When you’re managing purchasing for organizations you normally want to make sure what you’re paying for, the goods/services you’re receiving, and the invoice amount are all aligned.
- Otherwise you might leave your organization open to some unintended risks:
- You pay for things you didn’t order
- You pay for things you haven’t received yet
- You’re late on payments for things you have received (accruing late penalties)
- You might double pay for the same goods and services
- You pay for things that someone wanted but were never approved
- Also it opens you up to: Fraud, Theft, Embezzlement, etc
Over the years, finance and accounting practices evolved to generally include a system of checks and balances to safeguard company interests.
Two major checks and balances are:
Approval Process makes it easier to track down who is accountable for company spending.
Three way match triple checks your process and allows you to correct oversights or mistakes.
The reason they call it three way matching is because there are three documents involved.
- The Invoice – A document to tell you what the vendor wants you to pay and the line items they’re billing you for
- The Purchase Order – A document listing out what you intended to order from the vendor and at what price and quantity
- Receiving Document, Receiving Report, Packing Slip – A document to tell you what you actually received