E-invoicing | July 25, 2018 | by Dan Andrew

3 E-invoicing Steps that Help Ensure an Accurate 3-Way Match

It’s the “gold standard” of AP, the perfect match of three documents: PO, Receipt of Goods, and Invoice…but it can be extremely elusive. Enter the automated approval workflow solution.

In an ideal situation, here is the way the 3-way match normally works:

  • Procurement generates a purchase order, which goes to the supplier, while a digital copy remains in the PO system.
  • When the goods are received at a distribution center, loading dock, or remote location, the person receiving the product enters the PO or packing list information into the electronic PO system to receive the goods.
  • An invoice is received and once accounts payable ascertains that the invoice matches the PO and the receipt of goods (or at least matches within set parameters), that invoice will be submitted for approval and payment

Here’s why manual 3-way matching goes wrong

For those companies that still attempt matching through paper and manual processing, here’s what can happen that makes 3-way matching so difficult. A paper or e-mailed invoice is frequently received by AP before the delivery of the goods, causing a delay in the matching process. When a supplier has many open orders with a company, invoices are coming in constantly and can be difficult to track.

So how is a match performed? Since the line item detail from the invoice is on paper or image, an AP processor will have to key in information, such as PO number, vendor information, or item code in order to bring up the PO and receipt data in the system to match. Only then can the processor either complete the 3-way match, sending it on for approval. But if the data doesn’t match, this delays invoice processing as AP then needs to chase down purchasing or receiving to correct the exception to then process the invoice. These steps take time, and with the ever-present possibility of human error, mistakes can and do occur.

What is clear is that attempting a 3-way match manually is tremendously time and labor intensive and can lead to delays in invoice processing. With an automated approval workflow solution and e-invoicing, these time-consuming, error-prone steps are reduced and, in many cases, eliminated.

How does an automated approval workflow and supplier portal solution solve the problem?

For AP departments struggling with the matching process, the solution that makes the most sense is a combination of e-invoicing, supplier portal, and a cloud-based approval workflow solution, one that is easily configurable, easy to learn, and needs little IT involvement.

If the invoice data is sent electronically, or through a supplier portal, the invoice data will flow directly to a cloud-based system where the PO, receipt, and invoice will be systematically matched and integrated.   The service provider is given all of the company’s matching rules and PO and receiving data and then integrates them in the SaaS-based automated matching system which, in turn, works in conjunction with your ERP or AP system.

If the invoice is sent in a non-electronic method, it can still be processed through the cloud-based approval workflow solution and matched against the PO and Receipt of Goods using your matching rules and invoice tolerances. The invoices are then sent straight-through the automated matching system to the company’s AP system or ERP to complete the match, all with no processor involvement. Using an exception resolution workflow, exceptions like price and quantity variances are automatically recorded and routed to either purchasing or receiving. This allows the issue to be resolved without AP having to seek anyone out.

In cases where shipments are split or multiple PO’s are used for a single invoice, a best-in-class AP automated workflow approval system will attempt to reconcile these scenarios and auto-complete the invoice when the matching rules are met. When that cannot be accomplished, then the invoice is again routed through the pre-designated exception process.

3 steps to ensure accuracy in a 3-way match

Once the system is implemented, the process is as follows.

  1. Purchasing creates a digital PO as usual and the PO information is used by the SaaS provider’s AP matching automation solution and delivered to the supplier in the format they need.
  2. When goods are received, the receipt transaction is sent to the service provider who will store the receipt for future 3-way matching.
  3. Data from the e-invoice, whether EDI, supplier portal or automated workflow process, is interfaced with the automated matching system for electronic capture of every line item, eliminating the need to manually look at paper or an image from email. Using the e-invoice data, the automated matching system can complete the third part of the match (invoice to PO and Receipt of Goods detail) using the workflow’s algorithms, eliminating the need for a person to do the match:

The best solutions in the marketplace can utilize EDI, supplier portals, and approval workflow.  This is the best way to gain 100% supplier adoption and 100% straight through processing!

See how our accounts payable automation solutions can help you achieve an accurate 3-way match.