Mastering the Accounts Payable Three-Way Match: Simplifying Complexity with AP Automation

Ensuring accurate and efficient accounts payable (AP) operations isn't always easy — especially when it comes to purchase order (PO)-based invoices.

One of the trickiest steps when processing PO-based invoices is three-way matching. This is the process where businesses compare three key documents: the purchase order (PO), the invoice, and the receipt of goods. While it sounds simple, it’s actually a complicated task that can lead to frustration.

That's why many companies rely on AP automation technology to streamline not only three-way matching, but the entire invoice lifecycle — from capture and code to PO-matching and payment.

Let’s break down the three-way matching process, why it’s important, and how automation can simplify three-way matching for you.

What is AP Automation?

AP automation uses technology to streamline the entire accounts payable process, including invoice processing, payment approvals, and reconciliations. This not only saves time but also improves accuracy and helps maintain better financial control.

With the right AP automation solution, you can boost productivity, cut down on mistakes, and focus on other important action items — instead of getting lost in repetitious tasks and piles of paperwork.

What is a Purchase Order?

A purchase order (PO) is a document a buyer sends to a supplier to request goods or services. It outlines important details like the type of item or items being ordered, their quantities, agreed-upon prices, and delivery terms.

With a purchase order, the buyer formally agrees to pay the supplier for the specified goods or services once they are delivered. POs help businesses keep track of their purchases and serve as a vital reference point for verifying invoices during the three-way matching process.

What is Three-Way Matching in Accounts Payable?

Three-way matching in accounts payable is all about checking the details. It makes sure that what you ordered, what was delivered, and what you’re being billed for all match up.

This process involves comparing three key documents:

• Purchase Order: This is a formal request for goods or services, including details like quantities, prices, and terms.
• Invoice: This is the bill sent by the supplier for the goods or services provided.
• Receipt: This shows the proof of goods received, detailing what actually arrived.

The three-way match process checks each of these documents to confirm everything matches: Did you get what you ordered? Are the quantities right? Are you being charged the correct amount?

This process acts as a safeguard, helping prevent errors, overpayment, and even fraud.

The Challenges of Manual Three-Way Matching

Three-way matching by hand is a tedious task. It’s not just about checking numbers; every detail and line item must match perfectly. Even a small mistake, like a price difference on a single line, can lead to hours of work trying to resolve the issue.

Here are some common challenges AP teams face with manual three-way matching:

• Invoice Volume: As your business grows, your number of invoices also increases. It’s easy to feel overwhelmed as more and more invoices pile in.
• Human Error: Manually comparing documents can lead to mistakes. A tiny error could mean losing time and money.
• Time-Consuming: AP teams can spend hours matching just one set of documents — especially if there’s a problem.
• Data Formats: POs, invoices, and receipts often come in different formats, making the matching process even harder.

How Accounts Payable Three-Way Match Automation Works

AP automation uses advanced technology to make the three-way match process easier. Instead of relying on manual effort, an automated system can quickly and accurately match the PO, invoice, and receipt.

Here’s how it works:

• Data Extraction: Automated systems use technology like Optical Character Recognition (OCR), machine learning, or AI to read and gather information from each document. Even if the formats differ, these technologies can pull the necessary data with ease.
• Data Matching: Once the information is gathered, the AP system automatically compares the documents. It checks that the quantities, prices, and terms on the PO match those on the invoice and receipt.
• Discrepancy Detection: If there’s an error, the system flags it. Advanced systems may even suggest potential solutions based on past data.
• Exception Handling: When documents don’t match, many AP automation systems flag the issue for further review.

Why Three-Way Matching Matters

Why should you care about automating three-way matching in your accounts payable process? The answer lies in efficiency, accuracy, and cost savings:

• Time Savings: Automation reduces the time you spend on manual matching, allowing your team to focus more time on other important tasks.
• Error Reduction: Less manual handling means less chance of human error.
• Better Fraud Protection: Automation helps prevent fake or purposely-mislabeled invoices from slipping through.
• Improved Vendor Relationships: Paying your vendors accurately and on time helps build better, longer-lasting relationships.
• Scalability: As your business grows, automated systems can easily adapt to handle the increased workload.

How Nimbello Takes Three-Way Matching to the Next Level

Not all AP automation solutions are created equal. Nimbello’s advanced approach to PO matching offers several standout features that make it ideal for businesses of any size.

Nimbello's approach involves:

1. Advanced Data Processing: Nimbello's technology goes beyond basic OCR to extract unstructured data and accurately match line-item details.
2. Contextual Intelligence: The technology comprehends the context of transactions, including terms and conditions, enhancing accuracy.
3. Exception Handling: Nimbello leverages AI for intelligent exception handling, learning from past discrepancies to make informed decisions.
4. Integration: Seamless integration with existing systems ensures that the AP process remains efficient and streamlined.

It's Time to Automate Your Three-Way Matching Process

The benefits of automating your accounts payable three-way match are clear: It saves time, cuts costs, reduces errors, and strengthens your financial controls.

If your AP team is struggling with manual processes, it’s time to explore a better way. With Nimbello’s advanced solution, you can simplify three-way matching and enhance your entire AP process.

Ready to streamline your accounts payable operations? Nimbello’s automation solutions could be the answer you’ve been looking for — contact us today!