The process of comparing a purchase order, receiving report, and invoice to ensure that the goods or services were received and the invoice is accurate.
Three-way matching is a process used by businesses to ensure that the goods or services they receive from vendors are accurately reflected in their accounts payable records. The process involves comparing three documents: the purchase order, the receiving report, and the vendor invoice.
The purchase order is the document that the buyer creates to specify the goods or services they need from the vendor. The receiving report is a document that confirms the receipt of the goods or services by the buyer, and may include details such as the quantity received and any damage or defects. The vendor invoice is a document that the vendor sends to the buyer to request payment for the goods or services provided.
During the three-way matching process, the buyer compares the information on each document to ensure that they all match. This helps to ensure that the buyer is only paying for goods or services that were actually received, and that the price charged by the vendor is accurate. If any discrepancies are found during the matching process, the buyer may contact the vendor to resolve the issue.
Three-way matching is an important control process that helps businesses to detect errors and prevent fraud in their accounts payable processes. By ensuring that only valid invoices are paid, businesses can reduce the risk of overpayments or payments for goods or services that were never received.
Overall, three-way matching is a key component of effective accounts payable management, and can help businesses to ensure the accuracy of their financial records and improve their overall financial performance.