3-way matching: What it is, when to use it, and examples

Duplicate payments, pricing errors, and fraudulent invoices cost businesses millions every year without proper controls. Accounts payable (AP) teams combat this with 3-way matching—a process that cross-checks purchase orders (POs), goods received notes (GRNs), and invoices to ensure payments reflect what was ordered and delivered.

Let’s break down how 3-way matching works, why it's non-negotiable for businesses, and how to automate it.

What is 3-way matching in accounts payable?

3-way matching is a fraud-prevention process used by accounts payable teams to verify invoices before payment. It cross-checks three documents:

• Purchase order (PO): What your company ordered (quantity, price, terms).
• Goods received note (GRN): Proof of what was delivered.
• Supplier invoice: What the vendor is charging.

By comparing these documents, AP teams ensure that payments are only made for goods and services that were both ordered and received—preventing duplicate payments, overcharges, and invoices for undelivered goods.

For example, if a vendor invoices for 100 laptops at $1,000 each, but the GRN shows that only 80 were delivered, 3-way matching catches this discrepancy, saving you $20,000.

Why 3-way matching is non-negotiable for businesses

While 2-way matching may work for simple procurement processes, 3-way matching is essential for ensuring payments reflect actual deliveries.

Here’s why it matters:

• Prevents costly errors: Without 3-way matching, discrepancies between invoices and received goods can lead to overpayments and financial losses. Ensuring all documents align before processing payments minimizes these risks.
• Blocks fraudulent payments: Fraudsters exploit weak AP controls. In 2023, 80% of businesses experienced payment fraud (AFP). 3-way matching prevents fake invoices, duplicate charges, and unauthorized payments.
• Builds trust with suppliers: Discrepancies delay payments and strain vendor relationships. A clean 3-way match accelerates approvals, ensuring suppliers are paid on time.
• Simplifies audits: A clear paper trail makes audits more efficient and ensures compliance with financial regulations.
• Reduces AP workload: Fewer mismatches mean less manual reconciliation, reducing administrative burdens.

In short, 3-way matching is a non-negotiable process for businesses that want to maintain financial control, prevent losses, and ensure efficient, fraud-free transactions.

How does the 3-way matching process work?

Detecting invoice discrepancies before payment requires a structured approach. 3-way matching follows a sequential process—starting from purchase order creation and ending in payment approval—ensuring that businesses only pay for what was actually received.

Here’s how the process works:

1. PO creation: The procurement team creates a purchase order and sends it to the supplier. For example, say a company orders 500 laptops at $1,000 each, totaling $500,000.
2. Goods received and GRN issued: When the laptops arrive, the receiving team inspects the shipment and records a goods received note confirming how many were delivered.
3. Invoice submission: The supplier sends an invoice requesting payment based on the order details. The invoice states $500,000 for 500 laptops.
4. 3-way matching and verification: The AP team cross-checks the PO (500 laptops ordered), GRN (500 received), and invoice ($500,000 billed) to ensure they match.
5. Payment approval: If everything aligns, the payment is processed. If there’s a discrepancy, the invoice is flagged for review.

Comparing 2-way, 3-way, and 4-way matching

Choosing the right invoice matching process depends on the level of verification and oversight needed. Here’s a breakdown of how each method works and when to use it:

How to choose the right matching method

• 2-way matching: Works best for services and digital goods where delivery verification isn’t necessary; avoid it for physical goods where receiving confirmation matters.
• 3-way matching: Ensures businesses only pay for received goods, preventing overpayment or fraud; avoid it if quality verification is critical, since it doesn’t inspect product quality.
• 4-way matching: Adds a quality inspection step to prevent payment for defective or non-compliant goods; avoid it for routine purchases where speed is more important than additional verification.

Why the extra verification steps matter

3-way vs. 2-way matching

2-way matching only checks that the purchase order and invoice align—it doesn’t confirm whether goods were actually received. This creates a risk of paying for undelivered, incorrect, or damaged items. For example, say a vendor invoices for 100 laptops at $1,000 each:

• 2-way match: The invoice matches the PO, so you pay $100,000.
• 3-way match: The GRN confirms only 80 laptops were received. The payment is adjusted to $80,000, preventing a $20,000 overpayment.

Without a GRN check, businesses may unknowingly pay for goods never received.

3-way vs. 4-way matching

4-way matching adds an inspection report to verify product quality before payment. This step is critical in industries where defective goods create financial, safety, or regulatory risks.

• When to use 4-way matching: High-risk industries that require formal inspections, such as manufacturing, healthcare, and construction.
• When 3-way matching is enough: Standard inventory purchases where quality control is not a major concern.

For businesses needing stricter compliance, 4-way matching ensures only approved goods are paid for. However, in most cases, 3-way matching provides sufficient protection while keeping the process efficient.

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3 strategies to improve and accelerate 3-way matching

While automation and standardization help streamline 3-way matching, certain strategic optimizations can further reduce errors, improve speed, and strengthen financial controls. Here are three advanced strategies to enhance your process:

1. Implement vendor scorecards to improve invoice accuracy

One of the biggest challenges in 3-way matching is dealing with inconsistent or inaccurate invoices from suppliers. Implementing a vendor scorecard system helps monitor and improve supplier performance by tracking key metrics:

• Invoice accuracy rate: Percentage of invoices that match POs and GRNs without discrepancies
• Delivery accuracy: Number of shipments that meet the correct quantity and quality standards
• Response time for corrections: How quickly vendors resolve discrepancies when flagged

By tracking supplier performance, businesses can identify repeat issues, hold vendors accountable, and prioritize working with reliable suppliers to minimize invoice mismatches.

2. Use AI-powered invoice processing for anomaly detection

Even with automation, some discrepancies may go unnoticed due to human error or fraud attempts. AI-powered invoice management enhances 3-way matching by using:

• Machine learning models: Detects patterns in invoices, POs, and GRNs to flag unusual variances
• Anomaly detection algorithms: Identifies inconsistencies in supplier pricing, quantities, and frequency of corrections
• Automated risk scoring: Assigns risk levels to invoices based on historical data, helping AP teams focus on high-risk discrepancies

AI-driven tools reduce the burden on AP teams, ensuring that fraudulent or erroneous invoices are caught before payment is approved.

3. Integrate dynamic discounting to incentivize faster matching

Slow 3-way matching can lead to delayed payments, which strain vendor relationships and miss out on potential cost savings. Dynamic discounting allows businesses to:

• Offer early payment discounts to suppliers that consistently submit accurate, matchable invoices
• Prioritize invoice processing based on discount opportunities, improving cash flow management
• Encourage vendor compliance with 3-way matching by making accurate invoicing financially beneficial

By integrating dynamic discounting into the full AP process, businesses can increase efficiency, reduce processing costs, and strengthen supplier partnerships.

Manual vs. automated 3-way matching: What’s the difference?

While manual matching can work for low-volume operations, it quickly becomes inefficient as businesses scale. Errors, slow approvals, and fraud risks make manual processes costly in the long run. Here’s how automation compares:

With automation handling repetitive verification, AP teams can focus on resolving exceptions instead of manually matching every invoice.

How automation works in 3-way matching

Instead of relying on manual cross-checking, automation validates invoices in real time. Here’s how the process works:

• Digitized invoices: OCR extracts and processes invoice data without manual input.
• Automated matching: AI cross-checks invoices, POs, and GRNs for discrepancies.
• Smart exception handling: Mismatches are flagged and routed for resolution automatically.
• Seamless payment approval: Once validated, payments are processed without bottlenecks.

By eliminating manual bottlenecks, automation makes 3-way matching faster, more accurate, and scalable:

• Faster processing times: Invoice approvals that once took days can now be completed within minutes.
• Fewer discrepancies: Automated validation catches errors early, preventing costly mismatches.
• Stronger fraud protection: AI-powered tools flag duplicate invoices and unauthorized charges before payments are issued.
• Scalability without extra workload: Handles high invoice volumes effortlessly, allowing AP teams to focus on exceptions rather than routine checks.
• Better supplier relationships: Faster approvals ensure on-time payments, reducing disputes and improving vendor trust.

The bottom line is that automation turns 3-way matching into a strategic advantage, helping businesses save time, reduce costs, and strengthen financial control.

Optimize your 3-way matching with Ramp

Automation doesn’t just make 3-way matching faster—it gives you complete control over your AP process. Ramp’s intuitive three-way match experience ensures you only pay for what was actually received, at the agreed-upon price.

Our platform links your records, flags discrepancies instantly, and surfaces the details you need to resolve mismatches—without digging through emails or spreadsheets. Here’s how it works:

• AI-powered invoice matching: Automatically cross-checks POs, GRNs, and invoices to catch errors before they turn into costly mistakes
• Smart exception handling: Flags mismatches in real time and routes them to the right approver for quick resolution
• Real-time spend visibility: Tracks outstanding POs, invoices, and payments in a centralized dashboard for total control

With Ramp, you eliminate manual busywork and ensure every dollar is accounted for—without slowing down approvals.

Interested? See how Ramp simplifies 3-way matching, or watch our demo to get started.