Three-way matching represents an accounting process that helps ensure your business never pays a fraudulent invoice. This process involves matching the invoice with the relevant purchase order and the receiving report. When you match the figures properly, your accounting becomes more accurate.
Do the Math for Three-Way Matching
You receive an invoice for $1,500 from a supplier who sent you 750 rubber ducks. Double-check the purchase order to make sure someone approved the purchase before paying the invoice. Examine the quantities and items on the purchase order to see that it matches with an order for 750 rubber ducks at $2 each for a total of $1,500. The invoice you receive from the supplier should say the same exact items and dollar amounts on the purchase order.
Then, compare the information on the invoice to your receiving report. This report shows who received the materials and when. The receiving department should have a bill of lading or packing slip that shows the quantities and costs of the items. That bill of lading should match the numbers in the receiving report.
If these three documents,the invoice, purchase order, and receiving report, agree with each other, you have a three-way match. If you received the materials as expected, you write the cheque to the supplier.
Why Use Three-Way Matching
Three-way matching reduces losses related to errors on invoices, double billing, and fraudulently submitted invoices. You can make this process more efficient by three-way matching on invoices over a certain amount. Alternatively, you may want to auto-approve all invoices within a certain percentage of the original purchase order or receiving report, rather than spending time tracking down very small inconsistencies.
Using a three-way match to confirm orders improves accuracy of your books while developing a trusted relationship with your suppliers. When it comes to tax time, more accurate financial records lead to better returns and reduced chances of an audit from the CRA. QuickBooks Online offers a robust program for maintaining financial records and running financial reports that show precise invoicing. Keep your books accurate and up to date automatically. Change the way you manage your finances now.