Accounting departments have long faced the challenge of reconciling across multiple sources of data, commonly known as multi-way matching. In the multi-way match process, multiple sources of data must balance out each other to identify discrepancies that represent a risk to the company.
With Adra® Matcher’s new automated multi-way matching feature, users can set up match scenarios between three or more sets of data. These scenarios can be implemented to run automatically upon import of data into Adra Matcher.
What is So Challenging About Multi-Way Transaction Matching?
Multiple factors contribute to the complexity of multi-way transaction matching. In many scenarios, accounting teams are manually performing this type of matching on high transaction volume accounts. In a 2-way matching scenario, manual high-volume transaction matching can be an incredibly time-consuming process with a high likelihood of human error.
Adding a third source to the matching process at least doubles the amount of time to manually match the data and investigate the discrepancies, further increasing the risk of error. It also adds a new level of complexity to the matching scenario to ensure that a single transaction matches across all three sources. As companies grow and begin to reconcile new sources and higher volumes of data, a manual multi-way matching process cannot effectively scale to meet the company’s reconciliation requirements.
Multi-Way Matching in Practice
Accounts Payable Use Case
One such example of multi-way matching is manufacturing companies that produce a variety of products made from numerous parts. To create the products, manufacturing companies must purchase parts from multiple different vendors. The process of purchasing these parts results in a purchase order, receiving report, and an invoice. To reduce the risk of potential fraud, the accounts payable departments must first check the purchase order, receiving report, and invoice to verify that the parts ordered match what was received and invoiced.
Before implementing Adra Matcher, the accounts payable teams would manually match all purchase orders to the receiving reports and invoices in a 3-way match. The manual matching process was performed daily in Excel, and because these documents were kept in disparate systems, the matching process was time-consuming. With the implementation of Matcher, an accounts payable department can automate its 3-way match process. Purchase orders, receiving reports, and invoices are all imported into Adra and automatically matched daily, allowing for greater visibility and time savings.
Restaurant Use Case
Adra Matcher is used by a large number of restaurants that experience challenges with multi-way matching. A restaurant with multiple locations across the United States implemented Adra within the last year; as part of the company’s reconciliation procedures, the accounting department must verify that there are no discrepancies between the transactions recorded on the point-of-sale (POS) system, the bank statement, and the general ledger.
Before implementing Adra Matcher, the accounting team was manually matching these data sets in a 3-way match. Because of the high volume of transactions, the process was time-consuming, the risk of human error was high, and managing discrepancies was difficult. If there was a discrepancy, it was virtually impossible to tie the general ledger transaction back to the order placed in the POS. After implementing Adra Matcher, the company has automated this match, resulting in a shorter close process and decreased risk with the elimination of human error potential.
E-Commerce Use Case
One of the companies that also recently implemented Adra is a retailer that operates both brick and mortar stores and an e-commerce site. They found themselves shifting to a full e-commerce model when lockdown orders were given during the global pandemic. Similar to our previous example, the accounting department must check for discrepancies between the transactions recorded on their ordering system, the merchant file, the bank, and their ledger.
The e-commerce industry has an added layer of source complexities, which pushes the multi-way matching to four sources. This is common for most e-commerce organizations; accounting is performed at every step, whether it is calculating merchant fees, putting up accounts receivable, or recording revenue. Adra Matcher not only streamlines the reconciliation process but also eases the documentation for downstream accounting.
Whether your organization faces similar challenges or those unique to your industry, automated multi-way matching can benefit complicated reconciliation processes. By automating the entire process, you will reduce your time to complete the reconciliation and also the inherent risk associated with a multi-way matching scenario.
Written by: Renee Olmos