3-way matching ensures that the billed quantity matches the ordered and received quantities, helping to identify shipping or receiving discrepancies. This method allows the company to flag issues before processing payments, ensuring accuracy and control during reconciliation. Your university bookstore places a PO with a supplier for 500 specific textbooks at a negotiated price per unit. Upon delivery, the receiving department verifies the quantity and condition of the books, documenting everything in a GRN.
Documents in 2-Way Matching
Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing. Benefits of 2-way matching include avoiding overpayment and to maintain a strong supplier relation. The supplier sends an invoice to the buyer against the sale of goods or services ordered through a purchase order. Join BC Krishna, CEO of Centime, to explore how AR automation can transform your collections process, improve cash management, and delight your customers. The PO serves as a reference for verifying the items ordered, the agreed price, and purchase terms.
- It is an extra security measure to two-way matching by ensuring the amount and type of goods supplied are being billed for.
- A vendor might accidentally send an invoice for a purchase that has been canceled, not completed, or not been fully delivered.
- Once company A delivers the monitors and sends an invoice, the AP clerk starts the verification process.
- While NetSuite provides the tools to implement 3-way matching, understanding how to configure and optimize the process can take time.
- These examples highlight the effectiveness of each process in ensuring accuracy, reducing discrepancies, and streamlining payment workflows.
- Some G2 users have noted that while NetSuite continues to enhance its platform, businesses often face high subscription costs.
The Role of Automation in Enhancing Matching Processes
If you maintain a good relationship with your vendors and your purchases are typically low value and low risk, performing a two-way matching might work for your company. The issue is immediately Insurance Accounting raised to the relevant business departments if discrepancies are found between the purchase order and the invoice. If the purchase order is correct, the problem is communicated to the vendor for correction. The vendor sends a corrected invoice with updated payment terms and/or discounts, which is processed. Purchase orders contain information about the type and quantity of goods or services required. Occasionally, they also collect information about the agreed-upon price and discounts.
- For example, a small software development company orders 50 licenses for a project management tool and uses 2-way matching to ensure the invoice matches the purchase order in quantity and price.
- With a 95%+ first-pass match rate, the AI matches POs to invoices seamlessly, flagging errors, warnings, and close matches.
- All invoices received by a company for products or services that have been purchased from a vendor must be checked for accuracy before payment is initiated.
- However, for many organizations, managing AP can present significant challenges, such as missed invoice payments, lost early-payment discounts, duplicate payments, and disputes with suppliers.
- In this blog, we’ll explore how 2-way, and 3-way matching can help streamline your purchasing process.
A better way to send and receive invoices.
In the above example, suppose ABC has issued a purchase order for 10 chairs at a discounted total price of $2000 ($200/chair) as agreed with XYZ. After reviewing and accepting the purchase order, and delivering the 10 chairs, XYZ sends an invoice for the what is a 3 way match in accounting original price of $2500 ($250/chair). The invoice creator at XYZ may not have been aware of the discount offered by the XYZ marketing person to the purchase department at ABC for the bulk purchase.
In case you couldn’t tell, I think automation is the way to go here; there’s no reason you should spend your time building a puzzle out of your business information if you don’t have to. While 4-way matching offers the most robust verification, it’s essential to weigh its benefits against the potential drawbacks. For startups dealing with high-value or quality-critical goods, the enhanced control may outweigh the additional processing time. On the other hand, startups dealing with lower-risk, standardized products might find a 3-way matching process sufficient.
By understanding the differences in document requirements, accuracy, and suitability, businesses can choose the matching process that best fits their needs. To further illustrate their application, retained earnings let’s look at some practical scenarios where each matching process plays a critical role in streamlining operations. Accounts payable workflow automation can also help with the detection of errors and fraud. Rather than relying on human eyes and attention spans to notice the difference between documents, the automated system can readily, consistently, and more accurately find these discrepancies. Further, depending on the size of your business — or your suppliers — you may not be provided with or have access to receiving information, making more complex invoice-matching efforts impossible.
