3-way matching in Accounts Payable

How to Master 3-Way Matching in Accounts Payable

Increasing invoice fraud, duplicate payments and compliance pressures have resulted in Accounts Payable processes becoming ever more complex and fraught with risk. In light of these challenges, UK finance leaders are turning to 3-way matching as a critical control mechanism. Whether you’re a CFO, an AP manager, or a finance controller, understanding and automating this process can significantly streamline and accelerate your Accounts Payable (AP) processes.

The alignment of purchase orders, invoices and goods receipts is often overlooked on account of being excessively complex and time-consuming. Automating this process can provide increased control (with a view to avoiding exposure to fraud and missed or duplicate payments) while at the same freeing up your finance team to focus on strategic tasks that bring genuine value to your organisation.

This guide will walk you through all you need to know about 3-way matching in Accounts Payable, from the basic principles to automation and beyond.

How does the 3-way matching process work?

The 3-way matching process typically follows these steps:

1. The purchase order is created

A PO is issued defining the goods to be purchased, the quantity, price and any relevant terms and conditions such as the agreed delivery date or payment terms.

2. Goods or services are received

When the delivery is made, a goods receipt note (GRN) or confirmation is logged.

3. An invoice is received

The supplier sends an invoice referencing the purchase order.

4. The matching process begins…

The AP system (or AP team) will now compare the following:

• PO quantity vs. invoice quantity
• PO price vs. invoice price
• GRN confirmation vs. invoice details

5. Approval or exception handling

If the information is consistent across the three documents, the invoice can be approved for payment. If this is not the case, it will be flagged for investigation.

This process ensures that only valid, verified invoices are paid, thereby safeguarding working capital and ensuring accountability within your finance team. In addition, it avoids duplicate or inaccurate payments, building confidence and trust and reinforcing supplier relationships. We will now take a closer look at the benefits of integrating efficient 3-way matching into your accounting procedures.

Benefits of implementing 3-way matching in your operations

Implementing 3-way matching offers a number of tangible benefits for finance teams: 

For CFOs and finance leaders, 3-way matching provides peace of mind that your AP processes are accurate, compliant and efficient.

Overcoming challenges with manual 3-way matching

3-way matching as part of a traditional manual AP procedure is certainly a worthwhile endeavour, however, performing this series of checks presents real challenges:

Time consuming: Matching documents manually can require hours of painstaking work, especially within high-volume invoice environments or when documents are received and stored in non-standardised formats. AP teams are often required to spend time chasing down missing POs or receipt confirmations. This increased workload is only exacerbated when inconsistencies between documents are uncovered.

• Human error: Manual entry and cross-checking increase the risk of mistakes.
• Data silos: POs, GRNs and invoices may be processed and stored in different systems, which can make accessing documents awkward and laborious.
• Delayed payments: Matching delays can lead to late payments and missed early payment discounts, jeopardising supplier relationships and wasting financial resources.
• Resource intensive: Not only does manual document matching demand large amounts of time, it also requires sufficient staff resources to dedicate to the task. This means that as an organisation grows, the process needs more and more people to be able to keep up. In short, manual matching can limit scalability and drain AP resources, especially within fast-growing or multi-site organisations.

Automation of the 3-way matching process

With all of the above in mind, 3-way matching is one area where AP automation solutions really come into their own. Modern systems like Yooz utilise smart workflows and AI-driven Smart Data Extraction to automate 3-way matching from end to end.

These positive features can have a significant positive impact on your business operations, such as:

• 80% faster invoice processing
• Lower cost per invoice
• Higher accuracy rates
• Greater likelihood of accessing early payment discounts
• More robust fraud prevention

For UK finance leaders preparing for increased digitalisation and e-invoicing mandates, automated 3-way matching is no longer optional – it’s essential. This raises the question as to which automated solution is the right one for your business…

Choosing the right solution for 3-way matching

There are a number of key features that you should look out for when choosing a 3-way matching automation tool:

• Seamless integration with your existing ERP or finance system: Leading platforms comply with a wide range of ERP software applications. To ensure a smooth and efficient transition, your chosen solution should adapt to your needs and not the other way around. Yooz leads the field in this regard, integrating more than 250 third-party ERP and accounting software solutions.
• Intelligent data capture (no templates): Once invoices have been scanned using OCR, AI driven solutions can identify relevant data from invoices issued in multiple formats. The data is then stored in a standardised format, greatly accelerating the matching and approval process.
• Support for UK-specific compliance and audit requirements: Legislation in the UK continues to evolve, impacting businesses across all sectors, particularly their finance and accounting functions. Look for a provider that you can trust will remain abreast of developments and make effective and rapid adjustments to ensure compliance if regulatory requirements change.
• User-friendly dashboards and approval workflows: Staff acceptance is crucial to success when implementing a new end-to-end accounting procedure. The new solution must be clearly laid out and easy to use.
• Fast implementation and dedicated local support: An experienced and easily reachable support team will be essential in helping you to iron out teething issues and make adjustments to ensure that you reap maximum benefit from your automated solution.

Final thoughts

Whether you’re in the early stages of digital transformation or are already automating your Accounts Payable procedure, 3-way matching is arguably the aspect that will deliver maximum impact within your organisation.

Aligning the information on POs, invoices and GRNs will improve your company’s financial health and provide peace of mind by implementing controls to avoid duplicate, missed or late payments, reducing risk in terms of fraud and negative supplier interactions and overall creating a more scalable AP operation.

And with an effective and efficient automation solution, the task of matching becomes almost effortless. Contact the experts at Yooz to find out how to set about integrating automated 3-way matching into your existing Accounts Payable process today.