MATCH

3-Way Match: The 3-way match is an internal control process that involves
cross-referencing three key documents: the supplier's invoice, the
corresponding purchase order (PO), and the goods received note (GRN).

Goal: The primary goal of the 3-way match is to ensure that key financial
details on these three documents match. These details typically include order
quantity, order amount, total amount, PO number, and other relevant
information.

Benefits: The 3-way matching process offers several benefits:

1. Faster Invoice Approval: It helps expedite the approval of invoice

payments by quickly confirming that everything aligns.
2. Error Detection: It identifies inconsistencies, errors, or potential
fraud, preventing incorrect payments.
3. Financial Accuracy: It ensures that the financial information on all
three documents is accurate and consistent.
 VERIFICATION &
CONTROL

Verification and Control: All invoice payments involve some form of verification or control to ensure accuracy and prevent financial
discrepancies or frauds.

1. Tolerance Levels: To allow for minor discrepancies that may occur due to factors like rounding errors or minor quantity differences,
organizations often define acceptable tolerance levels. These tolerance levels specify how closely the details on the invoice must match
those on the PO and GRN.

2. Handling Failures: When an invoice does not match the PO and GRN within the defined tolerance levels, it is typically placed on
hold. It is then sent for appropriate review and resolution. This review process may involve contacting the supplier to rectify the
discrepancies or investigating potential issues.

In summary, the 3-way match is a crucial component of effective financial controls in accounts payable. It ensures that payments are
accurate and compliant while helping organizations detect and address any discrepancies or potential issues in a systematic manner.
 KEY CRITERIA – FOR A SUCCESSFUL 3-WAY
MATCH
•
A three-way match can assist in deciding whether only a portion of the invoice should be paid or the whole amount should be paid.
The invoices must fall within the matching limits for the verification to succeed.

• If they do not, the invoice will be put on hold, and payments will not be made until the hold is lifted or the issue is resolved. A retained
invoice is a fail-safe that prohibits payment of an order that has not been matched with a customer and is not confirmed.
TWO-WAY VERSUS THREE-WAY MATCHING

• Three-way matching compares line item details and totals across purchase orders (PO), receipts for good, and vendor invoices sent to
the customer.

• A 2 way match in comparison, only compares the PO with the invoice. The quantity billed (in the invoice) should match the quantity
ordered (in the purchase order). The invoice price should match the price quoted in the purchase order.

• The 2-way matching process is the default approach to verify invoices across organizations. However companies are increasingly
adopting three-way matching to add an additional layer of verification and prevent overspending.

Fig: 3-way build benefits in PTP/ STP

KEY BENEFITS -THREE-WAY MATCHING
•It eliminates invoice errors. Even if both parties in a deal are careful, mistakes can happen. Supply chain fluctuations may create
backorders and substitutions, or manual entry could introduce discrepancies into a price calculation. Three-way matching creates a system
of accountability that everyone can benefit from.

•It helps identify fraud. Tying every shipment back to its purchase and invoice documents makes it more difficult for bad actors to move
phantom or inflated invoices through the process. It makes spotting these issues easier and creates an audit trail for researching
procurement fraud.

•It eliminates double payments. Tying invoices to accounting data creates a clear chain from purchase to fulfillment to payment. By
ensuring every invoice has a home, businesses can avoid costly duplication and the time and research involved in seeking a refund.

•It creates confidence in your numbers. Disorganized processes lead to doubt and frustration. By creating a clear internal control for
each purchase, accounting and finance teams can trust the numbers they deliver in their reporting, and executive teams can rely on the
financial statements created from this data.

Three-way matching has the added benefit of simplifying bookkeeping and audits. With all your historical ordering and matching data
centralized, you surface other purchasing insights, refine your reporting process, and get to the bottom of issues and exceptions more
quickly.