It can also provide effective details to satisfy the requirements of an audit. When the auditors come knocking, one of the first things they’ll look at are your purchase orders, shipping orders and invoices to check that everything is in order. Having your documents straight nullifies the need for an investigation into the business practices of the organization, allowing you to run the company without any other interruptions. The intent of the 3-way matching is to ensure that the goods ordered, goods received, goods billed, order price and the billed amount are consistent across the PO, GRN, and invoice.

Without systems sharing data appropriately, departments may silo their efforts with poor communication that hinders operations. If you’re one of the businesses that use manual matching procedures to track their transactions with suppliers, here are the drawbacks you need to watch out for. If your business purchases inventory or goods, as opposed to primarily services, and you use item receipts to track delivery, then three-way matching is probably the best choice for your business.

Challenges of Three-Way Matching

Automating 3-way matching makes your accounts payable team significantly more efficient while ensuring you don’t overpay your suppliers. According to a report, best-in-call AP teams are twice as likely to automate invoices, which results in higher efficiency workflows and fewer exceptions. The three documents that must have matched totals include purchase orders, order receipts/packing slips, and invoices. Ensuring that these documents are matched before paying an invoice saves businesses from overpaying or paying for an item that they did not receive. The three documents this process requires are also critical in internal and external audits. The 3-way match process ensures consistency of purchase orders, invoices, and order receipts.

AP automation ensures the highest level of accuracy in 2-way matching. How does an AP team know that it’s time to start the three-way invoice matching process? Usually, it is the receipt of the supplier’s or the service vendor’s invoice that triggers the matching process, either through manual workflows or automated three-way matching software.

Way Matching in AP

A company can adapt these methods to suit its specific purchasing process. Authorize accounts payable personnel to complete payments for invoices if the figures across the received invoice, purchase orders, and receiving report differ with a small margin of error. Clearly, 2-way matching leaves room for errors because the packing slips and receipts are not included in the process.

If there are too many documents for too few procurement officers, three-way matching is done in a hurry – and mistakes are bound to happen. When many invoices are piling up – for example, during peak season for production – staff might not have time to process them. The matching process https://www.bookstime.com/articles/what-is-3-way-matching-in-accounting might seem tedious and complex, especially when done manually. Some companies might choose to refrain from using a 3-way match for small or recurring purchases, or when purchasing from trusted vendors. But with new vendors or large purchases, the matching process shouldn’t be ignored.

Find the Right Automation Solution for You

The purchase order (PO) is the document containing complete information on the goods/services required along with pricing information. Order receipts are proof of payment that is included with delivered goods. They contain information on the goods included in the shipment and the payment method. An invoice is a paper or EDI form document that is sent from the vendor to the buyer. Information contained in invoices is unique invoice numbers, vendor contact details, applicable discounts or credits, and the total amount due.