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Emirates Industry Specific Intuitive VAT Complaint ERP

Your effective management VAT compliance software for businesses in UAE.

What is 3-way Match Accounting

3 way matching accounting - ERP Software

What is 3-way Matching?

When you are ordering goods or requesting for services, you are required to go through the reconciliation processes to confirm the receipt of the goods or services before initiating the payment process. 3-way matching is the process which helps the businesses to match the below parameters in the PO issued, vendor invoice and GRN

  • Item Name
  • Quantity ordered
  • Price quoted.

3 way matching accounting Software
Technically, Matching is defined as the process performed for goods and services ordered through the purchase order that takes place during the invoice approval process. Invoices are matched to purchase orders (2 way matching), receipts (3 way matching), and inspection information (4 way matching) as applicable. If the invoices do not meet the matching tolerance demands or while the invoice is held, payment is not applicable until the hold on the invoice is resolved or released manually.

Why is 3-way matching given preference?

Even though the default setting for all the invoices is 2-way matching, 3-way matching is the most common practice in all the businesses. With 3- way matching details on the invoice such as item, quantity and the invoice amount have to match with the corresponding details on the purchase order and in the GRN. The actions and processes are outlined in the steps given below:-

Step 1:- Business issues Purchase Order to the supplier with Item, Quantity, Unit Price

Step 2:- Ordered goods are received by central receiving or the appropriate department.
GRN is recorded in the system.

Step 3:- The supplier or the vendor sends the invoice for payment of goods or services mentioned in the purchase order, which contains information such as the quantity, location shipped, price, tax along with the buyer’s PO Number.

Step 4:- The purchase team notify the vendor with GRN which contains the vendor details and the materials which are arrived along with rejection quantities.

Step 5:- Systems matches the products quantities, price per unit between Purchase Order, Supplier Invoice & GRN
The 3-Way matching process is carried is to verify that the quantities on the PO are matching with those of the receipt and invoice. In addition to this, it is a must to check the prices between the PO and the invoice. System would ensure that these tolerances are met.

Step 6:- When the tolerances are ment, payment for the invoice would be released

Step 7:- If the tolerances are not met, invoice would be holded for further investigation.

accounting erp Software

Benefits of 3-way matching process:-

  • The regulations are carried out effectively in such a way that there is no room for any noncompliance.
  • Visibility of the receipt of goods /services
  • Control on the cost
  • Tracking of Good Receipt-Invoice Not Receipt, Goods Not Receipt- Invoice Receipt, Goods Receipt Invoice Receipt

Disadvantages of manual 3-way matching process:-

  • If not done properly, it would pave way for more human-made errors
  • The tracking of the process is a bit complicated if done manually
  • It is rather time consuming if manual processes are involved

Enable effitrac GST & VAT enabled ERP solutions to enable a smoother 3-way matching processes. With effitrac, you can always be assured that the processes are carried out in simpler steps, which saves your time and does not give chances for any human-made errors. Hence you can always rely on us for better Accounting & Inventory solutions.