This strengthens vendor relationships by ensuring payments are made on time. 2-way matching ensures accurate invoice processing by verifying purchase orders against invoices, reducing the risk of overpayments and discrepancies. It enhances financial control and streamlines vendor relationship management. Artificial Intelligence (AI) is revolutionising the way businesses handle invoice matching by automating the process. AI-powered systems can quickly Grocery Store Accounting compare documents, identify discrepancies without human error, and even learn from historical data to improve over time. These systems can handle large volumes of invoices with ease, significantly reducing processing time and freeing up staff for higher-value tasks.

Step 1: Issuing a Purchase Order (PO)

A company, ABC Ltd, what is a 3 way match in accounting places an order for 100 office chairs from a supplier, XYZ Furniture. The price per chair is Rs 2,000, making the total purchase amount Rs 2,00,000. In this blog, we’ll break down how 2-way and 3-way matching work, their key differences, and which one is best for your business.

Key Documents in 2-Way and 3-Way Matching

If tolerance does not meet,  place a hold on the invoice, and proceed for step 8. If tolerance does not meet,  place a hold on the invoice, and proceed for step 5. The goods ordered through a purchase order are received by the appropriate authority such as stores personnel, inventory manager, or warehouse gate-keeper, who issues a GRN or Goods Received Note. The invoice was entered into the system once the What is bookkeeping tolerance levels were met. These purchases don’t involve deliveries, so checking the invoice against the purchase order is enough to confirm everything is correct.

• 3-way matching applies when businesses need to receive goods physically or when services are rendered over time.
• One of the most challenging tasks in the accounting process is the verification of these supplier invoices.
• While 3-way matching is more secure, it also takes more time because businesses must verify an extra document (the GRN).
• AP professionals recognize the 3-way match and 2-way match are crucial to ensure accuracy in the purchase order invoice process.
• Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner.
• Despite only involving two documents, there are several steps accountants must go through during the matching process.

The Process of 4-Way Matching

A typical document flow in the procure-to-pay process may be understood by the following simplified hypothetical example. Also, by confirming the delivery information, your A/P staff can avoid authorizing premature payments for orders that were never shipped or running behind schedule. To determine your matching criteria, there is a requirement to set a tolerance. In some cases, most companies consider quantities inside the tolerance limits as matched.

Once 3-way matching is set up, NetSuite automates most of the verification process, reducing manual workload for accounts payable teams. However, some steps still require human oversight—especially when discrepancies arise. The most straightforward method of implementing 3-way matching is to assign 3-way matching duties to employees within your team or hire additional accounts payable staff. The number of employees required for this process can be determined based on the volume of invoices received monthly and payment terms. Assigning roles ensures accountability among your employees and can ensure the timely processing of invoices.

Automate Accounting Processes: The Ultimate Guide to Improving Efficiency and Accuracy

Timely payments are essential for maintaining strong vendor relationships and avoiding unnecessary fees. Late payments can lead to penalties and lost early-payment discounts that could otherwise improve cash flow. Implementing an efficient AP process—supported by automation—helps reduce human error, cut down on administrative overhead, and prevent costly errors.

Financial Close & Reconciliation

Three-way matching can be a lengthy and tedious process when you’re first setting it up. Longer processing times at the beginning could translate to delayed payments and stand in the way of building a good relationship with the supplier. Once company A delivers the monitors and sends an invoice, the AP clerk starts the verification process. The clerk checks whether the purchase was authorized through a PO, looking at the price, quantity, and company name to ensure it’s not a phony invoice. Two-way matching compares line items on the PO and invoice, but not the GRN.