Why Three-Way Matching Is Not Enough

Leading companies are always working to streamline the processes and technologies that affect their suppliers, including accounts payable. While AP automation isn’t new, it has yet to be adopted by most manufacturing companies because of the complexity associated with managing direct spend

SourceDay recently hosted a webinar featuring several team members: Clint McRee, COO and Co-Founder, Phillip Pavelka, Solutions Engineer, and Colby Young, VP of the NetSuite Business Unit. They discussed the reality of the AP management challenge in direct spend and how much progress has been made from an automation standpoint—enough that anyone not leveraging AP automation is missing out on substantial opportunities for efficiency, alignment, and transparency.

If you think automated three-way matching is a substitute for full AP automation, you may be overlooking these common challenges:

Three-way matching may still require manual data entry if you don’t have AP automation with ERP integration.

Automated three-way matching is ‘quasi’ automation—it is still dependent on manual data entry. This is particularly problematic with AP solutions designed to manage indirect spend, because they don’t integrate with your ERP. Even general ledger integrations, which may be able to pass transactions back and forth, still don’t fulfill the receipt transaction or voucher the invoice back into the ERP. Having a solution that automates “matching” without keeping itself up-to-date as conditions change leaves a company and its suppliers reliant upon manual data entry. This is a very real problem because…

See how SourceDay processes 95% of invoices touchlessly

52% of POs change, making it easy for people—and data—to fall out of alignment.

People often don’t trust ERP systems, but the real issue goes far beyond ERP. The software is fine; what they have is a data problem. If a purchase order or receiving transaction is inaccurate, AP has to manually intervene before processing payments. Since 52% of POs need to be changed at some point, the realities of day-to-day business can lead to bad ERP data or suppliers that invoice based on old purchase orders. There are multiple points in the purchasing process where bad data can result in a mismatch, resulting in a manual repair process without full ERP-integrated AP automation. 

Partial shipments are common – and here to stay.

When it comes to direct spend, three-way matching (automated or not) is much more complex. Companies need to look at what was ordered, what’s on the receipt, and what has actually been fulfilled. Partial shipments are common, and they lead to partial receipts as well as multiple receipt transactions that need to go to one voucher or invoice. 75% to 85% of invoices match for most organizations, but if they still require manual oversight because of partial shipments, the time spent matching invoices that don’t have any issues is not beneficial—it’s just lost time.

Solving Direct Spend Invoice Woes With AP Automation

In this webinar, our experts discussed why AP Automation is critical for successful management of Direct Spend, and how our customers are reaching 97% paperless invoicing and ditching manual paperwork tasks.

3-way matching isn’t meaningful if two of the documents are from the supplier.

For many companies, three-way matching consists of matching a supplier invoice, the supplier’s packing slip, and their own PO. The risk of this method is that two of these documents come straight from the supplier. Companies may do this for many reasons, including the ‘we’ve always done it this way’ justification. Unfortunately, the invoice and packing slip are likely built off each other and, therefore, if one contains an error, the other likely does too. When companies have an ERP system they trust, they can start at the source, ensuring that the PO receipt and the invoice match.

AP automation is far more than systems-driven three-way matching. Using ERP data to ensure that the invoice is correct, the PO is correct, and the receiving transaction is correct requires all process-driven data to be accurate as well. Given the average rate of change to most POs, keeping everything up to date is far more of a challenge than the matching itself.

Solutions like SourceDay can now automate the first 70% of the accounting process. That affords companies more time and energy to focus on the 20-25% of invoices that truly need human attention, far more valuable than automating the technical matching of unreliable documents.

To learn more about three-way matching and AP Automation for direct spend, watch our latest webinar on-demand. Contact our team today to see how your business could be processing 95% of invoices, touchlessly. 

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