3 way matching in Accounts Payable safeguards businesses against the threat of fraud, over payment and provides control over spending. Automated 3 way matching gives business owners the security they need to ensure only ordereditems are paid for.What Is 3 Way Matching?
There arethree documents integral to 3 way matching; a purchase order, an invoice and a delivery note. Apurchase orderis the official document sent to a supplier with details of an order, an invoice is the request for payment from the supplier and a delivery note / receipt confirms what has been delivered and the payment method.
Accounts Payable teams willcheck that these three documents match exactly to verify what has been delivered is what was ordered, before authorising payment.
It is at this stage any discrepancies or errors are flagged, such as an incorrect price or missing goods, and if so, payment is put on hold. This will remain the case until the issue is rectified and 3 way matching can be performed again.The Problems with Manual 3 Way Matching
Manual 3 way matching processes require a lot of time and effort, having to cross reference numerous data points means errors can easily occur.
With manual 3 way matching processes, paper documents or those saved electronically in network folders first need to be located. This can be a time consuming process, whether it's looking for a purchase order a colleague says they've filed, or trying to access an invoice stored on the server via a poor VPN connection from home.Delays to Suppliers
Paper documents can be lost or damaged causing delays to suppliers, and preventing organisations from taking early repayment discounts.Multi-Location Logistics
Organisations with multiple offices can also struggle with logistical challenges. If goods are delivered to a branch, but Finance manages all payments from Head Office, how can checks be easily managed?
Delivery notes posted in bulk cause delays, if documents are saved to a network folder, mistakes can easily happen or there can be access issues, and emailed information relies on timely responses from both sides.Lack of Visibility
Manual 3 way matching offers very little visibility into how the entire process is performing. There is no single way to understand how many invoices need paying, those that are on hold or which suppliers are offering early repayment discounts.How Automated 3 Way Matching Works
With an automated solution to manage 3 way matching, all purchase orders, invoices and delivery notes arestored digitally in a centralised system. Documents are either scanned in if received on paper, stored directly from email or picked up by the system from a desk top watch folder.
Once they enter the system,key datasuch as reference numbers, dates, company names etc. areaccurately captured and storedas indexed information. This same data is used when searching for documents, making documents quick and easy to find.
When an invoice enters the digital system, aworkflowis initiated behind the scenes to look for apurchase orderand delivery note with a matching reference number. It will also check the invoice total with the amount stated on the purchase order and if all are correct,the system performs the 3 way matchand moves the invoice through to the completion step.
At this stage, a member of staff adds GL codes to the invoice line items and creates the booking record. For invoices with multiple items that need to be checked quickly, a digital stamp can be used and added as an overlay to the document. The system stores the original alongside any mark upped up invoices.
If the 3 way match is successful, the invoice is marked as approved and sent for payment. Thesystem can also perform a 'quick match' based on parameters set by the business- such as any invoice under £1,000 from a trusted supplier can automatically be moved through to payment.The Benefits of Automated 3 Way Matching
If you're reading this blog it's likely you're facing challenges with your Accounts Payable process, and we want to help. We hear the benefitsour clientsexperience once our solutions are up and running and they often wish they'd made the change sooner.Save Time
We all wish we had more time in our day to complete tasks, and a digital system that automates 3 way matching gives employees just that. It takes less time to locate documents, re-keying data is no longer required and the process of physically matching documents is removed
This gives staff more time to work on other jobs, or get out of the door on time!Stop Fraud
With anautomated systempurchase orders that haven't been pre-approved cannot be submitted, not can fraudulent invoices be accidently paid. There arerules in placeto stop this happening, for example a purchase order can only enter the system if the chosen supplier is on an approved supplier list, or an invoice cannot be paid without adelivery note.
Businesses can save money on wasted purchases and overpayments.Audit Ready
All documents are efficiently stored and indexed in digital filing cabinets making them easy to find. Information within the system cannot be lost or misplaced and so readily available during an audit.Better Compliance
When 3 way matching is automated,every step has to be followed before the next can begin. This provides organisations withaccurate datawhich can effectively be used to make important financial decisions. Mistakes are avoided when there are multiple checks in place.Improved Relationships
A digital system provides better visibility of the fullAccounts Payableprocess compared with manual or paper systems. In a matter of clicks,management can track deliveries and payments with suppliers and customersand go on to understand ordering patterns. Placing repeated orders with the same suppliers builds better relationships,ensuring consistent qualityand potential deals on price.Start Making A Change Today
Why continue withold processes that are no longer fit for purposeand consume more employees time than they should. Paper processes may have once worked but as the business grows they will buckle under the pressure.
Don't let the competition move ahead, speak with us about 3 way matching in accounts payable and understand the improvements we can make to your processes. We'd welcome a chat about the problems you're experiencing as well as any bespoke requirements you may have.
Book a time in our diary andstart making a change today.