![]() ![]() There are several significant advantages of adopting this verification method. While this can add an extra layer of security, it can also be time-intensive. The four extra are 8% higher than the requested amount, exceeding the tolerance level. For example, a company with a 5% tolerance level orders 50 widgets and receives 54. In 4-way matching, companies also look at what is known as tolerances.Ī tolerance limit is the percentage variation that a company finds acceptable between the purchase order and what is received/billed. While this may reduce the amount of time spent on the process, it does increase the possibility of mistakes as it is a less thorough method of cross-checking. In 2-way matching, the AP employee simply ensures that the information on the invoice matches that of the purchase order. Both 2-way and 4-way matching are frequently used. ![]() While 3-way matching is becoming the preferred verification method, there are others that companies may choose to use. How does it stack up to other verification methods? If there is a discrepancy, the AP rep must contact the vendor to resolve the issue. This will be sent to the customer, in expectation of payment.Ī goods or packing receipt will also be included, to indicate what items are contained in the shipment.Īs the name “3-way” suggests, a member of the accounts payable team will need to compare all three documents to ensure that they are consistent. Like the purchase order, it should reflect the cost, quantity, and total. The vendor produces an invoice documenting the items or services purchased. An invoice is a formal request for payment sent by the vendor to the buyer after the order is filled. What’s the difference between a purchase order (PO) and an invoice?Ī PO is sent by the buyer to the vendor to track and control the purchasing process. When the order is placed, a PO will be created citing the price, quantity requested, and total cost. Let’s say that a company decides to purchase 500 widgets at the cost of US$2 each. Put simply, 3-way matching is making sure that the prices and quantities on the original purchase order, invoice, and receipt are all identical. For accounts payable departments, one of the best ways to ensure this is to use 3-way matching - a process of verification that uses invoices, purchase orders, and receipts. When it comes to money, it is obvious that you don’t want to part with a cent more than necessary. ![]()
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