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Imagine discovering that up to 2% of your business's payments are duplicates, incorrect amounts, or other errors. According to industry surveys, this is a common challenge for many companies, and inadequate debt reserves have risen by more than 10% over time.

Accounts payable (AP) departments rely on the three-way matching process to verify invoice legitimacy and accuracy. This robust process plays a crucial role in identifying and preventing fraudulent invoices, embezzlement, computer glitches, and human errors, thereby ensuring that unauthorized payments are stopped in their tracks.

While three-way matching may sound like the perfect solution, its practical application often reveals significant challenges. For many companies, the manual verification of payments can be a time-consuming and costly process, sometimes even exceeding the cost of occasionally paying an erroneous invoice. This highlights the need for efficient and optimized three-way matching processes.

Since three-way matching aims to improve payment, accuracy, and cost control and avoid unauthorized spending, it is essential to do it as efficiently as possible.

Now, let's delve deeper into this topic. We will explore how organizations can optimize their accounts payable processes, not only to improve financial accuracy and build stronger supplier relationships but also to reap significant benefits such as improved financial health and enhanced competitiveness in today's market. These potential gains should serve as a strong motivation for businesses to optimize their three-way matching process.

What is Three-way matching in accounts payable

Three-way matching is a crucial internal control process in AP that involves comparing purchase orders (POs), goods receipt notes, and supplier invoices. The primary goals are to eliminate fraud, save money, and maintain comprehensive records for auditing purposes. This process is typically completed before issuing payment to the supplier after delivery.

 By verifying relevant documents, three-way matching ensures that:

  • The business requested the goods or services listed on the invoice.
  • The business received the goods or services specified in the invoice.

This verification determines the legitimacy of the invoice. The process confirms that each invoice is consistent with the products and quantities ordered (as listed on the PO) and matches the goods delivered (as noted in the receiving report). Ultimately, three-way matching ensures that the items delivered align with the original order, maintaining accuracy and accountability in financial transactions.

Components of three-way matching

Three-way matching involves cross-verifying related documents to authenticate an invoice before payment. This process includes placing three documents side-by-side to ensure an invoice accurately represents goods or services rendered to a business. These documents include:

  • Purchase order (PO): Imagine you need to buy something for your business. The first step is creating a PO, which details what you're buying, the quantity, and the agreed price. Once your supervisor approves the PO, it gets sent to the seller. Using cloud-based software can make managing PO quicker and easier.
  • Goods received note (GRN): When the seller delivers the goods or services, the next step is to generate a GRN, also known as a delivery note. This document serves as a receipt confirming what was delivered. The team needs to ensure everything matches the PO. The GRN should only be created once the buying company has confirmed that everything is accurate.
  • Vendor invoice: After confirming the delivery, the seller sends an invoice listing the goods or services and their cost. The AP team will then check this invoice against the PO and the GRN, using automated accounting tools to streamline the process. Once the department head or financial controller reviews and approves the invoice, payment is made to the seller.

Finally, AP processes the payment and stores all documents, preferably digital, for future audits. These steps ensure a transparent and fair buying process for all parties involved.

The three-way matching process


The three-way match is a crucial accounting method because inventory is usually one of a company's most significant assets. This method helps ensure that inventory and other assets are bought correctly and recorded accurately.


Step 1: The process starts when demand is raised for a product, an order is created, the procurement team approves a purchase, and a PO is sent to the supplier. This PO outlines the quantity of goods or services, pricing, and delivery terms. Keep a copy of this PO for internal records.

Step 2: The supplier prepares and delivers the requested order. When the organization receives the order, confirm the accuracy of the paperwork. Address any issues with the delivery before finalizing the Receipt, GRN.

Step 3: The supplier sends an invoice at the appropriate billing cycle. This invoice lists the delivered items, expected payment, pricing, any additional fees, and other related details.

Step 4: The AP team verifies that the transaction was pre-approved and that all relevant records are available. They then perform a three-way match, reviewing the PO, receiving records, and invoicing for any discrepancies.

Step 5: If all details match, the AP team authorizes payment and transfers funds. If there are discrepancies, the invoice is reviewed further to identify and resolve the issues before finalizing the payment.

An example of a three-way matching process

Suppose a nonprofit manager needed to buy $10,000 worth of bus passes for an upcoming event.


  1. First, the manager submits a request to the purchasing department and awaits the delivery of the products.
  2. The procurement team approves the request and assesses the prices offered by various vendors.
  3. Identifying the best value, they generate a PO and send it to the finance team for processing.
  4. The PO is transmitted to the supplier upon approval from the finance team.
  5. The supplier sends the invoice to the AP team for validation, providing alignment with the receipt and PO.
  6. Following invoice approval, payment is disbursed to the supplier.

Introducing four-way matching: enhancing accuracy in procurement 

Four-way matching extends beyond three-way matching by incorporating inspection slips alongside invoices. These slips detail the quantity of goods accepted post-inspection. Notifying the vendor if goods are found unacceptable is crucial for arranging a replacement delivery or adjusting the invoice total accordingly.

Benefits of the 3 way matching process in accounts payable

  • Eliminate fraud and risk: By comparing the invoice with the corresponding PO and GRN, the AP team can quickly verify whether the invoice accurately reflects the goods and services provided to the business. This comparison helps identify and avoid fraudulent or genuine invoices with altered figures. Automating the procurement process further enhances fraud prevention. Businesses can significantly reduce the risk of falling victim to counterfeit bills by implementing three-way matching and automating the procurement process.

  • Transactional and accounting accuracy: Procurement and AP errors can create significant issues, including financial discrepancies and strained supplier relationships. The three-way matching process acts as a safeguard, detecting any inaccuracies or inconsistencies between the PO, GRN, and invoice. This process enhances transactional accuracy, minimizes the need for backtracking and correcting errors, and ensures smoother business operations.

  • Maintain adequate records for audit purposes: When a business undergoes an audit, a robust audit trail is essential for tracking the money flow. The three-way matching process in AP creates a comprehensive record that details how much has been spent on legitimate business expenses. This paper trail is invaluable for verification by the government, investors, or other stakeholders, ensuring transparency and accountability in financial practices.

  • Improved supplier relations: Addressing discrepancies promptly and fairly fosters trust and transparency with your suppliers. Precise and accurate transactions build stronger, more reliable supplier relationships.

  • Settlement discount management: The three-way matching system helps your organization take advantage of settlement discounts. By identifying invoices with discount terms, the system ensures that these invoices are processed on time or even earlier, allowing your business to benefit from the discounts offered.

  • Accelerate payments: Three-way matching, especially with an AP automation tool, streamlines the payment process for legitimate vendor invoices. Faster payments not only improve efficiency but also help build stronger supplier relationships. 81% of payors believe that instant payments lead to better supplier relationships.

Challenges of the 3-way match


  • Managing partial shipments and backorders: Dealing with partial shipments and backorders can complicate the three-way matching process. Clear protocols for these scenarios are essential to ensure payments correspond accurately with the received goods. Based on the organization's policies, this might involve adjusting the invoice or goods received a note or holding payments until the entire order is fulfilled.


  • Navigating discrepancies: Discrepancies are a usual part of any process, including three-way matching. The key is in how these discrepancies are managed. Implementing a robust discrepancy resolution process helps identify and address the root cause of issues, such as data entry errors, quantity mismatches, or pricing discrepancies. Prompt resolution addresses the current issue and helps prevent similar problems in the future, ensuring smoother and more accurate financial operations.


  • Transitioning from a manual matching process: Although the three-way matching process offers several benefits, according to Accounts & Legal, sticking to traditional or outdated accounting systems in a growing company dramatically increases the risk of invoice fraud, delays, and duplicate payments. It can lead to cash flow problems and strained vendor and employee relationships.

Many organizations are adopting automated solutions to address these challenges. These systems streamline operations and minimize the risk of human error, improving overall efficiency and accuracy.


The real cost of a manual 3 way matching process

Companies adopt three-way matching to minimize errors, detect fraud, and save money. However, despite efforts to avoid overpayment, a manual approach can lead to higher processing costs.

Consider findings from a recent Ardent Partners study on AP and invoice processing:

  • The average manual invoice costs $9.25 to process.
  • Over 20% of invoices have exceptions, requiring time and money to correct.
  • 38% of surveyed businesses experienced fraud in the past year.

Manual invoice matching can result in thousands or even millions of extra processing expenses.

Enhancing 3 way matching process

Three-way matching is essential for preventing fraud and ensuring all incoming invoices are adequately reviewed before payments are made. However, AP teams may need help performing their best and ensuring timely supplier payments.

Here are practical tips to make your three-way matching process more efficient, allowing faster AP processing without compromising security and transparency.


  • Focus three-way matching on high-value, one-time invoice: To streamline the three-way matching process, consider excluding small-value and recurring invoices. Recurring payments can be verified when set up, minimizing the risk of fraud. It's also unlikely for fraudsters to target an organization through small-dollar transactions.


  • Standardization of process: If your three-way matching process isn't fully automated, slight document discrepancies may occur. Requiring exact matches every time can delay payments and settlements.

A practical solution is to allow AP staff to complete payments if the discrepancies between the invoice, PO, and receiving report are within an acceptable margin of error. This approach lets the team proceed without unnecessary delays due to minor differences.


  • Adopt an automated system: Managing three-way matching manually can be time-consuming and prone to errors. An automated three-way matching solution can streamline the process significantly. These systems can:
  • Store PO once they're created
  • Collect reports from the team
  • Automatically compare these documents with incoming invoices

Using an automated system eliminates errors, reduces processing time, and cuts costs. Automation ensures that invoices are processed quickly and accurately, freeing the team to focus on more strategic tasks.


Applying these strategies simplifies the three-way matching process, improves efficiency, and maintains strong security and transparency in your AP operations.


Case studies: Real world 3 way matching

Viking Well Service significantly improved its three-way matching process by using Ramp's solutions. Ramp allowed Viking to consolidate bills and Pos in one central location, simplifying payment tracking and enhancing visibility. With automated matching mechanisms, Viking can quickly reconcile invoices and POs and receive reports, reducing manual errors and processing times. This streamlined approach increased compliance and saved substantial time, enabling the finance team to focus on more strategic tasks.

For more details, you can read the full case study here.

The Nevada Partnership for Homeless Youth (NPHY) streamlined procurement and three-way matching processes with Ramp's automated platform. By centralizing PO, invoices, and approvals, Ramp reduced manual errors and saved significant time. NPHY now enjoys faster PO approvals, enhanced transparency, and a 50% reduction in processing time. The shift from checks to Ramp cards has minimized fraud risks and improved overall efficiency.

For more details, you can read the entire case study here.

Automate 3 way matching with Ramp


Implementing three-way matching correctly can significantly benefit businesses. Automating invoice processing, procurement with Ramp, and related systems saves time and costs, allowing your accounting team to focus on more strategic tasks.

To automate three-way matching in the P2P process, you need a system that can:

  • Centralize order and supplier data in one platform.
  • Enabling Ramp to import PO
  • Syncing Invoices with Linked PO
  • Conduct automatic three-way matching between PO, delivery receipts, and invoices.
  • Automate the invoice approval and payment process.
  • Generate reports on these activities from within the platform.

Ramp offers a comprehensive solution for purchasing, vendor management, and automating AP, reducing the time and expense associated with manual data entry and minimizing human errors.

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P2P Analyst
An experienced P2P Analyst with over six years of experience, my expertise lies in the nuanced field of accounting and financial operations, particularly in managing and optimizing accounts payable processes. My journey has been marked by a deep dive into the intricacies of P2P operations, where I have honed my skills in data analysis, problem-solving, and process enhancement. My writing encapsulates the lessons and insights gained from streamlining financial procedures, enhancing revenue growth, reducing costs, and ensuring compliance across diverse regions.
Ramp is dedicated to helping businesses of all sizes make informed decisions. We adhere to strict editorial guidelines to ensure that our content meets and maintains our high standards.


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