Accounting departments that use manual matching processes spend hours organizing payables and receivables. Ensuring expenses are reported in the same period as the revenues were earned, makes the matching principle a fundamental component of accounting.
Regardless of when cash is exchanged, accurate matching prevents net income inaccuracies, and confirms that balance sheet totals are not understated or overstated, according to the specific tolerances you’ve defined. This, of course, keeps your company operating smoothly and in compliance with accounting regulations. And while the default setting for all invoices is 2-way matching, many transactions require 3 and 4-way matching for approval.
Your accounting department relies on having purchase information delivered correctly and timely, but in a manual setting it can be challenging to ensure the process goes smoothly. Data entry errors, misplaced procurement information, and frequent holds have the power to wreak havoc on accounting processes. Finding a tool that can solve inefficiencies will deliver speedy ROI and reduce future labor costs.
Understanding the 2, 3, and 4-Way Matching Principle
For accountants, this information is extremely familiar. In an accrual basis, revenue recognition necessitates good judgment to estimate the timing and amount of revenues and expenses. This means that the matching principle is applied when invoices are matched to purchase orders (2-way), receiving (3-way) and inspection information (4-way). This ensures the expenses and income are recorded in the period they occurred.
The matching principle certifies that certain criteria are met for approval. It safeguards your company against billing errors, ensuring you are only billed for the quantity and quoted price, and providing confirmation you received the agreed quantity. Once the tolerances have been met and any holds resolved, your accounting department releases the payment.
How to Reduce the Time and Labor Required for Matching
Since the manual matching process relies on continuous sorting, transferring, checking, and double-checking, your accounting department’s labor costs can be high. Automated processing technology eliminates many manual matching tasks by completing the process for you electronically. Your accounting specialists don’t have to worry about synchronizing tasks with your receiving department because process automation provides digital solutions. Benefits include:
- No more waiting for department checks
- No more piles of paperwork and lost invoices
- The blame game is eliminated
- Pre-established routing for approvals, matching, and verification processes
- Easy to locate documents
- Immediate notifications for matching
Automated workflow software provides heightened visibility, so you know exactly where your documents are at all times. Plus, electronic forms are simple to process and file, improving your compliance performance.
Improve your bottom line by reducing the cost-prohibited confusion and labor required to maintain your matching principle tolerances. Enhance your accounting processes with automated software that removes human error and keeps your reporting accurate, efficient, and cost-effective. Contact us today to learn more.