Accounts Payable / Accounts Receivable Special Project Polic

Accounts Payable/Accounts Receivable Special Project Policies and Procedures for Ensuring the 3-Way Match Occurs before Paying Invoice

Develop a comprehensive internal process, including policies and procedures, for a selected company to ensure that a three-way match is completed prior to processing invoice payments. This process must address the responsibilities of all relevant departments—such as Purchasing, Shipping and Receiving, Accounts Payable, and the Controller. The procedures should outline step-by-step actions to verify that purchase orders, receiving reports, and invoices align before payments are issued. The goal is to minimize errors, prevent fraud, and ensure proper controls within the company's accounts payable function, especially considering that the accounting software used (e.g., QuickBooks) does not automatically enforce a three-way match.

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The importance of implementing a robust three-way matching process within an organization cannot be overstated, as it plays a vital role in safeguarding assets, ensuring accurate financial reporting, and maintaining operational integrity. This process involves verifying that the details on the purchase order (PO), receiving report, and invoice align before authorizing payment. Given that QuickBooks lacks an automated three-way match function, this procedural framework provides structured, manual controls to compensate for this limitation and to promote accountability across departments.

Responsibilities

The Controller or Chief Accountant is responsible for overseeing the entire accounts payable process, ensuring compliance with company policies, and conducting periodic audits to verify the integrity of the process. The Head of Accounts Payable is tasked with implementing these procedures, managing daily operations, and ensuring staff adherence. Accounts Payable personnel are responsible for executing the procedures diligently, including verifying documentation and processing payments only when a proper three-way match is confirmed. Shipping and Receiving are responsible for accurately documenting receipt of goods with verified quantities via packing slips or discrepancy reports. The Purchasing Department must diligently prepare and record purchase orders, ensuring all relevant information is accurate and entered into the accounting system timely.

Procedures

1. Purchase Order Preparation and Entry: The Purchasing Department will ensure that all executed purchase orders are entered into the company’s accounting system—specifically into the “Vendors/Create Purchase Orders” section of QuickBooks—within two working days. Each purchase order will include critical information such as:
   • Inventory item number and description
   • Unit price
   • Expected shipping date
   • Terms of sale (e.g., net 30, net 60)
   • Additional costs (e.g., freight-in, handling, sales tax)
   • Buyer’s contact details (name, phone number)
   • Seller’s contact details (name, phone number, email)
2. Receiving and Inspection: Upon receipt of goods, the Shipping and Receiving Department will record the receipt on a packing slip, detailing the quantities received. The department will compare received quantities against the purchase order and note any discrepancies in a formal receiving report. Discrepancy reports are forwarded to the Purchasing Department for resolution before further processing.
3. Invoice Receipt and Verification: Accounts Payable personnel will receive the supplier’s invoice and compare it with the purchase order and receiving report. They will verify:
   • that the invoice matches the purchase order’s item details and quantities
   • values align with the agreed prices, including any additional costs
   • that the received quantities match those billed, adjusting for discrepancies reported earlier
4. Three-Way Match Review: Only after verifying that the purchase order, receiving report, and invoice are consistent will the Accounts Payable personnel authorize payment. Any discrepancies will require resolution with the relevant departments before proceeding.
5. Approval and Payment Processing: The Head of Accounts Payable, under the supervision of the Controller, will review the matched documents and approve processing. Payments are scheduled according to the terms of sale, with proper documentation retained for audit purposes.
6. Recordkeeping and Audit: All documents involved in the process, including purchase orders, packing slips, discrepancy reports, and invoices, will be retained in the company’s records for at least five years. Periodic audits will be conducted to ensure compliance with the procedures and to identify any process improvements.

Conclusion

Establishing clear, accountable procedures for a three-way match in the accounts payable process mitigates risks associated with unauthorized payments and errors. By assigning defined responsibilities, maintaining meticulous documentation, and implementing systematic verification steps, companies can uphold financial integrity despite limitations in their accounting software. Regular training and audits further reinforce the importance of these controls, safeguarding the company's assets and maintaining stakeholder confidence.

References

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