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What is a 3-way match in Accounts Payable?

Companies use this reconciliation method to detect fraudulent invoices, embezzlement, computer glitches, or human error. 3-way matching in accounts payable (A/P) refers to a validation technique that is used to help confirm that a received invoice is accurate, credible, and should be paid. After all, no business wants to overpay on a purchase or fall victim to fraud, so a cautious, trust-but-verify wave payroll review 2021 approach to any request for funds from your suppliers is healthy and should be encouraged. When calculated for several goods on a monthly basis, manual processing costs may run into six figures. Misplaced paper documents, incorrect information, and human oversight further increase the cost of manual invoice matching. Manually matching documents and checking for discrepancies can be tedious.

Many businesses have trouble keeping track of which suppliers are approved, where everything was ordered from, and when deliveries are due. Ordering from multiple vendors on different sites and completing several checkout processes can lead to disorganization and confusion. While AP automation saves businesses thousands of dollars on manual approval process costs, that’s not the only benefit to automation. The right platform can save you time on needlessly complex procurement processes that eat up your schedule. The convenience store manager matched the PO, GRN, and Invoice and found all three documents aligned, thus processes the payment.

  • How does an AP team know that it’s time to start the three-way invoice matching process?
  • While the purchasing department creates and issues POs, the receiving department creates the reports regarding what physically arrives at the warehouse.
  • By 3 way matching supporting documents, companies can detect duplicate, erroneous, or fraudulent payments to vendors.
  • Three-way matching has the added benefit of simplifying bookkeeping and audits.

This slow pace often applies to processes such as three-way matching in accounts payable departments. Automating the invoice matching process helps save time, resources, and money. Digitizing the matching process ensures accurate and consistent data verification and matching. The matching process can be mapped through a detailed 3-way match flow chart, which is the basis for effective automation. Traditionally, the accountant is in charge of matching the invoice, PO, and GRN data.

Enhancing the 3-way invoice matching

The process involves comparing all these documents for accuracy and consistency. AP only releases matched invoices for payment authorization and works on resolutions for any deviations. Without double-checking that everything is in order, your business could over- or underpay or miss a payment deadline. Most companies do some form of matching of vendor invoices to purchase orders and/or goods receipts. Three-way matching has the added benefit of simplifying bookkeeping and audits. With all your historical ordering and matching data centralized, you surface other purchasing insights, refine your reporting process, and get to the bottom of issues and exceptions more quickly.

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. Using the right accounts payable procedures is an essential component to a business’ success. Take an honest look at your current practices and identify areas to target for improvement to increase your operational efficiency. A brief and general glance into the three-way paper invoice match system of accounting shows a logical, yet inefficient process. The receiving order specifies that a receiving officer has accepted the goods delivered by the supplier, and records the quantity, the delivery condition, and any other points applicable to note.

  • There’s a way to enhance the task, and it effectively halves time and increases accuracy ten-fold.
  • By acquiring, requiring, and matching these documents, a foolproof and secure payment process can be ensured.
  • With the right tips and tools, you can perfect the invoice matching process and make it a breeze.
  • If the quantity updates to reflect the correct amount, the invoice will automatically validate, requiring no further action on your part—a major time-saver.

Interested in learning more about how Accounting Automation can improve the efficiency of your accounting processes? Find out how DocuPhase can help you increase the audibility of your accounts payable processes by requesting a free demo. When all the pricing, approvals, and documentation is secured, the invoice is finally ready for entry into the system for payment.

Learn more in our articles on A/P software features to look for and how to automate accounts payable. Confident that everything checks out, Harry authorizes payment and initiates a wire transfer to Put a Lid On It Manufacturing’s bank account. For example, you don’t typically receive a separate delivery notice for commonly recurring charges, such as a software subscription or utility payment. Any relevant or necessary approvals are obtained electronically and even remotely.

What Is 3-Way Matching in Accounts Payable?

Having a transparent invoice verification process promotes strong vendor relationships. Timely notification of issues during the 3-way match of sales, 3-way match of receiving, 3-way PO match, or 3-way invoice match, ensures that payment to suppliers is done on time. Although the 3-way matching process is a labour-intensive and time-consuming process, it is an effective business practice for suppliers and buyers. By acquiring, requiring, and matching these documents, a foolproof and secure payment process can be ensured. In the three-way invoice match system, when an employee needs to buy something for their department, they complete a purchase order form that typically has a pre-printed purchase order (PO) number on the form. The PO number is given to the vendor or supplier when the order is placed.

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 the invoice, PO and order receipt match exactly (or within an acceptable tolerance level), then you a have a successful 3 way match. 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. A successfully verified invoice must match the PO and receipt within acceptable tolerance levels.

Delays and errors force the accounts payable team to work overtime and could also bring on penalties for late payments. If the information matches, accounts payable staff approves the invoice and the accounting department sends payment. For any business that regularly engages in large numbers of purchase transactions, an effective accounts payable department is not optional—it’s a minimum requirement. The 2-way matching in the accounts payable process verifies that the information on the purchase order and invoice match.


It then gets routed to the Accounts Payable department where the form gets filed, awaiting a match to the incoming invoice. Here are three key tips to apply in order to simplify your three-way matching process so you can process accounts payable faster, without sacrificing security and transparency. A good audit trail that tracks the flow of cash in and out of a business is indispensable whenever you’re faced with an audit. Whether it’s from the government, investors, or other vested parties, three-way matching creates a robust paper trail that’s useful for verifying how much legitimate expenses a business has made. Then, in the event of an audit, you can rest assured knowing that all of your approved files and documents are organized and secured in one centralized, accessible location. For companies attempting to scale operations, automating accounts payable is a necessary step in enabling future growth.

Proactive Detection & Prevention of Accounts Payable Fraud: A Detailed Guide

To understand the three-way match in accounting better, let us first understand what invoices, purchase orders, and goods receipt notes are. The purchase order is an official confirmation receipt of the order sent by the buyer to the vendor. The purchase order authorizes the purchase and includes information like PO number, payment information, and description of goods and their quantity.

How to Hire the Best CFO for Your Company

Under a 2-way matching system, the quantity and amount issued on the invoice are verified against the quantity and amount on the corresponding PO notice. A 3 way match system incorporates checking an order receipt for the amount issues as well. Indeed, there is some importance of 3-way matching to ensure invoice and purchase accuracy, but there are also many challenges. Regularly review and monitor the 3-way matching process to ensure that all procedures are being followed, and any issues or discrepancies are identified and addressed promptly.

Managing all the invoices that the accounts payable (AP) department receives each month can be challenging, especially as your business grows. The accounts payable three-way matching process is one of several systems that help to ensure your company pays its bills accurately and on time. 3 way matching of invoices helps highlight errors or inconsistencies in any of the 3 important documents mentioned above. Issues could include wrong payment details, incorrect prices, wrong or damaged products etc. However, finding the right accounts payable automation system can seem daunting. MHC NorthStar offers best-in-class technology to manage your AP processes and make all documents—especially those necessary for three-way matching—easy to access.

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