Accountants need to contact the purchasing department if they have purchased the items. They are not going to process payment for the items that have not been purchased. Moreover, accountants have to contact the warehouse if they have received the goods. A supercharged 3 way matching AP workflow ensures timely vendor payments. Vendors value early payments and could offer discounts in return. Thus automation can help save costs while establishing a stable supply chain.
- This process helps prevent overpayments, underpayments, duplicate payments, and other financial discrepancies.
- While AP automation saves businesses thousands of dollars on manual approval process costs, that’s not the only benefit to automation.
- It involves the close examination and comparison of three forms that occur throughout the buying transaction process.
- Most vendors will not fulfill an order for an organization without a purchase order number.
This provides visibility and accessibility of all business data in a single organised database. This just makes all sorts of data comparisons pretty straightforward. Integrations with ERPs and accounting software also become convenient.
Why Automate Three-Way Matching? What Are the Benefits?
The supplier invoice is the final piece of the puzzle in the 3 way match process. It contains the financial details of the transaction, including the total amount due, any applicable taxes, and payment terms. This document is compared to the purchase order and goods receipt to ensure that the charges are accurate and in line with the agreed-upon terms. When small businesses are starting out, essential processes and related workflows undergo a slow evolution. With a small workforce, most early efforts involve staff members handling paperwork and entering information manually.
- This process reduces the chances of paying for fraudulent invoices.
- Providing adequate training to employees, setting up clear guidelines, and leveraging technology can significantly simplify the implementation process.
- Zerocater now has a much more efficient system, with 50x fewer invoices, freeing up their time to focus on what they do best.
- By implementing this process, organizations can fulfill their fiduciary responsibilities while reaping various benefits.
- Delayed payments cause late fees and strained vendor relationships.
The resolution takes extra time compared to a known repetitive issue. If the 3 documents don’t match then the invoice is put on hold until the errors/issues are sorted. Book a 30-min live demo to see how Nanonets can help your team implement end-to-end AP automation. In accounts payable three-way matching is a procedure used to verify disbursal of payment to a creditor.
Purchase order quantities don’t match the supplier’s batch quantities
A 3 way match is an internal control process that cross-references a supplier’s invoice against its corresponding purchase order (PO) and good received note (GRN). The three documents that must have matched totals include purchase orders, order receipts/packing slips, and invoices. Ensuring 3 way matching accounting that these documents are matched before paying an invoice saves businesses from overpaying or paying for an item that they did not receive. By cross-referencing these three documents, organizations can identify any discrepancies or errors and take appropriate actions to rectify them.
Waiting to receive a corrected invoice from the vendor will delay invoice approval, payment and reduce overall productivity. Investing in automated 3-way matching is an excellent way for organizations to make an impact in all three of those priorities. Teams that are able to achieve automation will make the entire procurement process more efficient while positively impacting their organization’s bottom line.
A Better Way: Accounting Best Practices Using Accounting Automation Software
This process is important for large purchases or purchases with newer vendors, but businesses may choose not to use three-way matches for small or recurring purchases. The future of 3 way match in accounting is shaped by emerging trends and evolving business practices. As technology continues to advance, businesses must stay informed about the potential impact on the 3 way match process. Choosing the right software for 3 way match implementation is crucial. Thorough evaluation and testing can help organizations select the most suitable software for their specific needs.
