three-way process.
Identify Key Personnel
It ultimately saves you resources—including money, time, and energy. Without a three-way matching process, buyers also risk harming vendor relationships. When invoices aren’t paid on time or incorrectly, vendors have to spend time chasing after compensation from the buyer, which puts a damper on future deals and transactions by lowering trust. 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. A systematic 3-way matching system aids businesses in maintaining accurate and comprehensive records.