What is the three-way match?

This matching type is usually used for the most complex transactions, such as international purchases. Three-way matching is a process used to verify that the amounts on three separate documents (e.g., purchase order, invoice, and goods receipt) match before releasing a payment. It ensures that the buyer only pays for what was ordered and received and that the seller is being paid for the goods or services provided.

With a three-way match, you can confirm that the business’ established purchase approval process was followed. When an invoice, PO, and receipt are all compared, it’s much easier to double check your work. It also increases visibility, because it is more clear where company money is being spent. And when you find discrepancies, you can act on them as needed, such as by reaching out to the supplier to correct the price. You can make three-way matching more efficient by excluding small-dollar and recurring invoices from the matching requirement. Yet another option is to avoid the process entirely by shifting more purchases to company procurement cards – for which there are no purchase orders.

The three way matching process

The purpose of the three-way match is to avoid paying an incorrect and perhaps fraudulent invoice. Welcome to the world of accounting, where precision, accuracy, and control are of utmost importance. In the financial realm, businesses rely on various processes and procedures to ensure that their financial transactions are recorded and three way match accounting reported accurately. One such critical process is the three-way match, an integral part of the accounts payable function. 3-way matching is usually done before issuing payment to the supplier post delivery. The primary purpose of 3-way matching is to prevent any incorrect and fraudulent invoice or payment from happening in a company.

Sometimes, your AP department might identify errors, like price and quantity issues or product damages. If there are any issues, your business will usually withhold payment until the discrepancy is rectified. The supplier’s invoice is a document that details the goods or services supplied and is a request for payment from the buyer. It includes the supplier’s contact information, a description of the goods or services provided, payment details, and the total owed. Because you used three-way matching, resolving this issue is simple.

Components of a three-way match

It is vital to have a good understanding of how to implement three-way matching. Maintaining a healthy accounts payable process and ensuring accurate payments is essential. Three-way matching process is vital to any business, as it helps to protect from costly errors and potential fraud.

Deskera ERP is a complete solution that allows you to manage suppliers, track supply chain activity in real time, and streamline a range of other company functions. Cloud Technology is expected to become the primary medium for three-way matching. It will make it easier for companies to access and store data in one central location.

Reduce error rates & fraud

The details are compared, and any discrepancies are flagged rapidly. Invoice fraud is a serious issue that affects businesses of all sizes. The three-way matching process acts as a form of checks and balances. Comparing the three critical documents in this process ensures an invoice is legitimate.

Then, the printer issues an invoice for $2,000 requesting payment. At the same time, it delivers the placeholder cards to the receiving department with a delivery note and a packing slip. And three-way matching doesn’t only benefit your business—because of the expedited invoice approval process, it also maintains a positive buyer-supplier relationship. Three-way matching creates a built-in check to the vendor payment process, ensuring a positive supplier-buyer relationship. An effective accounts payable process ensures accurate, secure, streamlined payment processing.

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Four-way matching goes even further by adding an inspection process after the delivery. With this system in place, goods and services are only accepted after establishing that all the documents match. Then, the supplier delivers ten boxes of paper accompanied by the goods receipt note. But when you receive the invoice, you notice that the supplier billed you for eleven boxes. The purchasing department has decided to place an order with company A. Typically, the supplier sends an invoice once you receive the delivery but this may vary depending on your relationship with them.