The 3-way match process in accounts payable is a process of matching the purchase order PO, supplier’s invoice, and the receiving report to validate the invoice before disbursing the payment. The 3-match process achieves validity, accountability, and transparency in procurement planning and management processes. The premise of the three-way match process is to reduce the risk of financial fraud by preventing the reimbursement of unauthorized purchases.

A Business Case of the 3-Way Match Process

In 2020, someone managed to swindle Google and Facebook out of $123 million collectively. How the hacker managed to do that remains a mystery to companies of such size and sophistication. The alleged fraudster sent invoices to Facebook and Google for goods and services that were not rendered.

And surprise! The two tech conglomerates paid the bogus invoices.

Now, while Facebook and Google managed to get their finances back, fraudulent invoices are a serious problem in the world today, costing enterprises billions in losses. Perhaps, it can be assumed that if Google and Facebook had systems of vetting out purchases and invoices, they wouldn’t have fallen victim to invoice fraud.

Likewise, unless your business deploys security systems to vet invoices and send instant notifications, there’s no telling how much loss you stand to incur should you become a victim of an invoice attack.

What Precisely is a 3-Way Match Process in Accounts Payable?

A 3-way match process entails matching the purchase order PO, the receipt of the goods notes GRN, and invoice records to avoid paying for unauthorized purchases. The 3-way matching process is conducted to maintain adequate procurement records for the audit trail. The 3-way match process is usually done before issuing the supplier with the payment post-delivery.

This process deals exclusively with invoice approval by looking at documents that prove the following;

  • The enterprise requested the goods and services stated in the invoice, and that,
  • The enterprise received the services and goods the invoice was used for.

By determining whether the enterprise requested the goods recorded in the invoice, and by confirming whether the business received the goods the invoice was issued for, it is possible to verify whether invoices are credible or fraudulent. The 3-way match process entails cross-verifying relevant documents for accuracy in purchase orders, goods receipt notes, and invoice numbers.

This process involves placing documents side by side to verify whether an invoice represents goods requested and products supplied. The 3-way match process satisfies the procurement process, ensuring that no unauthorized payments are issued. In addition, matching creates a watertight procurement system that’s free from financial fraud.

Components of the 3-Way Matching Process in Accounts Payable

1. Suppliers Invoice

The supplier’s invoice outlines the goods offered by the supplier. In addition, the invoice states the quantity and duration of delivery and records other applicable details. The supplier’s invoice is essentially a formal request to pay money owed to the supplier.

2. Purchase Order

Whether an individual, a department, or an organization requires anything, they forward a request that details what they want, the quantity, and why they need it. The purchasing team receives the request and expands it into a purchase order for the supplier, outlining the goods needed quality and quantity, and the cost of the purchase.

3. Goods Receipt Note

The goods receipt note validates that a receiving officer has received the goods and services delivered by the supplier. It also specifies the time and other applicable details. The Goods Receipt Note is forwarded to the accounts department after the receiving officer has done the due diligence. With these three documents at hand, the accounts payable office can verify whether a supplier’s invoice is valid and legitimate before issuing a payment. This three-tier process prevents fraud from falsified and unwarranted invoices.

Benefits of the 3-Way Matching Process

The 3-way matching process helps track the origin of invoices and verifies them for validity and legitimacy. Here’s how the 3-way matching benefits you.

  • Eliminating fraud – By placing invoice documents side-by-side, the accounts payable can verify all invoices and make informed decisions about procurement clearance processes. An accounts payable staff can instantly look at an invoice purchase order and determine whether it accurately represents rendered services.
  • Keeping a verified record of suppliers – The matching process enhances the transparency of the relationship with vendors. So, it is possible to see the supplies from vendors and the money paid to the suppliers.
  • Increases profits – The 3-way matching process protects enterprises from unwanted expenses which, in the long run, add up to the bottom line. Individuals and businesses that leverage the 3-way matching process achieve cost savings and improve transparency on procurement planning processes.
  • Maintaining accurate records for audit purposes – A good audit trail that tracks the cash flow inside and outside the business is indispensable for any audit process. Whether it’s from investors, government, partners, or vested parties, the 3-way matching process provides a bold paper trail for verifying the legitimacy of expenses by a business.

Automating The 3-Way Matching Process in Accounts Payable

Businesses are now using AI-powered tools and software to automate their procurement processes. This is because cross-checking and verifying the three sets of documents can be tiring and time-consuming; businesses end up spending more time getting purchase orders and supplier invoices fulfilled. Thus, automating the 3-way matching process yields transparency and accountability in the accounts payable processes.

ProcurePort – Embedding Procurement Automation in Your Accounts Payable

Beyond the 3-way matching process, ProcurePort procurement and sourcing software provide simple, powerful automation that puts your procurement planning and management on autopilot. With ProcurePort, you can:

  • Store purchase orders once completed
  • Collect receiving reports
  • Automatically vet invoice documents once completed

You can use ProcurePort procurement and sourcing software for a spin right away.