The accounting processes in most companies requires a 3-way match to pay a supplier invoice. What exactly must match and why?

Example: Let’s call the company that places the order, ACME, and the company that provides the ordered item, the supplier ABEL. 

The process of order and fulfillment

The process all starts with ACME placing purchase order for an item (s) to the supplier ABEL. ABEL receives the order, ships, and invoices for the item at the quantity and price on the purchase order and as quoted by ABEL. The items are received by ACME. 

What are the accounting processes?

The accounts payable resources at ABEL are required to match the following items in pursuit of a 3-way match. The first match is the ACME purchase order quantity to the ACME received quantity. The second match is the ACME purchase order quantity to the ABEL invoice quantity. The third match is the ACME order price to the ABEL invoice price. These ACME purchase order items must match, all items on the purchase order, quantity and price must match all items on the ABEL invoice. 

*** Additional item matches may be added to the process including supplier quoted quantity, price, purchase order number, quote number, part number, and shipping costs are some of the items which can be matched. 

Why is this important? 

 The ACME accounting resources cannot pay the invoice unless the 3 matches occur. This prevents payment unless the exact quantity is received and the invoice price matches the ordered price. Any deviation in quantity or price may result in overpayment by ACME.  

What is invoice hold?  

 The ABEL invoice will be put on invoice hold (no payment will be made) till any incorrect quantity or price is resolved. In addition, some companies hold the invoice for terms of 60, 90 and 120 days. This is an ethical issue when the terms on the ABEL quote reflect 30 or 45 days and can be problematic for small companies. 

Contact Core Pointe

Do you need help to educate your resources on the use of the 3-way match or the management of customers that put invoices on hold or utilize extended payment terms? You can reach out to Core Pointe, we will listen and help you educate or establish the 3-way match or establish better processes to reduce impacts of the 3-way match by your customers.