Accounting processes vary in complexity, and as the business world requires accuracy and speed, legacy systems aren’t as effective as they once were. Accounts payable (AP) acts as a gatekeeper for cash outflows, and one way they do this is by auditing invoices. Across the organization, internal rules help to ensure the proper matching of invoices to purchase orders and receipts so controllers can approve and remit payments with confidence.
To identify where the system is most vulnerable to errors, we first examine how accounts payable audits invoices and best practices of invoice auditing like the 3-way match process.
3-Way Match Accounting
The segments in 3-way matching are the purchase order, the receiving report, and an invoice supplied by the vendor. Traditionally, an AP team member would take the time to manually match these items against one another for accuracy to protect the business from paying invoices with discrepancies. Ideally, this practice minimizes wasted spend, but all human processes are error-prone, and errors in matching are damaging and costly to cash flow.
By asking these questions while using the 3-way match process to audit invoices, you can reduce errors:
- Does the invoice come from the selected vendor with the correct billing information and terms?
- Has the spending on the invoice been approved, and is it within budget?
- Has the vendor delivered the goods or services?
The Benefits of 3-way Matching
For businesses that receive large influxes of invoices monthly, creating an efficient and modern accounts payable department is significant for long-term growth. There are many benefits internally and externally to incorporating a 3-way match into your AP process like:
Improved vendor relationships: By providing consistent error-free auditing, you can build better relationships with your vendors and guarantee payments are approved and released promptly.
Eliminate wasted spend to generate cash-flow: 3 way-match processing detects errors before your controller releases payment. By recognizing discrepancies between documents prepayment, you can protect against wasted spend directly impacting the bottom line.
Improves organization for audits: 3-way matching helps to keep purchase orders, invoices, and order receipts consistent and error-free for auditors to more efficiently evaluate your data.
Automation Enhances 3-way Matching and Optimizes AP
While adopting a manual 3-way match process is valuable for controllers in streamlining their procure-to-pay process, it is also exhaustive of your team’s time and resources. If your AP team receives hundreds to thousands of invoices monthly, it is time to bring on automation to optimize your processes. The latest AP automation is available to support your finance team by completing full audits of the invoices you receive and comparing them against your purchase orders and receipts. Meaning a faster procure-to-pay process, less labor-intensive workload, and more time for your team to concentrate on higher-value activities.