Matching supplier invoices in the finance function is one of the most important aspects of the job, ensuring businesses paid for what they bought.
It can also make the difference in paying late or on time, not over-paying for goods or services, and reducing the chances of fraudulent activities.
It’s for this reason that the accounts payable department have increased their use of automated invoice processing and especially of three-way match to better manage financial risk.
What is three-way match?
The aim of three-way match is to highlight any discrepancies in the purchase-to-pay cycle before wrongful payments are made.
Because before any invoices are processed and paid to the supplier or vendor, finance teams have to review the information held in the accounts payable system or the documents themselves - such as quantity, total price, VAT and tax codes etc. - to double and triple check what has been ordered matches goods received and the total price charged.
If any issues are found – inaccurate quantities, wrong prices, damaged goods, or more, payment is not sent until the issue is rectified. Once the invoice has been validated by the three-way matching process, payment is sent according to terms. Mismatching means something’s off such as the amount of the purchase order doesn’t equal the invoice amount.
How does three-way matching work?
Unlike with two way match where just the information on purchase orders and invoices are synched, three-way match takes this one step further by adding in an extra layer of certification.
Three-way match is all in the name, referring to the three documents - invoice, purchase order, and receipt - to verify and make sure that a payment can be made.
Three-way match involves checking an invoice against supplier data, purchase orders, and receipts. The process makes sure everything aligns correctly - important when dealing with fraud and security.
Companies might typically use tools such as Optical Character Recognition (OCR) to initially help scan documents and enter them into the ERP or financial software tool, but the entire purchase-to-pay cycle can also benefit from the use of automation - something we’ll get onto later.
The verification process starts as soon as the accounts payable department receives an invoice, with supplier invoice information matched to the purchase order that the item relates to. The supplier invoice is then checked against a receipt of purchase to ensure things such as goods or services have been received, correct quantity, and correct price.
What are the challenges of manual matching process?
Manually managing the three-way match process can cause major issues, including duplicate invoices, late payments, fraud, and ultimately a deteriorating relationship with the supplier or vendor.
Manual three-way match can quite literally mean an accounts payable professional doing it by hand with hundreds of paper-based documents to scan, check, and validate - something which can take time and vital resources away from more important tasks, especially when red flags are raised.
If variations - such as item cost, quantity, amount, or payment date on an invoice - are raised and information doesn’t match, the transaction will be flagged and a fix required. But that’s only if it is flagged, which takes a sharp eye from the accounting team.
With manual three-way match processes, companies also increase the risk of human error entering the process. Suppliers and vendors prioritise a smooth and fast purchase-to-pay cycle and may choose to take their business elsewhere if payment and invoicing is consistently inconsistent.
Can I automate three-way match?
A repetitive and time-consuming task such as three-way match is best performed alongside an automated solution, especially when mistakes can lead to so many critical issues.
Some of the main benefits of automated three-way match include reduced risk, better mistake and fraud detection, and the real-time synchronisation of financial documents. It also means accounts payable staff spend less time doing painstaking tasks like invoice matching and more time doing jobs that make a big difference.
Automated three-way match with accounts payable software can also see significant cost reductions, faster invoice processing, and improved supplier relationships by offering a more seamless and faultless process.
As well as protecting your business against duplicate, inaccurate, and mis-payments, three-way match can help reduce the likelihood of paying out for fraudulent invoices.
And, as the technology syncs with most ERP and accounting software systems, there’s really no excuse not to be using it.
The benefits of automating three-way match
The main benefit of three-way match automation is knowing that the purchase-to-pay cycle in your business is 100% correct, as payment only ever gets processed when invoices are matched to a purchase order as well as a confirmation of delivery of goods.
Automation in the three-way match process means businesses not only ensure they have received what they have paid for, but they secure the entire purchase-to-pay process - from the moment an order is made to receiving invoices and processing payment.
Compliance, visibility and control are all vital in the finance function, and this is exactly what automated three-way match provides, as well as being a safety net if things go wrong.
For example, say your business decides to purchase 10 new laptops, but only eight arrive. In a large enterprise, it could take days or weeks to manually investigate and figure out what was ordered, who ordered it, the quantity ordered, and the total cost. By utilising automation, this whole process can take just minutes by quickly finding the invoice in the ERP or finance software.
With three-way match automation, accounts payable staff can cut the time and cost of processing invoice and payments by around 80 percent compared to manual processing and prove to the rest of the business that their entire purchase-to-pay cycle is safe, accurate, and efficient.
Maximize Accuracy and Efficiency with Yooz's 3-Way Match Solution
Yooz redefines precision and efficiency in accounts payable management with its cutting-edge 3-way match solution. Leveraging advanced technologies such as Artificial Intelligence (AI) and Robotic Process Automation (RPA), Yooz revolutionizes the reconciliation process by seamlessly aligning purchase orders, invoices, and receiving documents. This innovative approach not only minimizes errors and discrepancies but also optimizes efficiency by automating manual tasks, allowing finance teams to allocate resources strategically and focus on high-value activities. Flexible and customizable, Yooz's 3-way match solution adapts to unique workflows, ensuring a seamless and accurate reconciliation process every time. With Yooz, organizations can streamline their financial operations, enhance compliance, and make informed decisions with confidence. Whether it's matching invoices to purchase orders, validating quantities and prices, or reconciling receiving documents, Yooz sets the standard for precision and efficiency in accounts payable management.
