Three-Way Matching: A Comprehensive Guide

With automation, you’ll get all the benefits of three-way invoice matching without the need to devote valuable AP resources to manual matching. Having complete and accurate documents will help your auditor check data and complete an audit quickly. A timely audit helps your business avoid costs you would have incurred if the auditor had needed extra time going through your documents. Other times, it’s a third-party posing as your supplier committing the fraud. If this three-way match reveals that the supplier invoice is in good order, then the accounts payable staff processes the invoice for payment. If not, the staff contacts the supplier regarding any issues it found, which may result in the issuance of a revised invoice or perhaps a credit memo by the supplier.

• A three-way invoice match ensures that all documents are complete and provide the correct information.
• This matching type is usually used for the most complex transactions, such as international purchases.
• Every business can benefit from speeding up payments and reducing the threat of human error.
• A corresponding PO is sent to the supplier based on the order placed.
• Fraudsters can send fake invoices which closely resemble legitimate invoices and without strong checks like 3-way matching, these invoices will get paid, and you might end up losing money.

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. An invoice that fails matching tolerances is placed on hold and is sent for appropriate review.

Why Is Manual Matching Bad for Businesses?

Invoice – Also known as a bill, it is a statement of all items purchased by a buyer in an order with price & quantity along with the total sum due on a particular date. Purchase Order (PO) – After a supplier has been finalized an official document is issued by a company to a supplier to buy specific goods or services. It usually contains the date, quantity, pricing, shipping terms, T&C etc. Put all together, and you get a procurement automation tool that simplifies the entire process so you can process invoices faster and safely.

• 3-way matching is usually done before issuing payment to the supplier post delivery.
• The PO indicates a total value of $15,000 and includes details like the quantity and price of the ordered monitors, expected delivery date, and internal accounting codes.
• Choosing vendors with low exception rates will save you time and money in your accounts payable processing because you can expect that they will require fewer corrections before payment.
• In order to simplify the three-way matching process, you might consider excluding smaller value invoices and recurring invoices from the three-way matching process.
• Using the Order.co Chrome Extension, the team could shop anywhere, check out across vendors, and consolidate their invoices.
• For example, in 2019, a Honda employee defrauded the company out of $750,000 by creating multiple purchase orders.

An automated system can quickly and accurately compare the three documents. The receipt should also be appropriately authorized and include applicable terms and conditions. Once all three steps of the three-way matching process have been completed, the payment can be released to the supplier.

Definition of Three Way Match

When this happens, the buyer will typically reach out to the vendor for clarification to make sure they’re paying the right amount and received the goods or services they ordered. The three documents that must have matched totals include purchase orders, order receipts/packing slips, and invoices. Ensuring that these documents are matched before three way match accounting paying an invoice saves businesses from overpaying or paying for an item that they did not receive. In order to simplify the three-way matching process, you might consider excluding smaller value invoices and recurring invoices from the three-way matching process. Recurring payments can be verified at setup, leaving zero room for fraud.