Three-Way Match Automation: 6 Use Cases and 7 Major Benefits in 2024
Automating the three-way match process is becoming critical for businesses to save time, reduce errors, improve compliance and optimize cash flow. This in-depth guide examines key use cases and tangible benefits of adopting three-way match automation in accounts payable and beyond.
What is Three-Way Match and Why Does Your Business Need Automation?
Three-way match, also known as 3-way match, is the process of verifying supplier invoices against purchase orders (POs) and receiving documents before making payments. It provides essential fraud checks and controls for businesses.
But manual three-way matching has many downsides:
- Prone to errors – Humans make mistakes leading to 30-40% mismatch rates according to research firm Aberdeen Group. This results in late payments, duplicate invoices and compliance issues.
- Time-consuming – AP staff spend 50-70% of their time on repetitive manual matching as per McKinsey. This is a huge drain on productivity.
- Resource-heavy – For companies processing over 1,000 invoices per month, AP teams get overwhelmed without automation. Hiring more staff is cost-prohibitive.
- Limited visibility – Spreadsheets and paper documents make auditability challenging. It hampers dispute resolution.
By adopting automation, you can eliminate these issues through streamlined digital workflows, free up staff, improve accuracy, and make strategic decisions using real-time data.
6 Common Use Cases for Three-Way Match Automation
While traditionally used in accounts payable, automated three-way match is proving beneficial across record-to-report, procure-to-pay and order-to-cash processes.
1. Accounts Payable
Automating invoice matching, approval routing, discrepancy resolution and payment release. This is the most common application.
2. Procure-to-Pay
Spanning procurement, inventory, invoicing and payment. Ensures proper controls over the full cycle.
3. Record-to-Report
Validating ledger entries against source transactions before financial reporting. Improves accuracy.
4. Quote-to-Cash
Matching order/contracts, deliveries and receivables from quote to collections.
5. Payroll
Verifying employee time sheets against pay rates before payroll processing.
6. Perpetual Inventory
Matches inventory receipts/issues to ledger updates for real-time tracking. Prevents stock-outs.
7 Major Benefits of Three-Way Match Automation
Adopting automation can transform your process efficiency. Here are 7 proven benefits based on results from 500+ implementations:
1. 60-80% Faster Matching
Top automation tools like Rossum and Anvil combine AI, OCR and machine learning to match documents in seconds with over 99% accuracy. This drastically shrinks cycle times.
2. 57% Cost Reduction
Automating manual efforts cuts process costs by over half according to research by Ardent Partners. This frees up budget for strategic initiatives.
3. 4X Better Compliance
Consistent application of defined rules ensures 100% documents are verified before payment. Audits become 5 times easier.
4. 83% Less Time Spent on Exceptions
Tools like BotKeeper auto-resolve discrepancies based on pre-defined thresholds. This allows staff to focus on high-value exceptions.
5. 72% Improvement in Vendor Relationships
With faster turnaround, vendors get paid on-time consistently. This strengthens the partnership as per JP Morgan.
6. 55% Higher Fraud Detection
Automated duplicate invoice identification and source verification makes fraud prevention over twice as effective.
7. Better Cash Flow Optimization
Accelerated processing and discounts from on-time vendor payments improve cash flows by opening up working capital.
Comparing Automation Approaches
There are a range of technologies like RPA, OCR and AI that enable automating matching workflows:
RPA – Configurable bots automate repetitive manual steps like data transfer and entry at scale. But lacks intelligence.
OCR – Extracts text and data from invoice images but alone cannot automate processes end-to-end.
AI – Platforms like Versapay use machine learning to match documents as well as respond to discrepancies.
Combined approach – Solutions like Kofax combine RPA, OCR and AI for optimal results. But integration can be complex.
Evaluate capabilities against your specific process complexity and goals to choose the right solution.
Real-World Examples of Three-Way Match Automation
Leading companies across manufacturing, retail, services and finance industries are using automation to optimize their matching processes:
- Johnson & Johnson automated invoice approvals resulting in 75% faster processing and 60% lower operational costs.
- Applied Materials‘ automation of PO and invoice matching reduced cycle time from weeks to hours while improving compliance.
- Dominos Pizza implemented an AI-powered invoice automation solution to gain visibility into accounts payable data leading to better strategic decisions.
- American Express streamlined and automated the vendor payment process through RPA resulting in 43% productivity increase.
Key Takeaways on Three-Way Match Automation
Automating three-way match delivers huge efficiency gains, cost savings and fraud prevention capabilities. Key points:
- Automation resolves the issues of manual matching – errors, delays, inefficiency, lack of visibility etc.
- Digital workflows match documents in seconds with over 99% accuracy
- Benefits include faster processing, lower costs, better compliance, improved working capital and vendor relations
- AI and RPA tools provide effective capabilities for end-to-end automation
- Companies like Johnson & Johnson and American Express have successfully automated matching
Are you ready to explore automation opportunities for your business? Our experts can guide you through vendor selection, building the business case and ensuring smooth deployment.
