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Accounts Payable Best Practices
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document in order to ensure that the correct quantities (and costs) ordered are the
same ones received and billed. This is a painfully slow and inefficient process,
given the large number of documents involved, as well as the startling number of
exceptions that nearly always arise.
There are two ways to solve the problem. One is to dispense with three-way
matching entirely, which requires considerable reengineering of the accounts
payable process, as well as retraining of the receiving staff and even of suppliers.
This process was described in detail in the ‘‘Pay Based on Receiving Approval
Only” section earlier in this chapter. Though the most elegant solution, it also
requires the most work to implement.
The second solution requires some software changes that may already be avail-
able in the existing software package, with minimal changes to employee proce-
dures, while still resulting in efficiency improvements (though not on the scale of
the first solution). This best practice involves keeping the matching process in its
current form, but using the computer system to perform the matching work. In
order to automate three-way matching, all three documents must be entered into the
computer system. This is easy for purchase orders, since most companies already
enter purchase orders directly into the computer in order to track purchase orders
through the manufacturing system. The next-easiest document to enter is the
receiving document, which can be either a bill of lading or a packing slip. To do so,
there should be a computer terminal at the receiving dock that is linked to the main
accounting database so that all information entered at the dock is centrally stored.
Finally, the supplier invoice must be entered into the computer system—line by
line. It is common enough to enter the supplier’s invoice number and dollar amount
into the computer system, but automated matching requires the complete entry of
all line items, quantities, and costs into the system, which can be a considerable
chore. Once this information is in the accounting database, the computer system
automatically matches the three documents (usually using the purchase order num-
ber as the index), compares all line items, and presents a summary of the matched
documents to the accounting staff, showing any variances between the matched
documents. The accounting staff can then scan the information and decide if the
variances require further analysis or if they can be paid as is. This best practice
automates an existing manual process without a large number of changes.
When deciding to use this best practice, it is useful to compare the savings
from eliminating manual matching to the added cost of keying all the documents
into the central database. There may also be an expense associated with installing
the matching software in the system, though it is usually an integral part of the
more advanced accounting packages. Low-end accounting packages do not nor-
mally contain the automated matching feature.

Cost: Installation time: