3-Way Matching in Accounts Payable: A Complete Guide for Modern AP Teams

Table of Contents

1. What Is Three-Way Matching?
2. Why Three-Way Matching Is Essential in Accounts Payable
3. How the 3-Way Matching Process Works (Step by Step)
4. 2-Way Matching vs. 3-Way Matching
5. Who’s Involved in the 3-Way Matching Process?
6. The Risks of Manual Invoice Matching
7. Benefits of Three-Way Matching for AP Teams
8. How to Automate Three-Way Matching
9. FAQs About 3-Way Matching in Accounts Payable

Key Takeaways

• Three-way matching verifies invoices against purchase orders and receiving documentation
• It plays a key role in preventing errors and fraudulent invoices
• Manual invoice matching is time-consuming and difficult to scale
• Automating three-way matching improves accuracy, visibility, and control
• Three-way matching strengthens the entire accounts payable process

Ensuring invoice accuracy is one of the most critical and challenging responsibilities in the accounts payable process. Without proper controls, AP teams risk overpayments, delayed approvals, and exposure to fraudulent invoices. That’s why 3-way matching in accounts payable remains a foundational best practice for finance teams looking to improve accuracy, compliance, and efficiency.

In this guide, we’ll explore what three-way matching is, why it matters, how it works step by step, and how automation is transforming the matching process for modern AP teams.

What Is Three-Way Matching?

Three-way matching is a financial control used during the invoice process to ensure that a company only pays for what it actually ordered and received. It compares three critical documents:

• The purchase order invoice (what was approved and ordered)
• The vendor invoice (what the vendor is charging)
• The receiving report or goods receipt note (what was delivered)

The goal of matching in accounts is to verify that quantities and prices align across all three documents before payment is released.

Unlike more basic controls, three-way matching validates both authorization and fulfillment — making it one of the most effective safeguards in the accounts payable process.

Why Three-Way Matching Is Essential in Accounts Payable

Invoices arrive from vendors every day, often from multiple departments and locations. Without a formal matching process, AP teams may unknowingly approve invoices for:

• Items that were never ordered
• Goods that were only partially delivered
• Incorrect pricing or duplicate charges

Three-way matching helps catch these issues early, before payment occurs. It also supports audit readiness, compliance, and stronger internal controls — all while reducing disputes with vendors.

For organizations moving toward digital AP, three-way matching works hand-in-hand with accounts payable automation to create a more resilient financial workflow.

How the 3-Way Matching Process Works (Step by Step)

What specific steps should AP follow during three-way matching?

A structured three-way matching process typically follows these steps:

1. Purchase Order Creation

Procurement creates a purchase order outlining approved quantities, prices, and delivery terms. This PO becomes the baseline for comparison later in the invoice process.

2. Receipt of Goods or Services

When goods arrive, the receiving team generates a receiving report or goods receipt note, confirming what was actually delivered.

3. Invoice Submission

The vendor submits an invoice requesting payment, detailing quantities, prices, and totals.

4. Matching Process

Accounts payable compares all three documents:

• Does the invoice match the purchase order?
• Do the delivered quantities align with what was billed?
• Are prices consistent with agreed terms?

5. Approval or Exception Handling

Invoices that match move forward for payment. Discrepancies are flagged for review and resolution.

This verification step is closely related to payment verification, ensuring funds are released accurately and securely.

2-Way Matching vs. 3-Way Matching

2-way matching verifies invoices by comparing only the purchase order and invoice. While useful for services or subscriptions, it does not confirm delivery.

3-way matching adds an extra layer of validation by incorporating the receiving report, making it more reliable for physical goods.

Who’s Involved in the 3-Way Matching Process?

Three-way matching is a collaborative effort across departments:

• Procurement teams create and approve purchase orders
• Receiving teams or warehouse staff confirm delivery
• Accounts payable teams perform the matching and approvals
• Finance leadership ensures controls and compliance

While this collaboration improves accuracy, it can also slow processes when done manually — especially across disconnected systems.

The Risks of Manual Invoice Matching

Manual invoice matching relies heavily on spreadsheets, emails, and human data entry. Over time, this approach introduces significant risk, including:

• Missed discrepancies
• Lost invoices or documents
• Slow approval cycles
• Limited audit trails

As invoice volumes grow, manual matching becomes increasingly unsustainable. This is why many teams turn to invoice management solutions to centralize and streamline workflows.

Benefits of Three-Way Matching

When implemented correctly, three-way matching delivers meaningful value across the organization:

• Prevents overpayments and fraudulent invoices
• Improves accuracy throughout the invoice process
• Strengthens internal controls and compliance
• Reduces vendor disputes
• Helps AP teams save time and money

These benefits are amplified when paired with automation.

How to Automate Three-Way Matching

To truly modernize the accounts payable process, organizations are choosing to automate three-way matching.

Automation enables:

• Automatic document comparison
• Real-time exception detection
• Faster approvals and payments
• Centralized audit trails

Automation also reduces reliance on manual invoice matching and supports scalability as businesses grow.

Helpful resources include:

• What is accounts payable automation?
• Invoice glossary
• Bill vs. invoice

Modernize Your AP Matching Process

If your AP team is still managing manual invoice matching, automation can help you reduce risk, improve accuracy, and scale efficiently.

Automate your accounts payable workflows with Paystand