Introduction to 3-Way Invoice Matching
Before we get into the automation part, let’s first simply try to understand – what is a 3-way invoice matching process in accounts payable.
A 3-way invoice matching process is a way to make payments pledged to the suppliers while shielding the business from any sort of risk of unnecessary spending. Having an appropriate matching process builds confidence in the firm’s supply procedures and minimizes any adverse impact on cash flow.
According to an ACFE (Association of Certified Fraud Examiners) report, rooting out unauthorized or fake transactions can save a company an estimated 5% of its annual revenue.
3-Way Invoice Matching Process
So how does it work? And how can organizations automate this process? Let’s take a deep dive –
First, we need to understand the procure-to-pay process –
The first step in this process is to place the order with a supplier through a purchase order (PO). This document will contain detailed information about the required goods/services along with their pricing. Once the PO is approved by the required authority it is sent to the supplier and the order is placed.
The supplier ships the goods and once received, the receiving department does a quality check and notifies the Accounts Payable (AP) department about the arrival of the shipment. As soon as AP receives this information, they start working on creating an invoice. The invoice contains all the relevant details such as a description of goods, purchase order number, quantity, unit prices, etc.
Once the invoice is generated, it is then compared to the purchase order. This comparison of data is called ‘invoice matching’ and is a vital step in the Accounts Payable process. After the invoice is matched with the PO, it is then routed for approval. Once it is approved, the payment is processed
The 3-way match principle establishes that data points in all 3 documents must match for a successful 3-way matching. If any of it fails to match, then the invoice payment is put on hold until a resolution is achieved.
Let’s see what the pain points in manual invoice matching are–
- Time-consuming– The entire process from receiving the PO to making the payment can take up to 30 days. And a big chunk of this time is spent on manually matching the invoices with the PO.
- High risk of errors– With so many documents and data points to match, there is a high chance of human errors. This can lead to incorrect payments and cause delays in the process.
- Lack of visibility– Since the entire process is manual, it is difficult to track the status of invoices and payments. This lack of visibility can lead to inefficiencies in the process.
3-Way Invoice Matching Automation
3-way invoice matching can be automated using a touchless invoice matching process powered by Artificial Intelligence (AI).
Zycus’ supplier management portal empowers suppliers to create and share digital invoices with the buyers. With the help of Zycus configurable workflow management software invoices, purchase orders, and receiving documents are at a central location. This data is captured into invoice matching software that uses AI to match, manage, receive, and approve, all invoices, irrespective of source or original format.
Benefits of 3-Way Invoice Matching Automation
This automation of 3-way invoice matching can help organizations in multiple ways –
Automating the process can help organizations save a lot of time as it eliminates the need for manual data entry and invoice matching.
- Reduced risks of errors–
Automating the process helps reduce the risks of errors as it removes the human element from the equation.
- Increased visibility–
Automating the process helps increase visibility into the accounts payable process as it provides real-time insights into the status of invoices and payments.
- Improved supplier relationships–
Automating the process helps in improving supplier relationships as it leads to timely payments. This, in turn, helps organizations get early payment discounts and improve their cash flow.
Approvals for purchasing and invoices are faster, reducing the risk of errors. Vendor invoices, delivery status, and purchase orders are auto-tracked in real-time to ensure the elimination of long email chains.
Having an AI-powered autonomous AP function can save up to $300K annually just out of FTE costs. (According to a Purchase to Pay performance study, top performing organizations employ 5.3 FTE per billion vs. 17 FTE for peers)
Zycus’ 3-way invoice matching automation process helps organizations not only save time and money but also helps in improving the accuracy of data and gives organizations better visibility and control over their procure-to-pay process.