3-way matching: what is it, and why does it matter?

One of the most challenging aspects of the AP workflow is managing the enormous volume of invoices that come across a team’s desk. It’s crucial that every invoice is verified and paid in a timely fashion to keep a company’s finances running smoothly. One of the most reliable ways an AP team can achieve this is to use 3-way matching — a verification process that ensures consistency and accuracy across invoices, purchase orders, and receipts.

What is 3-way matching?

As the name suggests, 3-way matching is a process where three unique elements of an AP purchase workflow are verified against each other, ensuring each invoice is legitimate and accurate.

In a 3-way match, an AP clerk compares: 

1. The purchase order 
2. The invoice 
3. The goods receipt note (GRN).

If the details all correspond correctly, it’s a good indication that the invoice is ready to be paid.

How does 3-way matching compare to other verification methods?

Thanks to its reliability and thoroughness, 3-way matching is becoming the preferred AP verification method. However, there are two alternatives: 2-way matching and 4-way matching.

2-way matching: The information on the invoice is compared with the information on the purchase order. This verification method is faster than 3-way matching since it only involves the comparison of two AP documents, but it can increase the possibility of manual error or fraud since it is less thorough. 

4-way matching: A 3-way match is completed and paired with a tolerance limit review. A tolerance limit is the percentage of variation that a company finds acceptable between the purchase order and what is received or billed. While this method can add an extra layer of security, it can also be time-intensive.

For example: A company with a 5% tolerance limit orders 50 widgets and receives 54. The four extra widgets are 8% higher than the requested amount which exceeds the tolerance limit — in other words, this indicates the possibility of an error or fraud and should be investigated before the invoice is paid.

The advantages of 3-way matching

When compared with 2-way and 4-way matching, 3-way matching emerges as the most viable option for most AP teams. It’s both more thorough and more accurate than 2-way matching, and less time-consuming than 4-way matching. It strikes the perfect balance. 

The benefits of 3-way matching include:

• Safeguard workflows: A detailed matching process helps ensure that companies are not overpaying, making duplicate payments, or paying fraudulent invoices. 

• Enhance vendor relationships: Regularly verifying that invoices, purchase orders, and goods receipt match can help identify any vendor/supplier relationships that might need adjustment. 
   
• Accelerate invoice processing: 3-way matching leads to a quicker turnaround when it comes to paying invoices. This speed helps vendors see the company as a trusted business partner and opens up the possibility of vendor discounts.

• Make audits easier: Ensuring consistency between invoices, purchase orders, and receipts helps companies be better prepared for an audit.

Improve 3-way matching with automation

3-way matching is an effective process when it comes to ensuring accuracy. However, it can be laborious when performed manually, and there’s always the risk of a costly human error. That’s where Quadient AP automation can help.

Quadient AP features AI-powered invoice processing to automate 3-way matching. Quadient AP quickly and accurately cross-references invoices with purchase orders and receipts, ensuring accuracy and consistency.

Automate your 3-way matching with Quadient AP

Quadient AP provides your AP team with the tools they need to strategically and responsibly manage your workflows. Book a demo with us today to see how Quadient AP can elevate and automate your 3-way matching process.