The 3-way matching process verifies that a purchase order, receipt note, and vendor invoice all match up before processing payments. However, this process has traditionally been a manual, time-consuming task that often leaves AP teams bogged down in resolving discrepancies and exceptions.
With advancements in AI, however, the entire paradigm of 3-way matching is shifting, inverting the finance function pyramid. It allows AP teams to focus on strategic decision-making rather than tedious data entry and error correction.
The Challenge of Traditional 3-Way Matching
Manual 3-way matching is a cumbersome task. AP teams often identify and resolve discrepancies between purchase orders, receipt notes, and invoices.
23% of AP teams struggle with high rates of discrepancies and exceptions with a 2% error rate each year. These errors can lead to delays in month-end closing and increased operational costs.
The Limitations of Manual and Basic OCR-Based Approaches
The conventional approach to 3-way matching revolves around static rules and basic OCR technology that identifies exceptions without addressing them.
While these systems can detect when an invoice doesn’t match a purchase order or receipt note, they still require human intervention to interpret the discrepancy and determine the appropriate action. This results in complex exception-handling workflows that drain valuable time and resources.
AI-Powered 3-Way Matching: A Game-Changer
The advent of AI-powered OCR systems has transformed the 3-way matching process by introducing the ability to recognize, understand, and resolve discrepancies at the line-item level without human intervention.
Unlike traditional OCR systems, AI-powered OCR can contextually understand exceptions, such as when a vendor uses a different item name or code on an invoice compared to the purchase order. By leveraging AI, these systems can quickly compare the unit cost of items on the invoice with those on the purchase order and resolve mismatches with minimal manual input. It represents a significant shift from merely detecting exceptions to intelligently resolving them, thereby reducing human involvement and error rates.
Benefits of AI-Powered 3-Way Matching:
- Reduce costly errors by up to 60%.
- Eliminate human error in manual data entry and exception handling.
- Accelerate month-end closing by up to 60%.
What’s Next
AI-powered 3-way matching is not just a technological upgrade; it’s a strategic enhancement that frees up your AP team to focus on higher-value tasks such as analysis, forecasting, and supplier relationship management.
The benefits are clear: reduced error rates, faster processing times, and a more streamlined month-end closing process.
So, where does your AP team stand in adopting AI for 3-way matching?
