Three-Way Matching In Accounts Payable

Three-Way Matching In Accounts Payable

Three-way matching is the process of matching the purchase order, the goods receipt, and the invoice for a given product before approving payment. This ensures that all three documents agree on the quantity and price of the product purchased. Three-way matching is a standard best practice in accounts payable.

When a company orders goods or services, a purchase order is generated. The purchase order includes the quantity of goods or services ordered, as well as the price per unit. Once the supplier ships the goods or provides the service, they generate a goods receipt or service invoice. The invoice should match the purchase order in terms of quantity and price. Finally, when Accounts Payable receives the invoice, they will match it to the purchase order and goods receipt to ensure that all three documents agree. If there are any discrepancies, Accounts Payable will investigate before approving payment.

Three-way matching is an important control in Accounts Payable because it helps to prevent overpayment and fraud. By ensuring that all three documents agree on quantity and price, Accounts Payable can be confident that they are paying for exactly what was ordered, and that no fraudulent activity has taken place.