Keeping track of income and expenses is essential, even if you don't own a business. And if you do own a business, things get even more complicated. There are paychecks to issue, taxes to track, and subcontractors to pay out. All of these details are a whole lot less challenging when you hire an accountant to oversee them. However, it is still important to know a little bit about accounting yourself. Dig into the articles on this website, and you'll gain a better understanding of accounting principles, what services accountants really offer, and the benefits of hiring these professionals to assist with your finances.
As your business grows, you will undoubtedly need more help to do things like paying bills, enacting collections, purchasing, and estimating. As more employees are involved in these processes, your company needs a way to ensure accuracy and timeliness.
One of the best ways to do this when it comes to paying invoices is to use three-way matching. What is three-way matching, what are its benefits, and how can you implement it? Here are a few key answers.
What Is Three-Way Matching?
Three-way matching, as its name implies, is the process of matching up three key sources of information before paying a bill. The staff member responsible for accounts payable would corroborate the information — primarily, items and pricing — provided when ordering (usually from a purchase order) as well as from the receiving documents before paying the bill.
How does this work in a real-world setting? When it is issued, a copy of the purchase order is kept in accounting to await the other two stages. Whatever receiving documentation arrives with the goods is attached to this order. Finally, when the invoice arrives in the mail, the accounts payable clerk will simply confirm that all three match, and they will promptly put the bill in line for payment.
How Does Three-Way Matching Help?
Three-way matching may sound like extra work, but it actually speeds up the process. Why? First, accounts payable is not required to get the approval of whomever did the purchasing because the purchase order provides confirmation. Secondly, they also do not need to verify the receipt because they have the receiving documentation.
In addition, accounting staff can often handle discrepancies between the invoice and expectations since they are armed with so much information. They can also keep track of items that might otherwise fall through the cracks. Finally, you will see a reduction in incorrect payments and orders.
How Should You Start Three-Way Matching?
Want to begin using three-way matching to boost your efficiency? You might begin by simply starting to use purchase orders on a regular basis. These purchase orders could be hand-written at the beginning, although you will want to move to a computerized accounting system once the training period is over. As everyone becomes used to purchase orders, three-way matching will become the logical next step.
Consult with an experienced bookkeeper to learn more about implementing three-way matching in your own business. While this new idea will require some time to implement, your business will be able to keep up with future growth and reduce unnecessary expenses.
To learn more about business bookkeeping, contact an accountant.