The 3-way match is a standard payment process that ensures full verification of all information on a supplier’s invoice before the issuing of a payment. The process cross validates information using three standard documents, the Purchase Order (PO), the receipt of goods/ packing slip, and the invoice, making it an aptly named and valuable cost-saving process.
When creating an order for your dental practice within Method’s purchasing software, quoted prices as well as real-time website prices are automatically retrieved onto the PO. Combined with the three-way match process, this holds suppliers accountable to quoted prices for the period they committed to and deters what is known as “price creep.”
What is the Three-Way Match?
The three critical components to the three-way match are:
1.) Purchase Order
A PO is a document that a dental practice would send to a supplier that is used to confirm all details related to a purchase that the dental practice is authorizing with the supplier. It includes the item descriptions, item quantities, item costs, ship to and billing addresses, shipping service, extra charges such as freight, and payment terms.
2.) Receipt of Goods (Packing Slip)
A Receipt of Goods is either a manual process (physically marking an invoice, PO or a packing slip) or a transaction recorded within a procurement software generally by barcode scanning in the received items. The purpose of a Receipt of Goods is to verify that all of the items that were ordered on the purchase order are correct and were received in the right quantities. The Receipt of Goods also details the date the items were delivered and confirms acceptance of their condition.
If it doesn’t seem obvious, an invoice is a request for payment of a product or service. The invoice should contain the same information as the purchase order and any details required for payment, including discounts, taxes, the total amount due, and the payment due date or payment schedule.
Before paying an invoice, accounts payable or the responsible party confirms prices and payment terms against the PO, making sure you pay what and when you should. The items and the quantities received are then verified against the Receipt of Goods, thereby ensuring you pay for only the product you received in good, usable condition, no more and no less. In short, this is a A/P 3-way match. The purchase order, the receipt of goods and the invoice all match.
As we explained in The Big Small Costs of Poor Procurement, from product returns due to quality issues to redundant invoices and incidental charges there are a host of incorrect charges found on invoices. And of course, the aforementioned “price creep” makes its way onto there as well.
Preventing Dental Supply Price Creep
Price creep increases prices in steady incremental amounts, often without written or verbal notice of the change. Unfortunately, in the dental world, where procurement so often goes mismanaged, some suppliers may take advantage and increase prices, knowing pushback will be minimal if at all, until now.
The three-way match is an accounting control measure designed to prevent losses from overpayments, whether from fraud or error. Any discrepancies found, such as inaccurate quantities, are investigated and rectified either internally or with the vendor before making payment. Once any necessary revisions are made, and the three documents align, the payment is processed according to the payment terms.
So how does the 3-way Match prevent dental supply price creep? If a dental supplier quotes your practice on a product, a set of products, or all your products, procurement software (like Method) will store those prices and quote expiration dates. When a purchase order is created the quoted price will appear on the purchase order until the expiration date of the quote. If the supplier does not honor the quoted price, the 3-way match process will identify the discrepancy and the invoice will not be paid until an off-setting credit is issued.
These seemingly small discrepancies can quickly add up to some significant losses. Put another way, based on the industry averages for a dental practice, every dollar you save in procurement equates to nearly three dollars ($2.94) in additional production. Use our free calculator to determine the impact on your practice.
Method’s 3-Way Match System
Methods 3-way match process makes safeguarding your profitability easy. It’s a simple yet valuable process that elevates your business standards, saves you money, and shows suppliers you’ve stepped up your game, and they should be too. Contact our team today to learn more about how our software can save you time, money, and help streamline your dental purchasing processes!