3-Way Match and Accounts Payable: Everything You Need to Know

MHC Team     Written: December 18th, 2021    Updated: January 13th, 2023

3-Way Match and Accounts Payable illustration

In the world of accounts payable, there are a slew of steps and checks to ensure that a company pays its bills quickly and accurately. One lynchpin in that system is three-way matching. This guide will walk you through exactly what three-way matching is, how it works and which departments work on it, why it matters in the AP process, and how to streamline it with AP automation software. 

What is 3-way Matching?

The most basic definition of 3-way matching is a comparison of data across three documents to make sure that all of the relevant information matches. This is generally done to make sure that payments are issued correctly and on time. 3-way matching can be performed manually by physically comparing the data included in all three documents, or using automated software that can extract and compare data without direct human touch points.

What is 3-way Matching in Accounts Payable?

In a specific accounts payable (AP) context, three-way match is the process of cross-referencing and verifying your accounts payable expenses using a set of three different documents—the invoice, the purchase order, and the receipt—in order to avoid any erroneous charges. Simply put, you check that the information on these documents matches up, ensuring that the amount you’re paying to the vendor is correct and lines up with the goods or services you actually received.

How Does 3-way Matching Work?

The goal of 3-way matching is to verify that all relevant details related to a purchase are in agreement across three key documents used by the purchaser and the supplier. If all of the details match, the accounts payable department can issue payment for the purchase. If there are discrepancies between the documents, they will be re-routed to identify and correct the errors. The three documents involved in a 3-way matching scenario include:

  1. Purchase order (PO): Includes the type of product, the quantity being ordered, and the agreed-upon price, as well as a PO number that can be used for tracking and recordkeeping.
  2. Receipt of goods or services: Confirms that goods have been received as ordered, or services have been performed as expected.
  3. Invoice: Includes the agreed-upon price of the goods or services, a time frame for payment, and an invoice number that can be used for tracking and recordkeeping.

While the actual process of 3-way matching is fairly simple and straightforward, it can be both tedious and time-consuming for accounts payable teams at organizations that handle a high volume of invoices. The three key steps in 3-way matching include:

  1. Verifying purchase order data, including names, addresses, amount of purchase, and general ledger codes, if required.
  2. Confirming delivery information, including whether the description of the goods or services laid out in the purchase order matches those received.
  3. Verifying invoice data, including whether payments have been authorized by all necessary approvers.

What is an example of 3-way matching?

Let’s contextualize that definition with an example that demonstrates how three-way matching plays out, and how it intersects with some steps of the procure-to-pay process. In this example, let’s say you’re handling accounts for a hospital that’s ordering 1,000 surgical masks, priced at $3 each.

Purchase of goods or services

First, of course, comes the act of placing an order. In this case, it’s the 1,000 masks, which, together, will cost $3,000 dollars. The mask vendor will provide you with a purchase order that will confirm the quantity (1,000) and cost of the items or services ($3,000).


Based on the purchase order, the vendor will create an invoice for the items or services. Please note that POs are different from invoices. The invoice will include the quantity ordered (1,000) as well as the cost per unit ($3) with the total cost owed ($3,000, plus any taxes or service charges).

Receipt of payment for goods or services

After the vendor sends the invoice and your accounts payable department approves and pays it, the vendor will then send a receipt. The receipt will include details like what you ordered (1,000 surgical masks), the payment method, any discounts (let’s assume there are none here), and the total amount you paid for the order ($3,000, plus taxes and fees).

It’s worth noting that, depending on the size or idiosyncrasies of your business, this receipt process can be more complex and involve multiple parties. For instance, if a third party is actually storing the goods ordered, you’ll need confirmation from them that they received the order.


This is the step where the three-way match comes into play. Accounts payable team members will look at all of the documents above—purchase order, invoice, and receipt—and verify that the information across the three documents matches: number of units, cost per unit, total order cost, etc.

If the information matches, accounts payable staff approves the invoice and the accounting department sends payment.  If the information doesn’t match, a member of the accounts payable team will need to follow up with the purchaser and the vendor to sort out the discrepancy.
Please note that non-PO invoices are different from PO invoices and they are not suitable for three-way matching.

Learn more about Invoice Matching and Invoice Data Capture


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Who Does Your AP Team Work With for Three-Way Matching?

The invoicing process is primarily the responsibility of your accounts payable team, but it also touches multiple areas of your business. An effective three-way matching process requires integrated efforts between your AP team and a variety of other stakeholders. Those will vary depending on the specifics of your business, but most AP teams will want to work closely with departments including:

Procurement and Purchasing

As the team responsible for sourcing and procuring the goods and services being paid for, your procurement or purchasing team is responsible for generating much of the data that the three-way matching process is tasked with verifying.

Suppliers and Vendors

Being able to work closely with the suppliers who provide both the goods and services being purchased and the data used in the three-way matching process is essential to maintaining open, accurate lines of communication in your AP processes.


The finance team plays a key role in the invoicing process by helping to set the metrics and key performance indicators (KPI) that inform your organization’s purchasing strategy.

Inventory and Receiving

The team that physically receives, records, and distributes the goods your organization receives is responsible for important details that are essential to a successful invoice matching process.

What is the Difference Between 3-way, 2-way, and 4-way Matching?

Though it’s a popular method, three-way matching isn’t the only way to cross-reference and check orders and invoices; there is also two-way and four-way matching. Let’s review both of these processes and how they differ from three-way matching.

Two-way matching

For a company using two-way matching, the accounts payable employee will verify the information using just two documents: the invoice and the purchase order.

A company might choose to use this method since it’s less time-intensive than a three-way match. However, they could be paying too much or too little for the goods and services rendered, as they have no way to cross-check the receiving information. As a result, the company might also see more errors in order processing.

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Four-way matching

In addition to cross-checking the invoice, purchase order, and receipt, four-way matching also checks information related to what are known as tolerances. Most often, tolerances relate to the quantity of goods a company will accept. (Though sometimes tolerances can involve quality of the product, too.)

Let’s stick with our mask example. If the hospital has a five percent tolerance, then they might accept 2,850 masks or 3,150 masks. This quantitative info (and qualitative, if it’s appropriate) would come from an inspection report.

Not all companies need or will use an inspection report, so this fourth step isn’t always possible. Plus, the additional step can add valuable person-hours to the process. However, some companies might choose this process just to be more thorough in their accounting.

Why Accounts Payable Should Use Three-way Matching

Even though there are many ways to check your accounts payable process, three-way matching is a best practice of all good accounts payable departments. Here are some reasons why three-way matching is the best way to check your payment process.

1. It establishes good relationships between suppliers and buyers

Trust between suppliers and buyers is one of the benchmarks of a healthy supplier relationship relationship and a successful business. If you’re keeping good records and subsequently paying invoices correctly and on time, it helps build loyalty between parties. Show that you value your relationship with them, and they’ll see you as a reputable partner.

2. It saves time and money

By keeping secure records and checking each payment, you’re making sure you’re not over- or underpaying invoices, missing discounts, or potentially subjecting the company to fraud. You’ll also avoid any potential payment problems that can create costly headaches and time sucks down the line.

3. It simplifies the auditing process

When it comes time for a business audit, having accurate records and information of all of your outgoing payments is essential for your company’s reporting. If you’ve done three-way matching throughout the year, you won’t have to do any of the extra work around the time of a company audit.

Manual Matching: A Problematic Process

Many companies use a manual matching system to check payments. While this process works, it’s not efficient. Here are some reasons why manual matching can be a problematic process.

1. It takes time

When done by hand, the matching process can be quite lengthy. People can only work so quickly, and taking the time to track down all the approved versions of the documents from suppliers creates a lot of back and forth.

2. It delays payment to suppliers

Since manual matching takes so much time, it can often delay payments to suppliers, which can hurt your relationship with vendors. As hard as your employees may try to get payments in on the due date, manual matching can just be too tedious.

3. High costs

With delayed payments come additional costs including late fees and penalties. You’re also paying more money for employees to work on processing and checking invoices, which can lead to higher personnel costs.

4. Prone to error

Manual matching allows human error to be introduced to the mix—from misreading an invoice to missing information on a document, you might not get the exact confirmation that you would from an automated process.

Automated 3-Way Matching with AP Automation Systems

A reliable 3-way matching process should be an important element of any AP automation solution. As with any automated approach, a high-quality matching process like the one offered by MHC NorthStar reduces the risk of errors, the time spent on processing, and the amount of repetitive tasks your AP team needs to complete each day. The result is a more streamlined and accurate process that keeps your organization connected to the goods and services you rely on.

An automated 3-way matching solution virtually eliminates human touch points such as manual data entry, paper receipts, and physical signatures for approval. Instead, the system employs tools such as optical character recognition (OCR) to extract necessary data from all kinds of invoices and purchase orders, including PDF files, Word documents, and even scans of paper documents.

An automated routing system ensures that each document has gone through all of the proper channels before the matching process begins. When errors or exceptions do occur, they are automatically flagged and re-routed to the teams or individuals who can fix the error. If other problems arise, an automated solution offers immediate visibility into the process, allowing your team to quickly pinpoint the cause of the problem. All of these improvements make 3-way matching an essential piece of your invoicing process and your AP automation system as a whole.


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Why You Should Automate 3-way Matching

Since manual matching is so time-consuming, costly, and error-prone, it’s a good idea to automate your three-way matching system—and your accounts payable process overall. Automating helps save time, maintain positive relationships with vendors and suppliers, improve data accuracy, and save money. Here’s a little more information on why an automated process is best for your business:

It saves time

By automating your three-way matching process, your company will need less manpower to maintain the process, freeing up your team to work on more complex tasks.

It ensures timely payment

Automated systems lead to a faster process, which means payments go out more quickly. As a result, you will be able to maintain fruitful and trustworthy relationships with your vendors and suppliers.

It improves data accuracy

An automated process eliminates opportunities for human error, and as a result, your data and records will be correct and consistent.

It saves money

Since you won’t have to compensate a larger team to manually handle matching, you’ll be able to put that money toward other things in your budget. Plus, timely and accurate payments mean you won’t be charged any late fees or have to account for any time-consuming and costly errors.

Find the Right Automation Solution for You

The bottom line is that three-way matching is an essential element of your AP automation system that saves money and time, all while helping maintain positive relationships with vendors and suppliers. Plus, it helps ensure your company isn’t subject to fraud and is ready and organized for audits. By streamlining this process and automating other steps throughout your accounts payable process, you get the most out of your AP team.

However, finding the right accounts payable automation system can seem daunting. MHC NorthStar offers best-in-class technology to manage your AP processes and make all documents—especially those necessary for three-way matching—easy to access. On top of this organization, MHC’s NorthStar supports straight-through processing. That way, employees only look at problematic documents or high-value invoices, i.e., the ones that are most in need of their attention.

Want to learn more about how MHC can support your business? Contact us or request a personalized demo and see our platform in action today!

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Team MHC consists of a multitude of roles, functions, and expertise within MHC. With extensive combined experience in accounts payable and customer communication management, Team MHC has a unique insight into how to empower people using solutions that streamline processes while enhancing customer communication. Working alongside field experts in various industries and company sizes, Team MHC has garnered impressive thought leadership knowledge that we are excited to share with our readers. Including Aragon’s 2022 Women in Tech winner Gina Armada, CTO Dan Ward, VPs of Finance and Customer Service, and other talent that runs the spectrum of technology ability, Team MHC offers a mastery of skills to benefit our customers and prospects alike.


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