Three-way matching in accounts payable is a cornerstone of AP controls, yet it’s one of the most misunderstood and error-prone parts of the invoice processing cycle. On paper, it sounds simple: match the invoice to the purchase order (PO) and the goods receipt (GRN). But for many finance teams, this step is anything but straightforward.
This blog explores why three-way matching causes so many bottlenecks — and how automation and smarter workflows can help organizations streamline the process.
Most organizations underestimate the complexity behind matching an invoice with its corresponding PO and goods receipt. Here are the core challenges:
Why Is Three-Way Matching in AP So Challenging?
While the logic is clear, the execution gets messy — especially in high-volume or complex procurement environments.
1. Disconnected Data Sources
Invoices may arrive via email, post, supplier portals, or EDI systems. POs are typically generated in an ERP. Receipts might live in a warehouse management system. Without integration, matching becomes a manual scavenger hunt.
2. Poor Invoice-Purchase Order Alignment
- Quantities may differ due to partial shipments.
- Prices may change between PO creation and delivery.
- Units of measure can vary (e.g., cases vs. items).
- Invoices often include extra charges (e.g., freight, tariffs) not reflected on the PO.
3. Delayed or Missing Receipts
Matching can’t proceed without a receipt. But in many cases, goods receipt entry is delayed, or the receiving department doesn’t update the system — leaving AP to chase confirmations.
4. Approval and Exception Bottlenecks
If something doesn’t match, AP often emails the buyer or warehouse team and waits. This slows down payment cycles, increases risk of late fees, and consumes significant admin time.
What Does a Successful Three-Way Match Look Like?
A “perfect match” means the invoice, PO, and receipt align in terms of:
- Supplier and PO number
- Product or service description
- Quantity
- Unit price
- Total value
When all of this matches, the invoice is cleared for payment — no manual intervention needed. But this is the exception, not the rule.
Common Scenarios That Complicate Matching
| Scenario | What Happens |
|---|---|
| Unit mismatch | PO orders 200 items, invoice charges for 20 boxes of 10 |
| Extra charges | Freight fees added to invoice, not listed on PO |
| Multiple POs | One invoice references multiple purchase orders |
| Partial deliveries | Goods received in two batches, invoice arrives after first |
Each of these requires either smart system logic or manual interpretation to resolve.
Straight-Through Processing: The Ideal Outcome
In high-performing AP teams, the goal is touchless or straight-through processing — where the system handles the majority of invoices without human involvement.
In fact, a 2025 report from the Forbes Finance Council projects the AR/AP automation market will grow to $2.61 billion — highlighting the surge in investment by organizations aiming to streamline manual processes like three-way matching in accounts payable.
To achieve this with three-way matching in accounts payable, organizations must:
- Align stakeholders (procurement, receiving, finance)
- Standardize PO and receipt entry processes
- Invest in AP tools with strong matching capabilities
- Continuously monitor and optimize based on exception data
How to Improve Three-Way Matching in AP
Here are some proven strategies to streamline the process and reduce manual work:
- Automate Invoice Capture and Data Extraction: Use OCR or EDI tools to extract header and line-item data from invoices automatically — including totals, SKUs, and bank info.
- Integrate Systems for Real-Time Matching: Ensure your AP system can communicate with the ERP or procurement platform to automatically pull PO and GRN data into one matching environment.
- Apply Tolerance Thresholds: Set acceptable ranges for quantity or price mismatches (e.g., ±2%). This prevents small discrepancies from holding up entire payments.
- Prioritize Exception Handling: Only route invoices for human review if something falls outside of rules. This allows the majority of invoices to flow through untouched.
- Track Match Rates and Root Causes: Analyse failed matches by reason — pricing issues, missing receipts, wrong SKUs — and feed that insight back into procurement and receiving processes.
Final Thoughts
Three-way matching doesn’t have to be a constant source of frustration. By understanding the root causes of mismatches — and addressing them with automation, integration, and clear workflows — AP teams can reduce delays, improve accuracy, and focus on strategic work instead of firefighting.
Ready to see how automation can simplify your AP process? Request a demo and discover how streamlined three-way matching can transform your finance team.
Frequently Asked Questions
Three-way matching in accounts payable is the process of verifying that the details on an invoice match the corresponding purchase order (PO) and the goods receipt note (GRN). This ensures the company is only paying for items that were actually ordered and received.
It helps prevent overpayments, duplicate payments, and fraud. It also improves financial accuracy and enforces procurement compliance by making sure what’s billed matches what was ordered and delivered.
Yes. Many AP automation tools use AI and rule-based engines to automatically match invoices to POs and receipts. This reduces manual work and enables straight-through invoice processing, especially for high-volume organizations.
Tolerance thresholds allow minor discrepancies (e.g., ±2% price or quantity) to pass through automatically without requiring manual review. These rules reduce bottlenecks and focus AP teams on true exceptions.
No. It’s typically used for PO-based purchases involving goods or inventory. Non-PO invoices (e.g., rent, utilities, subscriptions) follow different workflows and may only require two-way matching or approval routing.
