3 way match is best practice when it comes to accounts payable. But 2 way match in accounts payable is ‘good enough’ for many accounting departments.
What are 3 way match and 2 way match in accounts payable? Why do they matter? And how does AP automation make 3 way match and 2 way match simple?
Read on to find out!
What are 3 Way Match and 2 Way Match?
3 way match and 2 way match are part of the purchase order (PO) invoice process.
- Matching the PO to the PO invoice alone is called 2 way matching.
- Matching the PO to the PO invoice and the packing slip or receipt is called 3 way matching.
How Does 3 Way Match and 2 Way Match Work?
A purchase order is an official commercial document. It commits a buyer to pay a seller for a specific product or service that will be delivered in the future.
The seller then ships the products or provides the service. At that point the seller invoices the buyer using the PO number so that it can easily be matched with the delivery information. This is a PO invoice.
The seller also provides a packing slip or receipt that describes the goods sent or services rendered.
In reality, A PO is basically a pre-approved PO invoice. The supplier, purchased goods or service and amounts are approved as part of the PO purchase requisition process leading up to creation of the purchase order. So a PO invoice should look almost identical to the PO itself. And the packing slip or receipt should reflect the items or services identified in both the PO and the PO invoice.
Occasionally part of an order is back ordered, or services will be provided over a period of several months, and a PO will be ‘partially received’. So the PO remains in the ‘open’ status as more invoices are processed and matched against it. The PO is moved to the ‘closed’ status when all items are received and the items and pricing all ‘match’ between the PO, the packing slip/receipt and the PO invoice.
The purpose of 3 way match is to identify any discrepancies in the three critical PO purchasing documents: purchase orders, invoices and receipts/packing slips.
2 way match only compares two of the documents, typically the PO to the PO invoice.
The invoice is sent for payment only if the information on the documents match. And if a discrepancy between the PO, PO invoice or packing slip/receipt is identified in the matching process then the invoice is sent to the purchasing department for review and action.
In this way, 3 way match and 2 way match save businesses from overspending or paying for an item that they did not receive. It’s also a critical element in protecting your business from invoice fraud.
Manual Matching is Inefficient and Painful
With so many details to review, 3-way matching can be a tedious process if done manually.
Typically with a manual match, a member of the accounts payable team gathers all the relevant paper documents in a transaction in order to satisfy the matching procedures. He or she looks at each line of each document to make sure they all match.
Now imagine a transaction with a 10 page line item PO that has to be matched to a 10 page PO invoice that has to be matched to a 10 page packing slip. That’s a LOT of lines to match. And that’s for ONE invoice!
Manual invoice matching is even more difficult when a PO remains open for months or even years.
And, worse, people can lose paper documents and misread figures. Any manual system is subject to both human error as well as fraud.
Plus, managing stacks of paperwork and invoices is a repetitive and soul-sucking task that is incredibly inefficient and destroys employee morale.
Manually matching purchase orders is a nightmare!
Automating Invoice/PO Matching
CoreIntegrator systems can automatically compare the three critical PO documents (PO, Receipt/Packing Slip and Invoice) and highlight any discrepancies between them.
This brings massive efficiency to processing PO invoices, freeing your AP staff up to save your company money!
And it can also enable you to be eligible for early pay discounts on invoice payments.
At the same time, CoreIntegrator’s AP automation solutions bring accounts payable best practices to your accounting department.
Bottom Line – 3 Way Match or 2 Way Match Automation
3 way match and 2 way match are critical aspects to the purchasing and invoice payment process.
They protect your company or organization from over payments, under- delivery as well as outright fraud.
The manual PO match process is massively inefficient and prone to error.
So take a look at AP automation software that automates not just 3 way and 2 way PO matching, but provides so much more including verified automated invoice data entry, automated approval processes, and even the ability for your AP staff to work from home!
Click below and let us show you how your organization can save time, money and become future-proof at the same time!