Three ways matching is the control that put in the accounting department especially in payment function to ovoid overpayment to suppliers.
That is the main purpose of this internal control function. There are three main documents and functions involved. First is the purchase order, second is the invoice, and the last one is goods received noted.
How does this process work?
Before we talk about how the process work, let talk about the process of the purchase order, invoice and goods received the note.
The purchase order is what our company order goods from suppliers. That probably after comparing all quotations and gone through the final price negotiation. The items in the purchase order are what we expected to receive from suppliers.
Nothing else. Goods received noted is the noted that list down all items that we received from the purchase order we made.
And the invoice is what our suppliers billed to us as the result of delivering goods.
The process of three ways matching is done at the payment times and this is to make sure that we pay for goods we order with the amount received.
And these three documents must be matched together before payment released. It starts from matching the goods received noted to purchase order. This is to ensure that what suppliers delivered, and what received are what we order.
If it is different, we must investigate. One we are okay with that, the next step is to check whether what the suppliers billed is only for what we received.
As experiences, we might reject part of the suppliers’ delivery if the quality or other mater found.
So, while all three documents are matched, the payment process could be made.