Increase Your Accuracy with 3-Way Matching: A Guide to Streamlining Your Procurement Process

15 - January - 2023

Imagine your business unknowingly paying for errors and duplicates, causing you to lose profits and waste valuable time.

Often tech giants like Google and Facebook fall prey to invoice fraud because they lack a system to verify their invoices before paying them out. If it can happen to them, it can happen to anyone.

Unfortunately, this is the reality for many companies that need a system to verify every invoice's legitimacy and accuracy. But fear not, there's a solution - three-way matching.

By using this reconciliation method, businesses can catch fraudulent invoices, embezzlement, computer glitches, or human errors and prevent unauthorized payments. With a small percentage of business payments affected by errors, implementing three-way matching can save money and protect your business.

In theory, it makes perfect sense to implement a system that reduces costs, like three-way matching. The implementation process, however, has flaws, making it difficult for many businesses to implement it.

Some businesses view manually verifying payments as a time and resource wastage because the cost outweighs the rare errors. The most effective three-way matching must be used, though, if the objective is to improve payment accuracy and prevent irresponsible spending.

Keep reading to learn more about managing your accounts payable effectively and safeguarding your business against invoice fraud.


What is the Difference b/w Three-Way, Two-Way, and Four-Way Matching?

While all accounts payable approval processes, each version takes the matching process differently. Two-way matching is the most basic, simply checking the vendor's invoice details against the purchase order number to ensure they match up.

Three-way matching adds another layer of verification by including the receiving report or receipt of goods.

And if you want to take things to the next level, there's four-way matching, the most complex and time-consuming method. This technique matches the supplier invoice against the PO and the receiving report, compared to the packing slip or order receipt.


What are the Components of A Three-Way Match?

Cross-verifying associated documents through three-way matching to validate an invoice before reimbursements. When three documents are compared side by side, it can be determined whether an invoice accurately represents the goods or services that were provided to a business.

These documents consist of the following:


Make Sure The Platforms And Procedures For Procurement Are Accessible 24/7:

We are all aware from our own professional experiences that not everyone tends to work the same hours and that people prefer to be able to complete their tasks when and where it is most convenient for them, particularly in the post-pandemic period when many businesses are using a hybrid or remote-operations model.

Platforms and processes must be digital, automated, and always on for procurement strategy to support that flexibility. Previously, procurement could only provide its services during business hours.


Make Agile Purchasing Possible With Digital Procurement:

Every organization will require agility from its procurement strategy function given the business environment's near-constant change and the daily emergence of new possibilities and problems.

Being agile for businesses means having the ability to decide quickly, act right away, and change course as necessary. Better leveraging of digital technologies in procurement is necessary to make this possible.

For instance, stakeholders should be able to access lists of recommended suppliers quickly using a self-service platform. But instead of being required to wait for the procurement unit to create the list or slog through spreadsheets to create it themselves.

● Supplier's Invoice: The supplier provides a detailed description of the products or services, the quantity supplied, the price of each per unit provided product, and any other pertinent information in the invoice. In essence, the supplier's invoice is a demand for payment of the amount to be paid to the supplier.

● Good Receipts Note: It confirms that a receiving officer has accepted the goods delivered by the supplier and includes important details like the quantity, delivery condition, and any other relevant notes.

The document is then sent to the accounts department for processing after the receiving department has completed its due diligence and recorded this information.

● Purchase Order: There's a constant stream of requests for supplies and services at any organization. Whether it's a new computer for an employee or a shipment of raw materials for the production team, these requests all have one thing in common - they need to be turned into purchase orders.

That's where the purchasing department comes in. They take the original request and turn it into a formal purchase order for the supplier, including all the necessary details like the product or service needed, the desired quantity and quality, and the agreed-upon price.

The accounts payable staff can cross-check using these three documents before paying a supplier by determining whether the invoice is valid. By doing so, fraudulent invoices that are not justified can be avoided.


Why is 3-Way Matching Beneficial?

Do you want to avoid dealing with incomplete or inaccurate transactions in your procurement process? The solution lies in the powerful process of three-way matching. You can ensure a seamless and error-free transaction by meticulously comparing and cross-referencing three essential documents - purchase order, goods receipt, and supplier invoice.

Three-way matching is such a game-changer that businesses that adopt it as a standard practice enjoy many benefits.

This article will delve into the nitty-gritty details of how this process can help elevate your business to new heights.

● Improved Accuracy- The first and most important benefit of three-way matching is improved accuracy by verifying that the purchase order, goods receipt, and supplier invoice all match. A company can ensure they pay only for the goods or services they have received.

This process significantly reduces the risk of overpayment or underpayment, ensuring that the financial records remain accurate.

● Overpayment- Overpayments can be a significant issue for many businesses. They can arise when invoices are paid for goods or services that still need to be received or received in quantities or quality that differ from what was ordered.

They can strain supplier relationships and even result in legal disputes. By accurately matching all three documents, businesses can ensure that they pay their suppliers correctly and maintain good relationships.

● Controlled Expenses- Three-way matching also gives businesses better control over their expenses. The process involves checking the purchase order, goods receipt, and supplier invoice and only approving payments if all three documents match.

This approach ensures that no unnecessary spending occurs and all expenses are legitimate. Businesses can also find inconsistencies between the goods receipt, supplier invoice, and purchase order using the three-way matching method.

By doing so, they can identify fraudulent activities or unnecessary spending, helping them control their expenses more effectively.

● Quick Payments- One of the most significant advantages of the three-way matching process is that it helps businesses to streamline their payment process. By matching all three documents accurately and quickly, businesses can approve invoices and make payments faster.

This improves cash flow and reduces the risk of late payment fees. When businesses take longer to process invoices, suppliers may become frustrated and withhold further deliveries. This can result in significant disruptions to the supply chain and, ultimately, a loss of business.

By using the three-way matching process, businesses can ensure that they process invoices and payments efficiently, maintaining good supplier relationships and reducing the risk of business disruption.

● Good Visibility- Another benefit of the three-way matching process is giving businesses greater visibility into their procurement process. The process allows businesses to identify inefficiencies or areas for improvement.

Businesses can streamline their Procurement Process, cutting costs and increasing efficiency, by examining the data produced by the three-way matching process.

For example, if businesses identify that they frequently receive goods in quantities different from what they ordered, they can work with suppliers to improve the accuracy of their deliveries.

Similarly, if businesses notice that a particular supplier's invoices frequently do not match the receipt of the goods, they can work with the supplier to improve their invoicing process. Improvements in supplier relationships and significant cost savings can come from such initiatives.

● Compliance with Regulations- The three-way matching process can help businesses comply with regulations and industry standards. The procedure ensures that companies keep correct records and follow financial reporting guidelines.

This can help businesses avoid legal disputes and regulatory penalties. For instance, businesses must maintain accurate financial records according to the Sarbanes-Oxley Act.

By ensuring that all financial documents are precise and current, the three-way matching procedure can assist organizations in adhering to this rule.

Similarly, in the healthcare sector, the three-way matching procedure can assist organizations in adhering to laws like HIPAA by ensuring that all receipts and payments are precise and traceable.


How to Make 3-Way Matching More Efficient?

Using three-way matching as a policy is crucial for maximizing its benefits. Here are some suggestions on how a business might improve three-way matching.

● Vendor Rating: Think about grading suppliers according to their invoices' accuracy. A high grade would be given to those who frequently submit accurate invoices, informing AP that future invoices from those individuals might only require periodic spot checks.

● Automated Process: A business can fully automate the three-way matching procedure if the appropriate technology exists. In this instance, AP is merely made aware of the disparities.

● Value Threshold: A business can specify that only invoices and purchase orders beyond a threshold are checked for three-way matching. Since unregulated high-value transactions have the potential to cause the greatest financial loss, this makes sense.

● Discrepancy Threshold: AP staff can be given the go-ahead to pay invoices within a certain range of the purchase order quantity to increase the effectiveness of three-way matching. Little differences resulting from a reasonable charge will be considered this way.


What is the Need to Automate 3-Way Matching?

Imagine a world where technology does the heavy lifting for you, freeing up your time and resources to focus on more important things. That's exactly what automating the three-way matching process can do for a company.

By entering purchase orders and order delivery details into a database, the system can quickly and easily match them up with vendor invoices, catching fraud and ensuring timely payments. And if vendors send their invoices electronically, the process becomes even more streamlined.

But the benefits continue beyond there. With all vendor information in one place, the AP team can easily track the history of each vendor and adjust their rating accordingly. Automating this process can save companies valuable time and money, freeing up staff to tackle higher-value projects.

And with discounts for timely payments and penalties for late payments on the line, automation can make all the difference in keeping a company's financials on track.

So, if you want to streamline your financial processes and boost your bottom line, automating the three-way matching process is the way to go!


What are the Possible Disadvantages of 3-Way Matching?

Invoice matching can be tricky, especially when dealing with a high volume of transactions. But one common challenge organizations face dealing with a flood of errors, many of which are too small to be worth investigating. That's where automated systems come in, allowing organizations to set thresholds for flagging discrepancies based on the dollar amount or percentage of the invoice.

Of course, the specifics of these thresholds will depend on each organization's size and frequency of transactions. After all, spending hundreds of dollars investigating a discrepancy that's only worth a few cents doesn't make sense. But with the right system, discrepancies can be quickly and efficiently resolved without creating animosity with suppliers or ill will among employees.

The key is an elaborate path for resolving flagged cases, ensuring they're sent to the right people and dealt with in the most efficient manner possible.

And unless fraud is suspected, the process should always remain respectful and professional. If you want your business to streamline your invoice-matching process while minimizing errors, an automated system with customizable thresholds may be just what you need.



When managing your business's accounts payable, three-way matching is a game-changer. By cross-referencing a delivery receipt, purchase order, and supplier invoice, this powerful verification technique ensures that you're only paying for goods and services that have been delivered and authorized.

While the benefits of three-way matching are clear, the process can be quite time-consuming if done manually and even more so if there are discrepancies between the documents. Hence, it's essential to automate the process whenever possible, freeing up your team to focus on more strategic tasks and catching potential cases of invoice fraud before they can do real damage.

Keep reading to learn how three-way matching can help your business build stronger supplier relationships and streamline your accounts payable process.

Chat with us
Get Free Consultancy

Signup Now

Weekly Live Demo: See how BusinessBid Can Enhance Your Procurement Experience. Register Now