3-way matching in procurement can protect from fraud
3-way matching is an essential control that all Accounts Payable (AP) teams should implement, says eftsure.
Here’s five things you need to know:
What is 3-way matching?
Your Accounts Payable (AP) team needs to be able to tell which of the invoices they receive, need be paid.
Once an invoice is received, the AP team must check it is legitimate and then work out how much to pay - this is where 3-Way matching comes in. By using 3-way matching, the AP team can verify this information.
Why is 3-way matching important
AP teams are targeted by fraudsters, some even inside an organisation.
The AP team needs a defence and with 3-way matching, AP teams can limit the risk of falling victim to such payments.
How to implement 3-way matching
Whenever an AP team receives an invoice, they should ensure:
- The details match the information in the Purchase Order (PO). This will remind the AP team what goods or services the organisation procured
- That the invoice matches the Receiving Report (also known as the Receipt Note), which verifies that what the organisation procured was delivered
Suppliers must include the PO number on their invoices, as this allows the AP team to cross-match the invoice.
Once the AP has been assured that the details on an invoice match both the PO number and the Receiving Report, they can commence 3-way matching.
How 3-way matching can protect from invoice fraud
Invoice fraud can happen in many ways:
- Cyber-criminals may use collected banking information
- Suppliers may add to the amount to be paid without consultation
- Multiple invoices can be submitted
- A supplier may request payment, after not supplying the goods or services it agreed to
3-way matching can minimise the risk if the supplier’s bank details are included in the PO.
How 3-way matching can reduce payment errors
Accidental duplicate payments are also a common error. An invoice can be paid more than once when a supplier has:
- More than one entry in a Vendor Master File
- Extra entries in an ERP system
With 3-way matching, the risk of AP teams making such a mistake is far smaller.