Procurement is often called the “last mile” of finance. However, issues in the procure-to-pay process can bring everything grinding to a halt. Invalid invoices have to wend their way back through various departments to be corrected before suppliers can get paid. This causes payment delays that damage supplier relationships, not to mention wasting countless work hours chasing down issues. 

According to a recent survey, invoice exceptions occur in over 30% of B2B transactions. invoice validation through 3-way matching can reduce exceptions to less than 2%. 

Read on to understand what 3-way matching is, why automation is key, and how leading organizations are using automated matching to transform their procure-to-pay process.  

What is 3-Way Matching and Why Does it Matter?

Three-way matching (3WM) refers to the process of matching three key documents before releasing payment to a supplier:

The Purchase Order (PO)

Purchase orders are issued by the procurement team and represent an official commitment to purchase a specific quantity of goods or services from a supplier at defined prices. The purchase order details what the organization is expecting to receive from that supplier.

The Goods Receipt (GRN)

Goods receipts, sometimes called packing slips, are documents created and sent by the vendor that outline exactly what was delivered. The goods receipt serves as proof that the items ordered via the PO were physically received by the buyer.  

The Supplier Invoice

The supplier invoice is created by the vendor and requests payment for the goods or services rendered. This document states what the vendor expects to be paid.

Why Match These Documents?

Matching a purchase order, goods receipt, and supplier invoice verifies that what was ordered matches what was delivered matches what payment is being requested. This validation ensures that vendors are not overcharging for goods not delivered, catching these types of mismatches early prevents incorrect payments that hurt the bottom line.

Some key benefits of 3-way matching include:

1. Reduces overpayments
2. Catch duplicate charges 
3. Helps identify fraud
4. Enforces procurement policies
5. Streamline audits

While manual 3WM has been industry practice for decades, modern automation makes the process significantly more efficient and accurate.

The High Costs of Manual 3-Way Matching

Typically, AP professionals have handled 3WM through tedious manual processes: printing hard copies of documents, visually comparing line items across each, logging any mismatches in spreadsheets, getting approvals for exceptions, and finally releasing payments. 

This manual matching introduces compliance issues, fraud risks, and significant processing costs:

1. Time-consuming: AP staffers spend over a third of their time managing exceptions and confirmations for manually matched invoices.
2. Expensive: Industry estimates peg the cost of manual invoice processing at $15-25 per invoice.
3. Error-prone: Fatigued staffers make mistakes that lead to overpayments and duplicate payments.

In today’s competitive economy, organizations cannot afford the high costs and long timelines associated with manual 3WM.

Automating 3-Way Matching for Faster, More Accurate Processing 

Modern automation allows organizations to streamline invoice validation while reducing risks and costs. Optical character recognition (OCR) and machine learning algorithms can be configured to:

1. Instantly scan digital purchase orders, goods receipts, and invoices
2. Compare line items across all documents in seconds
3. Automatically flag any mismatches as exceptions 

This automated matching hands your AP team huge time savings. Rather than spend hours scrutinizing paperwork, they can quickly review flagged exceptions and resolve discrepancies with suppliers right away.

Automating 3WM Delivers Game-Changing Benefits

Here is why more and more businesses are automating 3WM:

1.70% Faster Processing

Whereas manual 3-way matching can take hours for AP staffers to complete, automated systems can validate invoices almost instantly. The biggest timesaver is utilizing optical character recognition (OCR) and AI to instantly scan and extract key data from digital or scanned documents.

Rather than AP staff having to visually scrutinize every line item across multiple documents, the software does this work instantly and highlights any discrepancies for easy exception review. This reduces invoice validation time from hours down to minutes.

2.90% Fewer Exceptions

One of our customers involved in manual matching had exception rates over 30%. By exception rate, we mean, over 30% of invoices have discrepancies like price differences, quantity mismatches, duplicate charges, etc. By automating the entire process with IQ Invoice, today the customer  gets 99%+ accuracy, driving exception rates under 2%.

Fewer exceptions mean much lower risks of erroneous overpayments as well as fewer back-and-forth queries with suppliers to fix issues. This creates faster payment cycles while reducing fraud vulnerabilities.

3.Improved Compliance

Digital audit trails within automated 3WM systems provide clear visibility into who approved invoices and payments as well as timestamps. This aids internal and external compliance in case of audits while also reducing risks of duplicate payments.

4.$10-15 Processing Cost Savings Per Invoice

Most of our clients incur $15-25 per invoice when factoring in staff time, operations overhead, and exception write-offs. Automating can drive these costs down to $5-10 per invoice – saving $10-15 per invoice directly to the bottom line.

Across thousands of supplier invoices, these per-invoice savings quickly multiply into massive annual cost reductions. Companies can save millions each year through automation while also enabling staff to focus on more value-added tasks.

“By automating validations, we reduced invoice processing costs by 20% in the first year. Our AP team also delivered against a 5-day payment target for the first time.” – VP of Finance, Online Retailer*

Key Features to Look for in Automated Matching Software

While various vendors offer automated matching, the depth of features can vary tremendously. Below are key capabilities to look for: 

1. OCR and AI – The system can intelligently scan digital and paper invoices, purchase orders, and goods receipts with minimal or no human involvement.
2. Configurable Business Rules – Matching rules should be customizable to your unique validation needs, with ability to set amount tolerances.  
3. Real-Time Dashboards – Provides instant visibility into pending invoices, exceptions, and processing metrics. 
4. Middleware Connectivity – Seamlessly connects with your existing finance systems like Oracle, SAP, and others via APIs.
5. Supplier Portals – Gives suppliers access to submit and track invoices and payments.
6. Mobility – Matching functionalities need to be available across desktop and mobile devices.

Why IQInvoice is the Right Choice?

As a dedicated procure-to-pay automation platform, IQInvoice enables organizations to easily implement automated 3-way matching built on intelligent OCR and machine learning. Core benefits include:  

1. Rapid Deployment – IQInvoice is cloud-based for fast setup without lengthy IT projects.  
2. Intuitive Interface – User-friendly design allows your team to quickly adopt the solution.
3. Scalability – The system grows with your business in terms of transaction volume and geographic expansion.
4. Mobility – Enjoy full invoice validation functionalities across desktop and mobile apps.
5. Integration – Seamlessly connect with your ERP, payment systems, and other finance tools.  

The result? Your team reduces invoice processing costs while speeding up payment cycles. AP staffers gain back time to focus on more strategic initiatives. And CFOs gain real-time visibility into cashflow and actionable analytics for continuous optimization.

“IQInvoice has truly revolutionized our accounts payable process. Previously, managing over 30,000 invoices seemed like an overwhelming task. With their intelligent OCR and robotics, we’ve seamlessly transitioned to automatic invoice processing, reducing our processing time from 7 days to just 1 day. The efficiency gains have been incredible, and we’ve cut our processing costs by an impressive 70%. IQInvoice is a game-changer for our high precision packaging operations!” COO, High Precision Packaging Manufacturer.

Ready to transform your invoice validation process? 

Schedule a quick demo with us to see automated 3-way matching in action tailored to your exact processes. Our team would be happy to answer any of your questions and discuss an onboarding plan designed for your success.