2-Way, 3-Way, and 4-Way Matching Made Easy for Accounting Departments

    2-way, 3-way, and 4-way matching is an important aspect of ordering and receiving associated with the accounting department. Chances are if you work in accounting you're familiar with the idea, but let's revisit the concept as defined by Oracle:

    • Two-way matching verifies purchase order and invoice information math within your tolerances:
      • Quantity billed is less than or equal to quantity ordered
      • Invoice price is less than or equal to purchase order price
    • Three-way matching adds a third criterion to verify that receipt and invoice information match with the quantity tolerances you define:
      • Quantity billed is less than or equal to quantity received
    • Four-way matching adds a fourth criterion to verify that acceptance documents and invoice information match within the quantity tolerances you define:
      • Quantity billed is less than or equal to quantity accepted

    To non-accounting professionals this may seem complicated, but all you're really doing is ensuring that you're only being billed for the ordered quantity and quoted price, and then confirming that you receive the agreed upon quantity.

    The allowance for "less than or equal to" means that a vendor shipping more than the agreed upon quantity for the same price, or charging less for the agreed upon quantity is acceptable. This puts the responsibility of error in favor of the customer onto the vendor, and exists in delivery-based manufacturing far more than one might assume.

    So how is an accounting department going to track down the required pieces of this puzzle to ensure the matching occurs?

    Traditionally, the purchase order would be filled out on paper and given to accounting. The vendor would then invoice the company, and at some point the product will be shipped out. Upon receipt, a receiving clerk will (hopefully) verify the quantity of the product received, and give the packing/receiving slip to the accounting department.

    It then falls on the accounting department and the receiving department to match the purchase order, invoice, packing slip, and any other related documents to ensure that they are not overpaying, and that all required materials have been delivered.

    These two departments are often not the most synchronized in a company, allowing for errors and delays based on priority of work to be completed, and often times a lack of knowledge about where in the process a particular document may be.

    With workflow and process automation, we gain the tools to automate a large amount of this process and the visibility into where the work is at any stage in the flow.

    By taking the documents electronically (either through the use of electronic forms to replace the initial request, or by immediate scanning of the receiving slips) the documents are now secure and free of the troubles of the infamous "piles" of organization that exist on desks throughout most companies.

    Once in the system, pre-established routing can take place for approvals, matching, and verification. With a strong software solution, this will include notifications to keep the involved parties informed that there is work to be done or that a particular document requires their attention.

    No more waiting, no more misplaced work, and no more strong-worded arguments that place blame between departments when some part of the matching goes awry.

    Sound better than what you're doing now? Talk to one of our process experts today for a free consultation and let us know what is going on in your accounting department - we may be able to help.

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