The Pros and Cons of the 3-Way Match

Have you ever heard of the three-way (3-way) match? In accounting, the 3-way match refers to a procedure used when processing an invoice received from a vendor. The purpose of the 3-way match is to avoid paying incorrect or fraudulent invoices.

The question is, is this useful for small business owners or not? While this process is labor-intensive, if your business is inventory heavy, I highly recommend you implementing the use of three-way matching as an internal control measure.

Here are the three documents needed for the 3-Way Match:

  1. Vendor’s invoice which was received and will become part of the company’s accounts payable;
  2. Purchase order prepared by the company prior to authorizing the purchase of the goods;
  3. And receiving report prepared by the company.

The “match” refers to the comparison of quantities, price per unit, terms, etc., appearing on the vendor’s invoice to the information on the purchase order and to the quantities actually received. After the vendor’s invoice has been validated by the three-way match, it can be processed for payment.

Now that we have explained how three-way matching works, do you think you would benefit? Here are some of the pros and cons of implementing the 3-way match.

Discover the Pros

  1. Prevents Duplication. By matching the numbers across the three documents, accounts payable can ensure that your company doesn’t incur the same costs multiple times.
  2. Painless Audits. Purchase orders, shipping orders, and invoices are the first things an auditor looks for. By regularly sorting out your company’s documents, you remove the need for an in-depth investigation of your business.
  3. Isolate Trouble Spots. Three-way matching promotes accountability through visibility. Inaccuracies can be investigated easily because they are easy to trace.

Discover the Cons

  1. Labor-intensive. This is one of the primary cons in implementing the three-way match. Compiling all the documentation and reviewing it requires a lot of eyes and hours. This can cause payment delays and your business may incur penalties for not meeting the terms and conditions of payments.

Although the one con is significant, the pros of implementing the use of a three-way match can be extremely beneficial to inventory heavy businesses. In the long run, it could save you a significant amount of money if implemented properly.

Need help with your Accounts Payable processes? Schedule your free consultation and let us provide you suggestions. Your business is our success, so remember that!

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