The Accounts Payable process involves various steps, such as receiving invoices from vendors, validating them against appropriate purchase orders, and making payments on time. Most importantly, accounting professionals should take utmost care while validating and confirming invoice details. Even a minor issue in the process can lead to various consequences that can impact the company’s efficiency and brand value. For instance, if reviewers approve duplicate invoices, then the company has to spend extra money than it actually has to pay. This increases the company’s spend and decreases the overall efficiency of the process.
However, businesses can avoid this by effectively managing the invoice verification and payment process. In this article, we have discussed the most common issues associated with the invoice matching process and suggested a few tips that help to overcome issues and enhance productivity.
What is a Three-way Invoice Matching Process?
The three-way matching is a validation process using which accounting processionals evaluate invoices while approving payment to vendors. In this process, the vendor invoices will be validated against POs (Purchase Orders) and GRNs (Goods Receipt Notes) to ensure all the details are accurate, helping avoid payments to fraudulent and duplicate invoices.
Why Three-way Invoice Validation Process is Crucial?
The Accounts Payable department deals with the process of validating invoice information and paying vendors on time. As the process involves money and suppliers, even a minor issue can impact the cash flow and brand value of the organization. For instance, an ineffective invoice verification process can lead to the company overpaying vendors or making payments to duplicate invoices. The three-way matching process helps to identify any discrepancies and protects the company against fraudulent or unauthorized payments.
Purchase orders, invoices, and GRNs are the most commonly asked documents during the audit process. The three-way matching process ensures all these documents are properly reviewed, thereby making the audit process seamless. Employees don’t have to face issues with inaccurate invoices and spend hours of time searching and filing documents; instead, they can spend their valuable time on productive tasks.
Good vendor relationships are crucial for every organization as it helps in negotiating favorable product prices and payment terms. Inaccurate or incomplete receipts and invoices and delayed vendor payments spoil business relationships and can lead to various legal issues. With the three-way matching process, invoices can be validated accurately, make payments to vendors on-time and improve vendor relationships.
Most Common Issues Associated with Three-Way Matching Process
- Collecting paper invoices from vendors and validating them against appropriate expense receipts and GRNs collected from various departments of the organization is a tedious process.
- The accounts team is required to allocate vast amounts of money and resources to gather all the required documents and to handle the three-way matching process manually.
- Delayed document collection and approval process may lead to delayed payments to vendors. This annoys vendors and, in turn, diminishes their relationships with vendors.
- Ineffective vendor relationships can lead businesses to lose the preferred client benefits such as special discounts for early payments, increased credit periods, and favorable negotiation terms.
The Bottom Line
Accounts payable automation is an ideal solution to overcome the above-mentioned issues and improve the efficiency of the AP process. With the software, you can automate the three-way matching process to quickly approve invoices and make payments to vendors on time. The intelligent AP software automatically matches the invoice details against the supporting documents, such as purchase orders and GRNs, and flags the invoices that need human intervention.
Instead of spending time and resources reviewing all the documents, AP teams can simply review the invoices that are flagged by the solution for inaccurate or invalid information. This means the AP teams can approve invoices quickly and make payments to vendors on-time and get early payment discounts. A few advanced solutions even allow businesses to configure customized approval workflows as per the organization’s terms and ensure compliance across the process. The solutions also allow to set up of a multi-level approval flow based on the hierarchy involving stakeholders to review and approve the invoice. Plus, you can also configure automated email reminders to send alerts to approve or reject any pending invoice requests.