What is Invoice Matching? Types, Process & Examples

It helps reduce unnecessary costs, such as over-ordering or under-ordering, and helps ensure that the correct goods are being delivered at the right price. The system also helps what is a 3 way match in accounting reduce wasted time and effort, which helps reduce the overall cost of the supply chain. The receiving or inventory department must also ensure that all goods and services are received in good condition. Three-way matching process is vital to any business, as it helps to protect from costly errors and potential fraud. Yet, few steps can compare to the right automation solution for three-way matching.

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In this article, we will focus on how to record the 3-way match process in accounting. We’ll provide easy-to-understand explanations and examples of journal entries, aiming to simplify this important aspect of accounts payable. Learn how to spot wire transfer scams, protect your finances, and take quick action if fraud occurs. For over-taxed AP departments, it’s often the amount of time spent doing tedious work when they could be doing something that adds more value to the company.

Keep Track of Payments With an Accounts Payable Ledger Template

Filing can be very time-consuming for AP clerks and retention of volumes of paper takes up valuable space. In many instances companies must pay for off-site storage of this paper. An AP Retail Accounting manager, Accounting Manager, Controller, or perhaps CFO will review the cash requirements journal before checks are cut.

Why Is Manual Matching Bad for Businesses?

• Encourage communication and collaboration between the AP department, procurement, and receiving departments to resolve discrepancies quickly.
• A vendor might accidentally send an invoice for a purchase that has been canceled, not completed, or not been fully delivered.
• It will help to ensure accuracy and integrity in the three-way matching process, which will benefit businesses in the long run.
• The system continuously improves accuracy as it learns from historical transactions​.
• It is supposed to be a systematic approach that ensures high-level accuracy, timely analysis and faster exception resolution and coding for non GL invoices.

In Airbase, POs and receipts are synced from NetSuite against an invoice received in Airbase. This straightforward method is commonly used for simple purchases that carry little financial risk. Although it is the fastest process, it may not catch all discrepancies. The process unearned revenue typically begins with the creation of a purchase order that contains the relevant details of a purchase request, such as quantities and price.

In a three-way procedure, major purchases are controlled using cross verification. If there is a fault at any step, then the amount cannot be taken against the invoice until the error is resolved by receipt of a confirmation or the revised invoice from the supplier. It is also one of the risk management methods as the risk of payment to unauthorized persons or against fake bills is to be controlled. Sometimes it becomes a lengthy procedure, but it is the most effective way of managing the risk. The “match” part of the three-way match refers to comparing the quantities, price per unit, terms, and other information appearing on the three documents.

• A business can benefit from three-way-match processing in several ways.
• Three-way matching is an effective and efficient way for businesses to ensure accuracy regarding invoice and purchase order processing.
• Take an honest look at your current practices and identify areas to target for improvement to increase your operational efficiency.
• Overall, three-way matching is essential for any business that wants to ensure accuracy and efficiency regarding invoice and purchase order processing.
• Large enterprises deal with thousands of invoices every month, making accuracy a challenge.
• The right invoice matching solution should integrate smoothly with your AP workflows, eliminate inefficiencies, and scale with your business.