Managing finances and controlling their expenses is, for most companies, one of the hardest task they have to do. Many in fact, despite all the success in other areas such as finding loyal customers, having a great product and so on, fail simply because they were not in full control over their budget. This is why it’s necessary for a company to get a good grip on how it spends his money on procurement and using 3-way match is a practice that’s proven to work time and again.
What is 3-Way Match?
A 3-way match is a payment verification technique that validates that the invoice the supplier sent is genuine and matches the buyer’s purchase order and order/shipping receipt.
So, as you can already surmise, 3-way matching includes three documents that need to, well, match, before the buyer can make a payment for the goods he has received from the seller and pay their invoice.
These documents are:
- Purchase order
- Order receipts or slips
Let’s take a look at what part each of these play in a 3-way match:
An invoice is a document sent from the supplier to the buyer and is basically a request to for the later to pay for the goods they have received from the former. The invoice must include the same information as the purchase order and if it doesn’t (need to check that), it can’t be valid. Beside this, the invoice also contains its own number, payment schedule, how much is the purchaser due to pay in total and contact information.
- Purchase Order (PO)
A purchase order is a document sent from the buyer to the vendor in which they confirm an authorize a purchase certain goods, supplies or material and any related terms such as quantity and quality, delivery schedule, shipping address and so on.
- Order receipts or slips
The final document in the 3-way match is the order receipt or slip. This document proves that both payment and delivery were made. It contains information on the order shipment and as such, the seller will include it with the goods they are delivering to the buyer.
What are the Reasons to Use a 3-Way Match?
Although it may seem easy to match three documents in theory, in practice it’s not. Very often discrepancies and inconsistencies happen between a PO and invoice, PO and order receipt or between all three. As a result, businesses may end up paying more than what they ordered, invoices remain unpaid even though the vendor has shipped the goods or something else happens.
So the two most important reasons to use a 3-way match are:
- It helps business control finances and expenditures better.
By confirming that all three of these documents and their information match 100%, companies can prevent overexpenditure, double payment or simply paying for something they never received.
- It builds a better buyer-vendor relationship
In the end, purchasers and vendors need to get along, at least in business. It doesn’t help if there are always problems from one side or the other. A 3-way match almost ensures that there won’t be.
Not controlling if your purchase orders and invoices match is a sure way to lose money and cause some other problems. This is why a 3-way match is of such value for both the buyer and the vendor.
Do you use 3-way match? Let us know in the comments how it works for you. Also, don’t forget to subscribe your email for early access to our Purchase Order Plus software.