What Is Invoice Matching? Types and Processes Explained

The goods received note includes details of the delivered goods that have been included in the shipment as well as the payment method. This document specifies that a receiving officer has accepted the goods delivered by the supplier and records the quantity, delivery condition, and any other applications to be noted. The receipt is forwarded to the accounts department for cross verification against the supplier’s invoice. The cross verification is essential to determine the legitimacy of the invoice before making the payment. By automating the three-way matching process, businesses may save time and money, detect fraud, and free up accounts payable employees to work on more strategic initiatives. In addition to meeting payment deadlines, automation may help businesses take advantage of discounts for on-time payments and avoid late fines.

Payment Reminder Templates That Actually Work

The primary difference between the two are in 2-way matching, there are two documents matched whereas in the 3-way matching, there are three documents matched with each other. In case of any mismatch between the purchase order and invoice, the payment against the invoice is kept on hold until the discrepancies are resolved. Barbara invoice matching Cook is a freelance writer and former CFO with subject matter expertise in financial and accounting topics and automation software. Close your books faster by syncing your 3-way match directly on to your ERP or accounting automation software.

Key Documents: purchase order, receipt and invoice

Organisations should consider their priorities for accuracy, efficiency, and risk management when choosing the appropriate matching method for their accounts payable processes. 2-way and 3-way matching in accounts payable are critical control mechanisms that protect businesses from financial losses, fraud, and operational inefficiencies. While 2-way matching works for low-risk transactions, 3-way matching helps in comprehensive verification. These verification processes ensure payment accuracy by systematically comparing purchase orders, supplier invoices, and delivery receipts before authorising payments.

Invoice receipt

This method ensures that basic details such as vendor information, order number, and the total amount on the invoice align with the purchase order. The fact is that all organizations have to worry about the possibility of accounts payable fraud. To secure a company’s assets against criminal activity and human error, 3 way matching must be used. Create acceptable variance percentages for invoice amounts compared to POs.

Automating your AP is within reach

Industries where compliance and quality control are critical, such as manufacturing or pharmaceuticals, may fixed assets require the more robust 4-way matching process. However, for retail or service-based businesses, the 2-way or 3-way matching process may be sufficient. While the 4-way matching process offers enhanced accuracy and security, it is more resource-intensive. A cost-benefit analysis will help you assess whether the additional verification processes justify the investment in time, manpower, and systems. AI-powered Optical Character Recognition (OCR) technology in Cflow transformed the way invoices are processed.

Goods Receipts Note

Accounting for purchase orders and receiving reports, in general, help companies manage their finances better by accounting for purchases before the bill is paid. 3-way matching ensures you’re paying for what you’ve already accounted for, avoiding any surprises. By automating invoice matching, companies can streamline their accounts payable process, reduce risk, and improve overall financial efficiency. If all the details match, the invoice can be automatically approved for payment. If there are any discrepancies, the invoice can be flagged for manual review.

• In a three-way match the purchase order(PO) is compared to the invoice and the receipt of the goods.
• Let us understand the 3-way matching process with the following example.
• Nevertheless, the downside of 3-way invoice matching is the added complexity and time required to reconcile multiple documents.
• 3 way matching is more focused on the quantity,whereas 4 way matching focuses on quantity and quality of goods/serrvices.
• Only a lucky accident—the bookkeeper copying the real assistant—stopped the payment.
• This process helps identify discrepancies, such as incorrect pricing, quantities, or terms, before making payments.

Delayed Goods Receipts:

Its advanced features make it a scalable solution for businesses of all sizes, addressing challenges related to accuracy and timely data insights. Designed to meet the needs of finance teams, industry-specific business owners, and entrepreneurs, Pazy stands out in the market by streamlining financial operations. By automating critical parts of the three-way matching process and centralizing communication, Peakflo takes the burden off your team. Book a demo with Peakflo and take the first step toward a more streamlined, error-free payment process.

How to Automate Accounts Payable: 10 Steps

• It functions as a robust internal control, establishing a system of checks and balances designed to ensure the accuracy and legitimacy of financial transactions.
• The numbers on the packing slip must match those detailed on the PO and invoice.
• With automation, the matching process is significantly less prone to human error and carries a lower risk of fraud because the system operates with precision and without bias.
• This document confirms that the correct quantity was delivered and the goods are in the condition you expected.This is the final piece of the match.
• Find out how AI and machine learning fully automate document capture for company-wide efficiency gains.
• There are several benefits to having a good three-way matching workflow, such as a cleaner audit trail, reduced fraud, and better supplier relationships.
• Without a centralized view, AP teams struggle to identify where invoices are stuck, which documents are missing, or who needs to take action next.

This type of matching is typically used in industries with strict quality requirements or complex supply chains. Traditionally, the accountant is in charge of matching the invoice, PO, and GRN data. All the relevant paper documents need to be gathered in order to manually verify the goods and price information contained in them. Storing paper documents can be challenging https://kmgethiopia.org/net-vs-nett-the-tiny-difference-that-could-cost/ in terms of space and safety.

• When it comes to technology, there are several advantages to automating the three-way matching process.
• On analysis of the results, the AP team noticed that due to a transposition error, the price of the batteries was entered as Rs.7,520 instead of Rs.7,250 in the invoice.
• Discrepancy identification is crucial for catching potential payment errors before they occur.
• Also, suppliers and vendors might lose trust if the purchase orders and order receipts are often inaccurate.

With over 10 successful procurement and accounts payable related automations, Cflow is definitely the best choice for automating the 3 way matching in accounts payable. With Cflow, you get clean and convenient AI-powered no code automation that can be customized as per your requirements. Effective fraud detection is not the only benefit of automating the 3 way matching process. For successful automation of the 3 way matching process, getting the buy-in from the team is also important.