Getting to the Root of the AP 3-Way Match: Part 1

Our first “crowd sourced” project

StickManAPWbLgA question came up a couple of days ago asking HOW a lean company can eliminate the Accounts Payable 3-Way Matching process.  I thought: instead of giving the standard humble consultant’s answer – how about we use the A3 approach by asking questions?  This is really the lean way, and it gets the best answers.

So, we’ll start the process with the question for today, “What Causes Mismatches?”  We start here, because we have to understand why we’re doing something before we can figure out how to change it.

Why We do the 3-Way Match

The AP 3-way match process is a time-honored method involving detailed inspection of documents to ensure that the company is paying the right amounts of money to the right suppliers or other vendors.

The AP process (including the 3-way match) does not add value in the eyes of the customer. The customer does not care about AP. The AP process takes up a lots of time, work, and cost. From a lean thinking point of view; AP is 100% non-value-add and therefore it is waste we need to eliminate.   Good idea, right?

But wait … there are lots of 100% NVA processes that we must do regardless so we can run the business. The Payroll system is NVA, for example, but we must pay our people. What does a lean company do about required NVA processes? They skinny the process down to the minimum amount of work by eliminating as much of the waste as possible.

Here’s what I propose:  The primary waste in the AP process is the 3-way matching and the ironing out the problems that crop up as a result. Using A3 thinking now, if we are to eliminate the AP 3-Way matching process then we have to remove the reasons for it.

We begin by understanding what’s actually happening and why.

What are the reasons for a mismatch between the Purchase Order, the Receiving Document, and the Supplier Invoice? If we can list the reasons and then use lean methods to prevent those reasons, then (and only then) we can eliminate lots of waste in the AP process. This will generally apply to the routine purchase of materials and services. There will always be “one off” purchases of items from unknown suppliers where the AP 3-Way match is appropriate.

In the table below I have listed a bunch of the obvious causes.

Eliminating the Accounts Payable 3Way Match table wblg

Now it’s your turn.

What causes AP Mismatches in your company?  Share your thoughts below (in the Comments section.) We will update the table and republish it.  Let’s see what we can come up with.