No more payment errors: discover the power of the 3-way match!
Processing supplier invoices is a real challenge for companies. Efficient cash flow management is essential to avoid payment errors, fraud and non-compliant documents.
To achieve this, many companies are turning to the 3-way match method.
But what exactly is this method, and why is it so popular? Find out all you need to know on the subject!
What is the 3-way match?
Also known as "3-way matching " or " 3-factor matching ", the 3-way match defines an accounting verification method that consists of comparing 3 documents:
- the purchase order;
- the goods receipt;
- the supplier invoice.
The aim? To guarantee the accuracy of an invoice before it is paid. This process can be manual or automated.
3 way = 3 documents in the supplier invoice validation workflow
As its name suggests, 3-way matching is based on the 3 documents involved in the invoice processing and validation process:
- The purchase order: the company's purchasing department creates an order with its supplier. A copy of the document is saved internally.
- Receipt slip: the company receives the order and records the products received and the information on the dispatch note in the management tool.
- The supplier invoice: the accounts department checks that the supplier invoice matches the purchase order and the delivery note.
How does the 3-way matching process work?
The 3-way matching method is generally deployed when an invoice is received from a supplier or service provider.
It involves checking that all the information is consistent between the documents.
The control points to be defined
Several points are generally selected for checking (quantity, price, product description, etc.), so that they can be compared at the level of the purchase order, the delivery note and the invoice.
👉 The data verification criteria vary considerably from company to company, but most often include the following compulsory information:
- the invoice number ;
- supplier and customer details
- the description of the product or service
- unit price
- the VAT rate.
They also include the quantity (comparison between the quantity ordered, delivered and invoiced) or the number of hours in the case of a service.
The outcome of the process
The 3-way matching verification method leads to two outcomes: approval of the invoice or the reporting of an anomaly or shortcoming.
- If the control points on the three documents match, the invoice is declared compliant and payment is authorised.
- If a discrepancy is found, payment is suspended. The error must be rectified or the anomaly resolved before the document is re-approved and payment made. The invoice can be sent back to the supplier, who will make the necessary changes.
What are the advantages of 3-way matching in invoice management?
Processing, checking and validating supplier invoices are crucial steps for any business.
Adopting the 3-way matching process reinforces the controls and reliability of the approval circuit. Thanks to the three-factor reconciliation process, you avoid the risk of errors (typing errors, off-set commas, omission of compulsory information, wrong addressee, etc.), which can have a number of consequences:
- on the legal validity of the document ;
- on the financial health of the company (if the comma is off, if there is an extra zero, etc.) ;
- the relationship with the supplier.
Using three-factor reconciliation streamlines the invoice validation process and helps to comply with payment conditions. It also limits the risk of non-compliant or fraudulent invoices, as well as duplicate or higher-than-expected payments. Thanks to this verification, you pay the exact amount of what you have ordered and received.
☝️ However, the value and relevance of 3-way matching means that the method must be applied very rigorously!
What are the limits of the manual 3-way match process?
If it is carried out manually, the 3-way match, like any invoice approval circuit, represents a set of complex and time-consuming tasks with little added value, and is often a source of errors.
Typically, companies receive paper or e-mail invoices before the goods are received, which delays the processing and validation of the documents, since the three-factor match has to wait until delivery.
Also, in a manual process, it is often necessary to enter the information on the invoice to find the order and receipt slips, a time-consuming operation when repeated, and also prone to error.
And if one of the previous stages (purchase order or receipt of goods) has not been carried out correctly, the whole process can be cancelled.e correctly, the whole reconciliation and validation process, as well as the supplier's payment, is affected and delayed!
Fortunately, it is now possible to automate this three-factor reconciliation and approval process using specialist software.
Why dematerialise your 3-way match process?
Dematerialising and automating the invoice matching process offers a number of advantages.
Reduced processing time and costs
Electronic processing helps to optimise document management (purchase orders, goods receipts, etc.) and invoice approval. It also reduces the time and costs involved in the processes of data entry, verification, validation, payment, etc.
Having a document dematerialisation system promises even more benefits. By using this type of software, you standardise and unify your documents (purchase orders, delivery receipts, invoices, etc.), speeding up the 3-way match procedure.
Comprehensive, reliable and easy-to-use processing tools
Invoice dematerialisation and processing software solutions are often simple to implement, configure and use. They are configured according to the requirements and reconciliation rules defined by the company.
What's more, these tools, which incorporate the 3-way matching method, are capable of immediately identifying discrepancies and errors between the three documents. They flag up the anomaly for rapid resolution and timely payment.
🛠️ Software example:
The Compleo Invoice Platform electronic invoicing solution, aimed at SMEs, ETIs and large groups, harnesses the full potential of artificial intelligence to simplify the dematerialisation of supplier invoices. Result: save time on your 3-way match and on all your operations in general. What's more, you can set up workflows to speed up your validation processes.
Compleo Invoice Platform
A few good practices to be aware of
To ensure that the software solution fulfils its role to the full, it needs to be selected in line with your business and your requirements.
There are many tools available on the market, ranging from the simplest to the most sophisticated. Take the time to look at the features and services on offer and compare several software packages to find the one that really meets your needs.
For example, a large company dealing with a multitude of suppliers and managing a large number of invoices will certainly turn to a comprehensive and responsive software package, capable of examining documents quickly. This is not necessarily the case for an SME, whose priority is to optimise its financial management.
What's more, it's crucial to train staff in how to use the chosen software properly so that the verification process, even if it's automated, remains efficient and reliable. After all, everything starts with and stems from three documents: the purchase order, the goods receipt and the invoice. If one of them is out of date, the whole operation is out of kilter.
3-way match: what's in it for me?
Three-way matching is a relevant accounting verification process that helps companies to avoid payment errors and fraud, and to better manage their cash flow.
It is based on three essential documents for processing invoices (the purchase order, the delivery note and the invoice) and involves various control points (price, quantity, order number, etc.).
Performed manually, this process can be tedious and time-consuming. It can also be subject to errors. To guarantee its efficiency and reliability, we recommend that you opt for a paperless solution capable of automating the operation.
Article translated from French