Introduction to 3-Way Matching
3-way matching is a critical process in procurement that ensures the accuracy and completeness of financial transactions. It involves comparing three key documents: the purchase order (PO), the goods received note (GRN), and the supplier invoice. This process helps verify that the goods ordered were received as specified and are being billed correctly.
Key Components of 3-Way Matching
- Purchase Order (PO)
- Goods Received Note (GRN)
- Supplier Invoice
The 3-Way Matching Process
1.Initiation:
- The process begins when the supplier submits an invoice to the buyer. The buyer’s system will automatically initiate 3-way matching by comparing the invoice with the corresponding PO and GRN.
2.Verification:
- The system checks whether the quantities and prices on the invoice match those on the PO and GRN. This ensures that the goods received and their cost align with the order placed.
3.Discrepancy Handling:
- If there are discrepancies, such as shortages, damages, or price differences, the system will flag the mismatch. Common discrepancies include:
- Quantity Discrepancy: The quantity received (GRN) does not match the quantity ordered (PO).
- Price Discrepancy: The price charged on the invoice does not match the price agreed upon in the PO.
- Quality Issues: Goods received are damaged or not up to the agreed-upon standard.
- When a vendor delivers the shortfall at a later date, the buyer can create a Supplementary GRN (SGRN) to account for the additional goods received. This ensures that the inventory and financial records are updated accordingly.
4.Resolution Options:
- Request Delivery of Shortages: If the GRN indicates a shortage, the buyer can request the vendor to deliver the missing items.
- Request a Credit Note: For damaged or rejected goods, the buyer can request a credit note from the vendor, reducing the amount payable on the invoice.
5.Supplementary GRN:
- When a vendor delivers the shortfall at a later date, the buyer can create a Supplementary GRN (SGRN) to account for the additional goods received. This ensures that the inventory and financial records are updated accordingly.
6.Final Matching and Payment:
- Once discrepancies are resolved and any necessary supplementary GRNs or credit notes are issued, the system performs a final 3-way match. If everything aligns, the invoice is cleared for payment.
Benefits of 3-Way Matching
- Accuracy: Ensures that payments are made only for goods received in the correct quantity and condition.
- Fraud Prevention: Reduces the risk of fraudulent payments by requiring verification before funds are disbursed.
- Inventory Management: Keeps inventory records accurate by ensuring that only received goods are recorded.
- Financial Control: Enhances financial control by preventing overpayments or payments for undelivered goods.
Conclusion
3-way matching is a vital process for maintaining the integrity of procurement operations. By ensuring that purchase orders, goods received notes, and supplier invoices are in agreement, organizations can avoid overpayments, manage inventory more effectively, and maintain accurate financial records. Leveraging automation in systems like XFlow further enhances the efficiency and reliability of this process, contributing to smoother and more secure procurement workflows.