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 document non-compliance.
To this end, many companies are turning to the 3-way match method.
But what exactly is this method, and why is it so popular? Find out everything you need to know!
What is 3-way match?
Also known as "3-way matching " or " 3-factor matching ", the 3-way match defines an accounting verification method consisting of comparing 3 documents:
- the purchase order;
- Receiving slip;
- 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 flow
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 a purchase order with its supplier. A copy of the document is saved internally.
- Receipt slip: the company takes delivery of the order and records the products received and the information on the dispatch note in the management tool.
- Supplier invoice: the accounting department checks that the supplier invoice matches the purchase order and the goods receipt.
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 information is consistent between the documents.
Control points to be defined
Several points are generally selected for checking (quantity, price, product description, etc.), in order to be compared at the level of the purchase order, the delivery note and the invoice.
👉 Data verification criteria vary considerably from one company to another, but most often include the following mandatory information:
- invoice number ;
- supplier and customer contact details
- product or service designation
- unit price
- 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 reporting of an anomaly or shortcoming.
- If the checkpoints match on all three documents, the invoice is declared compliant and authorized for payment.
- If a discrepancy is found, payment is suspended. The error must be rectified or the anomaly resolved before the document is re-approved, and then payment is made. The invoice can then be returned to the supplier, who will make the necessary changes.
What are the advantages of 3-way matching in invoice management?
Processing, verifying and validating supplier invoices are crucial steps for any company.
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, staggered commas, omission of mandatory information, wrong addressee, etc.), which can have multiple consequences, both :
- on the legal validity of the document ;
- on the company's financial health (if the comma is off, the zero is too high, etc.) ;
- the relationship with the supplier.
Using three-factor reconciliation streamlines the invoice validation process and helps meet 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 interest and relevance of 3-way matching implies a very rigorous application of the method!
What are the limitations of manual 3-way matching?
If carried out manually, 3-way matching, like any invoice approval circuit, represents a complex and time-consuming set of tasks with little added value, and is often a source of errors.
Typically, companies receive paper or e-mail invoices prior to receipt of goods, which delays document processing and validation, since the three-factor match has to wait until delivery.
Frequently, too, in a manual process, the invoice information has to be entered to find the purchase order and receiving slip, a time-consuming operation when repeated, and also prone to error.
And if one of the previous steps (purchase order or goods receipt) has not been carried out correctly, the whole process is at risk.e correctly, not only the entire reconciliation and validation process, but also the supplier's payment, is impacted and delayed!
Fortunately, it is now possible to automate this three-factor reconciliation and approval process using specialized software.
Why dematerialize your 3-way match process?
Dematerializing and automating the invoice matching process offers a number of advantages.
Reduce processing time and costs
Electronic processing helps optimize document management (purchase orders, goods receipts, etc.) and invoice approval. It also reduces the time and costs involved in data entry, verification, validation, payment and other processes.
Having a document dematerialization system promises even more benefits. By using this type of software, you standardize 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
Software solutions for dematerializing and processing invoices are often simple to implement, configure and use. They are parameterized according to the requirements and reconciliation rules defined by the company.
What's more, these tools, incorporating the 3-way matching method, are capable of immediately identifying discrepancies and errors between the three documents. They report the anomaly, for rapid resolution and timely payment.
🛠️ Software example :
The Compleo Invoice Platform e-invoicing solution, designed for SMEs, ETIs and large corporations, harnesses the full potential of artificial intelligence to simplify the dematerialization of supplier invoices. As a result, you 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.
A few best practices to be aware of
To ensure that your software solution fulfills its role to the full, it needs to be selected in accordance with your business and requirements.
There are many tools available on the market, from the simplest to the most sophisticated. Take the time to browse through 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 rapidly examining documents. This is not necessarily the case for an SME whose priority is to optimize its financial management.
Furthermore, it is crucial to train staff in the proper use of the chosen software so that the verification process, even if automated, remains efficient and reliable. After all, everything starts with and flows 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 order.
3-way match: what's in it for me?
Three-way matching is a relevant accounting verification process that helps companies avoid payment errors and fraud, and better manage their cash flows.
It is based on three documents essential to invoice processing (the purchase order, the delivery note and the invoice) and induces various control points (price, quantity, order number, etc.).
Performed manually, this process can be tedious and time-consuming. It is also prone to errors. To guarantee its efficiency and reliability, we recommend that you opt for a dematerialized solution capable of automating the operation.
Article translated from French