Explore the benefits and automation of 3 Way Matching in Accounts Payable process in our latest blog. Learn how to automate three way matching process with automated invoice matching software enhances efficiency and accuracy in accounts payable for large enterprises. Dive into strategic insights on streamlining your financial operations and strengthening supplier relationships.

Accounts Payable (AP) is an essential function in any organization that handles vendor payments. It involves managing invoices and payments and tracking expenses. The accounts payable team plays a crucial role in ensuring accuracy and managing the workflow. One critical step in the AP process is verifying the invoice details against purchase orders (PO) and receiving reports (RR). This process is called 3 way match account processing, ensuring that payment is made only for the items received and invoiced. The internal control process of 3 way matching in accounts payable is vital for maintaining consistency between documents and preventing errors before payments are made.

What is the difference between 2-way matching, 3-way matching and 4-way matching in accounts payable?

3 way match in AP invoice processing involves matching invoices with the purchase order and purchase receipt to ensure there is no discrepancy and the order was delivered as per the agreed terms. Manual invoice matching in this context can lead to higher processing costs, human errors, and long delays, especially in the context of remote work.

By incorporating e-invoicing software into this process, organizations can streamline and automate the invoice match process, enhancing efficiency and reducing the risk of errors. This systematic approach not only prevents potential fraudulent or unauthorized transactions but also results in substantial cost savings, preserving valuable financial resources, particularly in case of large enterprises.

2 way match vs 3 way match vs 4 way match

In two way matching, the organization matches the invoices only against purchase orders, whereas in three way match, the invoices are matched against both, purchase orders and purchase receipts. In Four-way matching, the invoice is matched against purchase orders, purchase receipts, and product acceptance. It is crucial to cross-reference the invoice with the corresponding purchase order and receiving report to ensure accuracy and detect fraudulent transactions.

Document Purpose 2-way match 3-way match 4-way match Purchase Order Confirms the purchase was authorized  Yes Yes Yes Purchase Receipt Confirms the good was received No Yes Yes Invoice Amount owed against good delivered Yes Yes Yes Product acceptance Product delivered is as per the PO No No Yes

Understanding the Three Way Match with purchase order

The three way matching process is a cornerstone in invoice processing, involving the comparison of three crucial documents:

1. Purchase Order (PO): A document issued by the buyer outlining the items to be purchased and the agreed-upon prices.
2. Receiving Report (RR): This document confirms the receipt of goods or services as per the PO.
3. Supplier Invoice: A formal request for payment issued by the vendor detailing the goods or services provided.

During the 3-way matching, the details in the supplier invoice are verified against the PO and RR to confirm that the delivered items match the agreed terms and pricing. This verification process helps ensure the authenticity of the invoice and its readiness for payment.

Detecting fraudulent invoices through the 3 way matching in accounts payable process is crucial to prevent unauthorized payments and maverick spending.

Benefits of Automated 3 Way Matching in Accounts Payable

• Efficiency: Automation speeds up the matching process, reducing the time needed to process payments and enhancing AP productivity.
• Accuracy: Automated systems reduce the risk of human error, ensuring more accurate invoice processing.
• Improved Vendor Relations: Quicker processing leads to faster payments, which can improve supplier relations and enable discounts for early payments.
• Increased STP Rates: By minimizing manual intervention, automated systems increase straight through processing (STP) rates, enhancing overall AP efficiency.
• Regulatory Compliance: Automated systems enforce compliance with business rules and regulatory standards, minimizing the risk of financial discrepancies.

Challenges with Manual 3-Way Matching

Manual 3-way matching can be labor-intensive and prone to errors. Manually cross-referencing each invoice with its corresponding PO and RR is time-consuming and susceptible to human error, such as data entry mistakes or oversight of discrepancies. This inefficiency can lead to delayed payments and increased operational costs.

What is the problem with the manual three way match process?

Manual 3-way matching can be time-consuming and error-prone. The process involves manually checking each invoice against the PO and RR, which can be challenging, especially when dealing with a high volume of invoices. Additionally, manual 3-way matching is susceptible to human errors, such as incorrect data entry, misinterpretation of information, and missed matches.

Manual 3-way matching can also be costly. The time and resources required to match invoices manually can significantly impact the AP process’s efficiency and productivity. Furthermore, manual matching can result in delayed payments, which can affect suppliers and lead to lost discounts and increased costs.

What is an automated 3 Way Matching in Accounts Payable vs manual invoice matching?

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For organizations looking to improve their AP efficiency, reduce costs, and strengthen supplier relationships, investing in automated solutions like 3-way, 2-way, and 4-way matching systems is invaluable. Discover the transformative impact of AP automation by requesting a demo of our automated 3-way matching system today.

Automating the 3-way matching process can significantly reduce the invoice approval process timeline, cutting it down from 40 days to just 10 days for some companies.

Automated 3-way matching is a process that uses software to match invoices, POs, and RRs automatically. This process involves integrating the organization’s ERP system with an automated Accounts Payable Automation Software, which can extract data from the three documents and match them against each other.

The automated 3-way matching process begins with the system capturing the invoice details, such as vendor name, invoice number, and amount. The system then matches the invoice details against the PO and RR data, which are already stored in the ERP system. The software can identify any discrepancies and highlight them for review.

If the automated 3-way matching process identifies a match, the invoice can be processed for payment automatically. If there is a discrepancy, the system can route the invoice to the appropriate person for review and approval.

What are the benefits of automated three way match?

Automated 3-way matching offers several benefits to organizations. First, it eliminates the need for manual matching process, which can significantly reduce the time and resources required for the AP process. Automation can also reduce the risk of errors, improving the accuracy of the matching process.

Automated 3-way matching contributes to a secure and efficient payment process by flagging potential payment problems and making auditing easier.

Automated 3-way matching can also improve the AP process’s efficiency and productivity. By automating the matching process, the organization can process invoices more quickly, reducing the time it takes to pay vendors. Faster payments can improve supplier relationships and help the organization take advantage of discounts offered for early payment.

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Another benefit of automated 3-way matching is improved visibility into the AP process. The software can provide real-time data on the status of invoices, highlighting any issues that require attention. This visibility can help organizations identify bottlenecks and make process improvements, further streamlining the AP process.

Drive straight-through processing (STP) with automated 3-way match

Automated 3-way matching can also help organizations increase their straight-through processing (STP) rates. STP refers to the percentage of invoices that can be processed without any manual intervention. The higher the STP rate, the more efficient the AP process.

Automating matching in accounts payable can save time and reduce errors, providing benefits such as protecting against fraud and facilitating supplier relationships.

Automated 3-way matching can increase STP rates by reducing the number of invoices that require manual intervention. When an invoice matches the PO and RR data, it can be processed automatically without any manual intervention. This can significantly increase the STP rate and reduce the time and resources required for the AP process.

Additionally, automated 3-way matching can help organizations achieve regulatory compliance. The software can enforce business rules and ensure that invoices are processed according to the organization’s policies and procedures. This can reduce the risk of errors and ensure that the AP process complies with regulatory requirements.

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In conclusion, three-way invoice matching is a critical process in the AP function that ensures that payments are made only for the items received and invoiced. Manual 3-way matching can be time-consuming, error-prone, and costly. Automated 3-way matching can eliminate these issues by automating the matching process, improving efficiency, accuracy, and visibility. Automated 3-way matching through invoice matching software can also increase STP rates and help organizations achieve regulatory compliance. By adopting automated 3-way matching, organizations can streamline their AP process, reduce costs, and improve vendor relationships. If you’re interested in seeing how automated 3-way matching can help your organization, request a demo today.

Related Read:

1. 1. Navigating the Complexities of Accounts Payable Compliance
   2. Measuring Your Accounts Payable Effectively: Operational Metrics
   3. Effectively Managing Vendor Relationships with AP Automation
   4. How does AI led AP automation help in Straight Through Processing (STP)
   5. Setting Up Internal Controls in Accounts Payable Processes
   6. 5 Key Benefits of Enhancing Your Business with an e-Invoice Generation Tool
   7. White Paper – Accounts Payable Cheat Sheet for Detecting and Preventing Supplier Frauds
   8. Solution – Three way Invoice Matching Software
   9. Solution – Accounts Payable Automation Software
   10. Solution – Al-powered Automated Invoice Matching Software