Automated 3-way matching in accounts payable is an internal control process that helps you compare item details line by line and make sure the totals are matching up between purchase orders, receipts, and invoices. Since this is an automated process, the software can do the hard work for you, reducing the need to do this work by hand.
This also becomes useful in cases of protecting your business’ accounts payable. These systems are designed to verify and help you correct mistakes before making a payment. This helps you catch potential flaws that may be in an invoice and can save you from the headache and stress from paying a fraudulent or inaccurate invoice.
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There can be many benefits for automated 3-way invoice matching. For one, it can help your business save money in the long run. This is through its data verification process that keeps everything consistent across purchase orders, receipts, and invoices. By keeping a close eye on your finances, it will help lower the chances of fraud. These systems also facilitate a good relationship between vendors. By decreasing the number of mistakes within your accounts payable process, you are also doing the vendor a huge favor and showing them that you value their relationship. Finally, an automated 3-way match system will be tremendously helpful should you face an audit. When auditors come to check your business’ finances, you can easily pull out clear documentation of what goes on in your company. Since these systems help line up numbers for you, you can be sure that auditors will not find discrepancies in your workplace.
What is 2-Way and 3-Way Matching in Accounts Payable?
2-way and 3-way matching in accounts payable are two common methods of reconciliation used to ensure accuracy in a company’s financial transactions.
What is 3-Way Matching in Accounts Payable?
To begin exploring this idea we need to break down the three key components that answer the question, “What is 3-way matching in accounts payable?” These are:
- Invoices– a request for payment from vendor to buyer that includes a unique invoice number, contract details, credits or discounts, and total amount due.
- Order Receipts– proof of payment that comes with the delivered goods. They include details on exactly what is in the order and the payment method.
- Purchase Orders– confirmation receipt of the order being sent from the vendor to the buyer.
Using 3-way matching in accounts payable can highlight anything between these documents that are inconsistent. In terms of software, AvidXchange can track invoices, POs, and bill payments. Since you can track all three using AvidXchange, the software can help you automate 3-way matching.
What is 2-Way Matching in Accounts Payable?
2-way matching compares the invoice against the purchase order. The specifics it looks art are the quantity and the amount issued on each of these documents. It only checks to make sure these two documents are aligned. You can use the AvidXchange app to help you automate 2-way matching.
The Difference Between 2-Way Vs. 3-Way Matching in Accounts Payable
When it comes to the differences between 2-way vs. 3-way matching, using one over the other may be a matter of what internal controls you want to set. Using 3-way matching may tighten your internal controls compared to 2-way matching, but finding a 3-way match may become more work for you. Since software can help you automate 2- and 3-way matching, then you may want to reconsider the pros and cons of using either system for your business.
3-Way Matching in Accounts Payable
AvidXchange has developed solutions to your accounts payable needs. That way, middle-market businesses may be able to better process their invoices via practical software solutions that are designed to automate and streamline the payment process.
Our software solutions are capable of integrating with other accounting software. This means you may not need to change your existing processes to accommodate new accounting software from AvidXchange, and you can stick with what you are familiar with. AvidXchange may be able to sync with your current accounting software when you process purchase orders, invoices, and bill payments. AvidXchange has over 210 integrations that can help you add AvidXchange into your existing workflow with common accounting software systems. This allows you to streamline your 3-way match journal entries through automation.
What is 3 Way Matching in P2P?
The procure-to-pay (also known as purchase-to-pay or P2P) process is the cycle in which businesses inquire, request, receive, and then pay for raw goods and services. This procure-to-pay process involves numerous steps that helps to ensure payments and invoices and processed accurately and on time.
Some companies may also include three-way matching in the purchasing process to easily match the purchase order with the invoice and the receiving report. Managing both the invoice and the purchase order keeps track of all orders that don’t have matching invoices as well as goods which haven’t been received. If your business has a purchase order without an invoice, they are aware of what’s outstanding.
Examples of the 3-Way Matching Process
Before you can understand what 3-way matching entails, it might help to review some examples of 3-way matching in practice. In doing so, you may be better able to grasp the 3-way matching process and what steps will occur once the process has been automated.
The 3-way matching process begins when you receive an invoice from a vendor. Before you fulfill the invoice, you need to review the purchase order to ensure that it had been approved. That includes reviewing the services or goods rendered, their associated costs, and verifying that the quantity reported matches the quantity on the invoice.
After you completed this process, you must compare the order receipt to the invoice and purchase order to make sure the final totals all align. You should have a packing slip that also confirms the services rendered, the cost, and the quantities. If all details are correct, the numbers specified on this packing slip should mirror those on both the purchase order and invoice. Once you have confirmed that all three documents agree with one another, you must forward the invoice to accounts payable so that it can be fulfilled. If any discrepancies appear, then you must put the invoice on hold until the issue is resolved.
When you choose to invest in a 3-way matching for services, you could streamline this entire process. While handling a handful of 3-way matching tasks may be feasible, it becomes unsustainable when there are numerous invoices to process to ensure that suppliers can be paid on time. Matters could grow even more complicated if your accounts payable team detects a discrepancy; in that case, they would have to recheck all of their work, which requires a significant amount of time. By automating the 3-way matching process, your accounts payable team may be able to devote their time and energy to other projects that could contribute to the business’ growth.
AP 3-Way Matching Internal Control
AvidXchange automated solutions could help you manage your accounts payable process. More specifically, AP 3-way match internal control could automate a multi-step process that would otherwise likely require the accounts payable team to devote more time and labor than feasible.
What are the Important Documents in AP 3-Way Matching? AP 3-way matching requires three specific documents to be checked against one another to ensure that tolerances are met before an invoice can be fulfilled. These three documents are the invoice, the purchase order, and the order receipt.
It could be simple for our software to perform an automated 3-way matching on your accounts payable. With automated 3-way invoice matching, those three essential documents could be organized and compared electronically. Moreover, you could implement the 3-way matching process into your current accounts payable workflow without having to change too much of any existing systems already in place. By implementing a AP 3-way matching tolerance, you could potentially reduce the risk of human error affecting the process. Automating the process could also make meeting early payment terms more manageable, which could in turn increase potential opportunities for earning discounts or payment term reductions. This consequently could keep your company from facing damaging financial setbacks.
Moreover, using software for your AP 3-way matching internal control can help you because documents related to your accounts payable are easily accessible in one centralized location. Taking the steps towards implementing a 3-way matching process and automating your accounts payable may help protect your company as you continue to grow.
All businesses are susceptible to accounts payable fraud. Using AvidXchange to help you automate your 3-way match internal control can help keep you protected and save you time on repetitive AP tasks as you scale your business.