How 3-way matching in SAP works: A quick guide

Accurate invoice validation is a fundamental requirement for businesses using SAP ERP systems, particularly those managing procurement processes that involve purchase orders (POs) and goods receipts (GRs).

SAP’s built-in capabilities support 3-way matching, but configuring the system to align with business requirements and streamline AP operations requires careful setup and optimization.

Let’s break down how 3-way matching works in SAP S/4HANA, and how businesses can use third-party automation tools to enhance AP efficiency.

What is 3-way matching in SAP?

3-way matching in SAP is an invoice verification process that cross-references an invoice with its corresponding purchase order (PO) and goods receipt (GR) before authorizing payment. This ensures that businesses only process payments for goods or services that were properly ordered, received, and invoiced at the correct amount.

SAP ERP systems, such as SAP S/4HANA, support 3-way matching as part of their standard functionalities. This process is primarily managed within the Materials Management (MM) module, which oversees procurement and inventory functions. ​

Typically, the validation follows three key steps:

1. Purchase order validation: Ensures that the invoice references an approved PO and that details such as quantities and unit pricing align with the original order
2. Invoice-to-PO matching: Confirms that the vendor’s invoice reflects the expected costs, preventing unauthorized charges or pricing discrepancies
3. Goods receipt validation: Verifies that the ordered items or services have been received in the correct quantity and condition before payment approval

If the invoice matches both the PO and GR within SAP’s predefined tolerance limits, the system approves it for payment. If mismatches occur—such as discrepancies in pricing, missing goods receipts, or quantity errors—SAP flags the invoice for review, prompting AP teams to investigate before processing the transaction.

When would businesses need to use 3-way matching in SAP?

Implementing 3-way matching is particularly beneficial for businesses that:​

• Procure physical goods: Where verifying receipt before payment is essential to ensure that the correct items have been delivered in the right quantities.
• Require stringent financial controls: To prevent overpayments, duplicate payments, and fraudulent activities by ensuring that all procurement and payment processes are thoroughly validated

By using SAP’s 3-way matching capabilities within the MM module, businesses can enhance their AP and procurement accuracy, maintain compliance with internal policies, and improve overall financial integrity.

How to set up 3-way matching in SAP

While configuration steps may vary based on business requirements and system settings, SAP provides built-in tools for managing invoice matching within its modules.

The general setup process for S/4HANA typically includes:

• Activating invoice verification settings: Ensure the system is configured to match invoices against purchase orders and goods receipts as part of the AP workflow
• Defining tolerance limits: Set acceptable variance thresholds for price and quantity mismatches to control when invoices are automatically approved or blocked
• Configuring matching rules: Establish how the system applies 2-way or 3-way matching, depending on procurement policies
• Setting up approval workflows: Implement invoice approval processes to route flagged invoices for review before payment
• Managing GR/IR reconciliation: Ensure goods receipts and invoice postings are properly matched in the system before payment is released

Once configured, SAP automates invoice validation and discrepancy flagging, helping businesses streamline their AP processes while maintaining control over procurement accuracy.

What SAP automates vs. what requires manual review

SAP AP automation covers key aspects of 3-way matching through tolerance checks, invoice blocking, and approval workflows. However, certain steps still require AP teams to review flagged mismatches and manage exceptions.

While SAP provides automation for invoice matching, finance teams still need to step in when invoices exceed tolerance limits, GRs do not match, or mismatched invoices require further review.

Challenges of AP automation in SAP S/4HANA

SAP S/4HANA offers powerful AP automation tools for 3-way matching, invoice processing, supplier management, and more, but businesses may encounter automation challenges during implementation.

According to feedback from G2, a software review platform, some organizations highlight overall workflow complexity and pricing as key factors to consider before adopting SAP, whether for AP or procurement automation.

1. Navigation and search functionality can be inefficient

Some G2 reviewers report that SAP S/4HANA’s user interface requires too many steps to access key invoice and PO details. Finding purchase orders, supplier records, and invoice histories may not always be intuitive, leading to slower processing times for AP teams. This can make managing 3-way matching exceptions more time-consuming, especially for businesses handling high invoice volumes.

2. Customization can be complex

SAP S/4HANA is highly configurable, but tailoring it to specific business needs can require extensive setup and technical expertise. Some users on G2 mention that customizing workflows and settings can be challenging, especially for companies migrating from on-premise SAP systems to the cloud. Businesses may need dedicated SAP specialists to ensure a smooth transition and proper system optimization.

3. Implementation and support require significant investment

While SAP S/4HANA offers powerful automation, the implementation process can be lengthy and resource-intensive. Some users on G2 note that migrating to S/4HANA requires careful planning, dedicated teams, and ongoing support, which can increase long-term maintenance costs.

SAP’s licensing and infrastructure requirements can be more expensive than other solutions, making it important for businesses to assess total cost of ownership, including ongoing system updates and support.

What to look for in 3-way matching software

Businesses evaluating AP automation tools for SAP should look for solutions that enhance invoice matching efficiency while integrating with existing ERP workflows. Key features to consider include:

• Seamless SAP integration: The software should sync with SAP’s modules to pull invoices, POs, and goods receipts in real time
• Automated invoice-to-PO matching: AI-powered verification ensures invoices are checked against purchase orders and GRs with minimal manual review
• Configurable approval workflows: Multi-step approvals and customizable exception-handling rules help manage mismatched invoices more efficiently
• Strong exception management and audit trails: Automated alerts, variance tracking, and detailed reporting ensure financial accuracy and compliance
• Scalability for enterprise AP operations: The solution should support high-volume processing and multi-entity structures while keeping costs transparent

A well-optimized 3-way matching system in SAP reduces manual intervention and helps businesses stay audit-ready.

How Ramp supports invoice matching and AP automation

Choosing the right AP automation solution means finding a system that integrates seamlessly with your workflows—whether you’re using SAP or another ERP.

With AI-powered invoice capture, customizable approval workflows, and UCSV syncing, Ramp helps businesses streamline 3-way matching, speed up invoice approvals, and maintain financial accuracy.

Here’s how Ramp aligns with key invoicing and AP automation needs:

Automate 3-way matching with Ramp

The right invoice matching solution should streamline AP workflows and provide greater efficiency in invoice validation. While SAP’s built-in tools support 3-way matching, businesses looking for deeper automation and reduced manual intervention often turn to third-party solutions.

That’s why businesses rely on Ramp to simplify 2-way and 3-way matching, ensuring invoices align with purchase orders and goods receipts with minimal effort. By syncing with SAP through Universal CSV, Ramp automates invoice validation, speeds up approvals, and reduces the risk of payment discrepancies—helping AP teams process invoices more efficiently.

Faster approvals, fewer mismatches, and greater financial control—without the complexity of manual reconciliation. Get started with Ramp.