2-Way and 3-Way Matching

2-way and 3-way matching are integral components of accounts payable processes, serving as the financial backbone of any organization. Their significance lies in upholding fiscal integrity, preventing fraud, and ensuring accurate payments for legitimate purchases. This article delves into the realm of 2-way and 3-way matching in accounts payable, providing insights into their importance, processes, and associated benefits.

2-Way Matching

In account payable 2-way matching system functions as a strong control mechanism, employing a careful verification process. In this method, the accounts payable team meticulously cross-referenced the information from the purchase order with the details presented on the invoice. The primary goal is to guarantee adherence to all tolerance levels.

3-Way Matching

Taking precision to the next level, a 3-way matching system adds an additional layer of validation. In this process, the accounts payable team not only verifies the purchase order and invoice but also includes the Goods Receipt Note (GRN) in the case of goods or the Service Receipt Note (SRN) for services. When all three documents align, the supplier’s invoice is approved for payment. It’s a comprehensive method that also helps determine whether an invoice should be paid in full or partially.

Key Documents in 2-Way and 3-Way Matching

To execute these matching processes seamlessly, the following key documents come into play:

2-Way Match

Purchase Order (PO) and Supplier Invoice.

Verification of the billed amount on the invoice against the corresponding purchase order.

Ensures accuracy in the financial transaction between the buyer and the supplier.

3-Way Match

Receiving Report, in addition to the PO and Supplier Invoice.

Cross-referencing quantities received, amounts billed, and the agreed-upon purchase order.

Offers a more comprehensive validation process, reducing the risk of errors and discrepancies in procurement and payment.

Benefits of 2-Way and 3-Way Matching

Benefits of 2-Way and 3-Way Matching

3-way matching process act as a financial safeguard, eliminating the risk of overpayment to vendors. This not only saves money but also maintains data accuracy.

Conducting 2-way and 3-way matching prior to payment authorization reduces the chances of unauthorized payments for goods or services.

Robust documentation resulting from these matching processes simplifies auditing and enhances transparency in the purchasing process.

Timely and accurate payments nurture strong relationships with suppliers.

2-Way vs. 3-Way Matching: What's best?

2-way and 3-way matching is a strategic decision that should align with the specific needs, priorities, and industry requirements of your organization. Each method offers its own set of advantages and challenges, and selecting the right one can significantly impact the efficiency and accuracy of your accounts payable processes.

2-way matching is more efficient timewise, as it involves the comparison of only two sets of documents.

In contrast, the 3-way matching strategy enhances relationships with suppliers, increases profitability, and streamlines financial audit preparations.

The accuracy of data holds considerable weight for suppliers and vendors. Inconsistent or error-ridden invoices and receipts can erode trust and may prompt them to seek alternative partnerships. Moreover, matching prevents mistakes such as overpayments, repetitive transactions, or fraud.

Navigating 2-Way, 3-Way Matching

The traditional method requires manual coordination across different departments and documents, including purchase orders, invoices, packing slips, and associated paperwork. While essential, this process is prone to errors and can take time due to communication gaps and organizational complexities.

2-Way and 3-Way Matching with Accounting Automation

Through AP automation, IBN Tech optimizes bookkeeping and accounting matching procedures. Once documents are securely stored digitally, our system seamlessly enables predefined routing for approvals, matching, and verification. Robust software solutions offer real-time notifications to keep relevant parties informed of pending tasks or documents requiring attention.

Automated 3-way match enhances efficiency by minimizing errors, saving time, and elevating overall accuracy in financial operations. This automation eradicates manual tasks, streamlining the matching process and reducing the risk of discrepancies. It also boosts transparency, expedites approvals, and furnishes a more dependable audit trail, making it a strategic choice for organizations aiming for operational excellence in accounts payable.

No more waiting, no more lost paperwork, and no more interdepartmental blame games when discrepancies arise in the matching process particularly with the implementation of accounts payable outsourcing.

Our 30-minute free consultation is a great way to see the 3-way matching process in action. Streamline your accounting operations with accounting automation.

2 way and 3-way Matching FAQs

Q.1 What is the difference between 2-way and 3-way matching in AP?

The main difference between 2-way and 3-way matching in accounts payable lies in the number of documents involved. In 2-way matching, the purchase order is compared with the supplier invoice, while in 3-way matching, it includes an additional step of cross-referencing with a receiving report for goods or a service receipt note for services.

Q.2 What is 2 way and 3-way matching in accounts payable?

In accounts payable, 2-way matching involves comparing the purchase order with the supplier invoice, ensuring the billed amount aligns. On the other hand, 3-way matching adds an extra layer by including a receiving report (for goods) or a service receipt note (for services) in the verification process.

Q.3 Which document are required for 3-way matching?

For 3-way matching, the required documents include the Purchase Order (PO), Supplier Invoice, and an additional document such as a Receiving Report (for goods) or a Service Receipt Note (for services). These documents collectively ensure accuracy and completeness in the procurement and payment process.

How do I make a yearly payment?

Automating 3-way matching brings efficiency by reducing errors, saving time, and improving overall accuracy in financial operations. Automation eliminates manual tasks, streamlining the matching process and reducing the risk of discrepancies. It also enhances transparency, facilitates quick approvals, and provides a more reliable audit trail, making it a strategic choice for organizations seeking operational excellence in accounts payable.