Three-way matching is your key to preventing invoice fraud and overpaying due to invoice errors. Of course, even when you regain these funds, these errors can wreak havoc on your A/P efforts. And depending on how many manual steps are involved in your vendor’s invoicing efforts and your own A/P processes, common errors might even be unavoidable. But it might be time to have a serious conversation with them when most invoices from a particular vendor include mistakes that all err in their favor.
While three-way invoice matching is important and can save your business time and money, you will run into issues if you’re doing it manually. Did you know that one in seven large corporations commits fraud every year? A three-way invoice match helps you avoid falling prey to fraudsters claiming they provided goods or services.
To survive this uncharted road ahead, the modern finance team has to future-proof their organization with technology. In our e-book, The Ultimate Accounts Payable Survival Guide, we’ll help you navigate tasks like automating the invoice process and demonstrate how real-life survivalists scaled their businesses. If documents are complete and error-free, compiling them becomes less of a hassle.
The 3-way match increases revenue by protecting enterprises from unwanted, fraudulent financial transactions. The 3-way check helps businesses achieve cost savings and improve the transparency of procurement and accounts payable transactions. Order receipts are proof of payment that is included with delivered goods. They contain information on the goods included in the shipment and the payment method. An invoice is a paper or EDI form document that is sent from the vendor to the buyer.
The second step is matching invoices to purchase orders in terms of price and quantity. In this case, the purchase order for 1000 circuit boards at 5 INR each was raised, which totals 5000 INR. The third step would be to match the PO and invoice data with the goods received receipt data. The receiving department will have the receipt that specifies the cost and quantity of goods ordered. The numbers on the packing slip must match those detailed on the PO and invoice.
The number of goods ordered, billed, received, and accepted must be in sync to clear the 4-way matching process. Here are three key tips to apply in order to simplify your three-way matching process so you can process accounts payable faster, without sacrificing security and transparency. Three way matching helps businesses track the origin of invoices and confirm their legitimacy to avoid fraud.
The market is flooded with several workflow automation solutions for automating key business workflows. Businesses need to choose solutions that work best for their business needs. Cflow from Cavintek is a comprehensive workflow automation solution that provides fully customizable automated workflows for various business functions. Finance workflows like 3-way matching in accounting, invoice approvals, and expense reimbursements can be effectively automated with Cflow. The invoices are scanned electronically to extract important purchase data like the PO number, quantities, and prices.
Three-way matching has the added benefit of simplifying bookkeeping and audits. With all your historical ordering and matching data centralized, you surface other purchasing insights, refine your reporting process, and get to the expense: definition types and how expenses are recorded bottom of issues and exceptions more quickly. Considering that the entire purpose of three-way matching is to increase payment accuracy and avoid maverick spending, it’s essential to carry it out as efficiently as possible.
In the accounting and bookkeeping area of accounts payable, the three-way match refers to a procedure used when processing an invoice received from a vendor or supplier. The purpose of the three-way match is to avoid paying an incorrect and perhaps fraudulent invoice. Manual three-way matching requires a lot of time, especially if you’re using paper documents. Someone from the accounts payable team must review three documents for each invoice.
A fraudulent invoice won’t have a corresponding purchase order or order receipt. Because the process requires three documents to be compared before payment can be issued, a fraudulent invoice will be detected immediately. Once all three documents have been received by your accounts payable department, you’ll need to scrutinize each to verify that all information is correct before payment is issued. If there are any discrepancies in the three components, the AP department may send only a partial payment or temporarily withhold payment. Once the differences are resolved, your AP team can complete the three-way matching process and issue payment. Businesses must ensure their accounts payable (AP) departments verify the legitimacy and accuracy of every invoice they pay.
This AP procedure ensures that every time the supplied item matches the initial order. The receiving report or receipt of goods is an additional technique of verification added by the Accounts Payable 3-Way Match. Just upload your form 16, claim your deductions and get your acknowledgment number online.
It benefits your business by ensuring that the supplier invoice matches your ordered goods or services. Judiciously matching invoices with their purchase orders and receiving reports generates a strong paper trail for all cash flow out of your company. A reliable accounts payable audit trail ensures you have not been subjected to any internal fraud and are not losing money without your knowledge. It also ensures your accounting practices are compliant with the industry standards and aids in better external audits. The 3-way matching process is critical for keeping business finances healthy. Not only do businesses need a consistent supply of goods/services to keep the business running, but also need mechanisms to protect against overpayment and financial fraud.
When discrepancies are discovered in three-way invoice matching, the payment will be withheld until the discrepancy is resolved. By 3 way matching supporting documents, companies can detect duplicate, erroneous, or fraudulent payments to vendors. Three way matching is best performed as an automated financial workflow powered by AP automation solutions such as Nanonets. According to an ACFE report, companies lose up to 5% of their annual revenue on fraudulent or unauthorized spends. That’s why finance teams are increasingly adopting a 3 way match of vendor invoices as an essential step of their accounts payable process. Upon delivery of the purchase, the receiving department completes an order receipt, indicating the items received and the quantity of each.