Accounts payable 3-way matching helps guard your company against fraudulent or inaccurate bills. It reduces financial exposure by preventing overpayment for services and falling for bogus bills.
Invoice fraud occurs when a con artist poses as a business partner or vendor and submits a fake invoice to a company for services they never provided. Typically, the scammer would ask for payment by wire transfer in an email that looks like it came from a reputable business.
But it happens more often than you might imagine, even to major corporations, that invoices are fraudulently paid. Hire an expert Phoenix accounting firm to help determine what will work best for you.
A definition of “3-Way Matching.”
In order to ensure an invoice is genuine and the quantity is correct, a technique known as “three-way matching” is used.
- Submit a Buy Order (PO)
- Receiving Information
- Receipt from the supplier
To perform a 3-way match, you’ll need all three of the documents that we’ll discuss in more depth shortly.
Invoices can be shown legitimate by a 3-way match by comparing the following documents:
- Services or goods ordered, and the bill is valid
- products received were those and in the amounts specified by the supplier
- In accounts payable, you use three-way matching to ensure accuracy before making a payment. While 3-way matching’s primary purpose is to eliminate fraudulent invoices, it also has the potential to save money by identifying an honest but costly mistake made by a supplier.
It may verify that you only paid for what you actually received from a vendor, as well as inform you how much of each good you bought they sent.
The procurement process, which entails acquiring products and services for a company, often includes a third-party matching step.
Exemplification of a Three-Way Matching
The following is an example of a 3-way match to explain the concept better.
Caffeinated, a network of coffee shops, is interested in purchasing 500 items from supplier Y for $6 each. The coffee business places an order with vendor Y through a purchase order (PO). Therefore, the final price of this product will be $3,000.
After the order has been delivered, Caffeinated’s receiving personnel will double-check the inventory against the purchase order.
Supplier Y delivers an invoice to Caffeinated a week after the orders have been fulfilled.
In accounts payable, three documents are cross-referenced: the purchase order, the receiving report, and the vendor’s invoice. Quantity, per-unit, and overall expenditures are compared among the three publications.