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Why Automated 3 Way Match is Key to Accounts Payable Success

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Explore the benefits and automation of 3 way match accounts payable process in our latest blog. Learn how 3 way match accounting with automated invoice matching software enhances efficiency and accuracy in accounts payable for large enterprises. Dive into strategic insights on streamlining your financial operations and strengthening supplier relationships.

Accounts Payable (AP) is an essential function in any organization that handles vendor payments. It involves managing invoices and payments and tracking expenses. One critical step in the AP process is verifying the invoice details against purchase orders (PO) and receiving reports (RR). This process is called 3 way match account processing, ensuring that payment is made only for the items received and invoiced.

What is the difference between 2-way matching, 3-way matching and 4-way matching

3 way match in AP invoice processing involves cross-referencing the invoice with the purchase order and purchase receipt to ensure there is no discrepancy and the order was delivered as per the agreed terms.

By incorporating e-invoicing software into this process, organizations can streamline and automate the match process, enhancing efficiency and reducing the risk of errors. This systematic approach not only prevents potential fraudulent or unauthorized transactions but also results in substantial cost savings, preserving valuable financial resources.=, particularly in case of large enterprises.

2 way match vs 3 way match vs 4 way match

In 2 way match, the organization matches the invoices only against purchase orders, whereas in 3 way match, the invoices are matched against both, Purchase orders and purchase receipts. In Four-way matching, the invoice is matched against Purchase orders, purchase receipts, and product acceptance.

DocumentPurpose2-way match3-way match4-way match
Purchase OrderConfirms the purchase was authorized YesYesYes
Purchase ReceiptConfirms the good was receivedNoYesYes
InvoiceAmount owed against good deliveredYesYesYes
Product acceptanceProduct delivered is as per the PONoNoYes

Understanding the 3 Way Match

The 3-way matching process is a cornerstone in invoice processing, involving the comparison of three crucial documents:

  1. Purchase Order (PO): A document issued by the buyer outlining the items to be purchased and the agreed-upon prices.
  2. Receiving Report (RR): This document confirms the receipt of goods or services as per the PO.
  3. Invoice: A formal request for payment issued by the vendor detailing the goods or services provided.

During the 3-way matching, the details in the invoice are verified against the PO and RR to confirm that the delivered items match the agreed terms and pricing.

The matching process involves comparing the invoice details with the PO and RR to ensure that the correct items were received, and the price charged is accurate.

Benefits of Automated 3-Way Matching

  • Efficiency: Automation speeds up the matching process, reducing the time needed to process payments and enhancing AP productivity.
  • Accuracy: Automated systems reduce the risk of human error, ensuring more accurate invoice processing.
  • Improved Vendor Relations: Quicker processing leads to faster payments, which can improve supplier relations and enable discounts for early payments.
  • Increased STP Rates: By minimizing manual intervention, automated systems increase straight-through processing (STP) rates, enhancing overall AP efficiency.
  • Regulatory Compliance: Automated systems enforce compliance with business rules and regulatory standards, minimizing the risk of financial discrepancies.

Challenges with Manual 3-Way Matching

Manual 3-way matching can be labour-intensive and prone to errors. Manually cross-referencing each invoice with its corresponding PO and RR is time-consuming and susceptible to human error, such as data entry mistakes or oversight of discrepancies. This inefficiency can lead to delayed payments and increased operational costs.

What is the problem with the manual 3 way match process?

Manual 3-way matching can be time-consuming and error-prone. The process involves manually checking each invoice against the PO and RR, which can be challenging, especially when dealing with a high volume of invoices. Additionally, manual 3-way matching is susceptible to human errors, such as incorrect data entry, misinterpretation of information, and missed matches.

Manual 3-way matching can also be costly. The time and resources required to match invoices manually can significantly impact the AP process’s efficiency and productivity. Furthermore, manual matching can result in delayed payments, which can affect vendor relationships and lead to lost discounts and increased costs.

What is an automated 3-way matching?

Driving AP Innovations with Automated 3-Way Matching

Embracing automated 3-way matching through sophisticated invoice matching software not only streamlines the entire AP process but also supports regulatory compliance and enhances visibility into financial operations. For organizations looking to improve their AP efficiency, reduce costs, and strengthen vendor relations, investing in automated solutions like 3-way, 2-way, and 4-way matching systems is invaluable. Discover the transformative impact of AP automation by requesting a demo of our automated 3-way matching system today.

Automated 3-way matching is a process that uses software to match invoices, POs, and RRs automatically. This process involves integrating the organization’s ERP system with an automated Accounts Payable Automation Software, which can extract data from the three documents and match them against each other. The automated 3-way matching process begins with the system capturing the invoice details, such as vendor name, invoice number, and amount. The system then matches the invoice details against the PO and RR data, which are already stored in the ERP system. The software can identify any discrepancies and highlight them for review.

If the automated 3-way matching process identifies a match, the invoice can be processed for payment automatically. If there is a discrepancy, the system can route the invoice to the appropriate person for review and approval.

What are the benefits of automated 3 way match?

Automated 3-way matching offers several benefits to organizations. First, it eliminates the need for manual matching, which can significantly reduce the time and resources required for the AP process. Automation can also reduce the risk of errors, improving the accuracy of the matching process.

Automated 3-way matching can also improve the AP process’s efficiency and productivity. By automating the matching process, the organization can process invoices more quickly, reducing the time it takes to pay vendors. Faster payments can improve vendor relationships and help the organization take advantage of discounts offered for early payment.

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Another benefit of automated 3-way matching is improved visibility into the AP process. The software can provide real-time data on the status of invoices, highlighting any issues that require attention. This visibility can help organizations identify bottlenecks and make process improvements, further streamlining the AP process.

Drive straight-through processing (STP) with automated 3-way match

Automated 3-way matching can also help organizations increase their straight-through processing (STP) rates. STP refers to the percentage of invoices that can be processed without any manual intervention. The higher the STP rate, the more efficient the AP process.

Automated 3-way matching can increase STP rates by reducing the number of invoices that require manual intervention. When an invoice matches the PO and RR data, it can be processed automatically without any manual intervention. This can significantly increase the STP rate and reduce the time and resources required for the AP process.

Additionally, automated 3-way matching can help organizations achieve regulatory compliance. The software can enforce business rules and ensure that invoices are processed according to the organization’s policies and procedures. This can reduce the risk of errors and ensure that the AP process complies with regulatory requirements.

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In conclusion, three-way invoice matching is a critical process in the AP function that ensures that payments are made only for the items received and invoiced. Manual 3-way matching can be time-consuming, error-prone, and costly. Automated 3-way matching can eliminate these issues by automating the matching process, improving efficiency, accuracy, and visibility. Automated 3-way matching through invoice matching software can also increase STP rates and help organizations achieve regulatory compliance. By adopting automated 3-way matching, organizations can streamline their AP process, reduce costs, and improve vendor relationships. If you’re interested in seeing how automated 3-way matching can help your organization, request a demo today.

Related Read:

  1. Navigating the Complexities of Accounts Payable Compliance
  2. Measuring Your Accounts Payable Effectively: Operational Metrics
  3. Effectively Managing Vendor Relationships with AP Automation
  4. How does AI led AP automation help in Straight Through Processing (STP)
  5. Setting Up Internal Controls in Accounts Payable Processes
  6. 5 Key Benefits of Enhancing Your Business with an e-Invoice Generation Tool
  7. White Paper – Accounts Payable Cheat Sheet for Detecting and Preventing Supplier Frauds
  8. White Paper – Accounts Payable Cheat Sheet for Detecting and Preventing Supplier Frauds
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Swagata Kumar having over 13 years of experience as a seasoned Product Marketing leader, developing and implementing effective Go to Market strategies for high growth B2B SaaS Products and Technology solutions. She bring with an unique and strong blend of experience across Product Marketing, Go to Market, Customer Marketing, Business Strategy, Sales Enablement and Business Development in B2B SaaS. Throughout her rewarding career, she have closely collaborated with sales leaders in diverse markets, enabling me to design and implement impactful campaigns that have significantly contributed to business revenue growth and market share expansion. As a result, She have developed an in-depth understanding of revenue-driven marketing strategies for B2B SaaS products in the US and EMEA regions. She expertise encompasses Product Marketing, Product Positioning and Messaging, GTM Strategy, Cross Functional Leadership, New Product Launches, Sales Enablement, Product Evangelization, Customer Marketing, Market and Industry Research, Competitive Benchmarking, Content Marketing,
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