Three-Way Match: what it is and how to prevent improper payments in accounts payable

An invoice arrives for payment. The amount looks correct, the supplier is known, and the due date is close. The temptation is to simply approve the payment.

But does that amount really match what was purchased? Were the products delivered? Was the order authorized? Is there any quantity or price discrepancy?

In companies with only a few suppliers, these checks are often done manually. As volume grows, however, the process becomes increasingly difficult to control - and that is exactly when duplicate payments, incorrect charges, and compliance failures start to appear.

To reduce these risks, many companies adopt Three-Way Match, a widely used practice for validating payments before finance releases them.

In this article, you will learn what Three-Way Match is, how it works, its benefits, and how to automate the process without losing control.

What is Three-Way Match?

Three-Way Match is an accounts payable procedure used to validate whether a charge should actually be paid.

Before payment approval, three pieces of information are compared:

• Purchase order (PO): records what the company authorized.
• Supplier invoice: shows what is being charged.
• Goods receipt: confirms that the products or services were actually delivered.

Payment is only released when these three sources are compatible.

In practice, this process helps ensure the company pays only for what was approved, correctly invoiced, and actually received.

How does Three-Way Match work?

Although there are variations depending on the ERP and each company's internal process, the flow usually follows the same steps.

1. Purchase order creation

Everything starts when a department requests a purchase and the order is approved.

This document records information such as:

• supplier;
• products or services;
• quantities;
• negotiated prices;
• payment terms.

The purchase order becomes the reference for the next steps.

2. Product or service receipt

When delivery happens, the company records the receipt.

Depending on the operation, this confirmation may be performed by the warehouse, the requesting department, or automatically through integrated systems.

This record confirms that what was purchased actually arrived.

3. Invoice receipt

The supplier sends the corresponding invoice.

At this stage, accounts payable needs to verify whether the billing data is consistent.

4. Information comparison

This is where the Three-Way Match itself happens.

The system or team compares information such as:

• supplier;
• purchase order number;
• products;
• quantities;
• prices;
• taxes;
• total amounts.

If everything is consistent, payment can proceed normally.

If there is any discrepancy, the charge is routed for review before approval.

What discrepancies can Three-Way Match identify?

In practice, this process helps identify situations such as:

• duplicate charges;
• quantities higher than what was delivered;
• prices different from what was negotiated;
• items not included in the purchase order;
• incorrect suppliers;
• invoices issued with errors;
• missing receiving records.

These situations may seem uncommon, but they become increasingly frequent as operating volume grows.

What are the benefits?

Fewer improper payments

The main benefit is preventing the company from paying for products or services that do not match what was contracted.

More security in accounts payable

By requiring checks before approval, the process reduces operational risks and strengthens internal controls.

Greater traceability

Each payment becomes linked to documents that prove its origin.

This makes audits and future investigations easier.

Fraud reduction

Although Three-Way Match does not fully eliminate fraud risk, it makes it harder for payments to be made without proper documentation or prior approval.

Less rework

When inconsistencies are identified before payment, the company avoids the effort of canceling payments, requesting refunds, or negotiating corrections later.

A practical example

Imagine a company approved the purchase of:

• 100 laptops;
• unit price of R$ 4,000.

A few days later, only 95 units arrive.

The supplier, however, issues an invoice charging for all 100 units.

Without a structured checking process, this difference may go unnoticed.

With Three-Way Match, the system automatically identifies that:

• the purchase order expected 100 units;
• the receiving record shows 95;
• the invoice charges for 100.

Before payment, the discrepancy is routed for analysis, preventing an improper charge.

What are the main challenges?

Despite the benefits, implementing Three-Way Match is not always simple.

Common challenges include:

Scattered data

Purchase orders, invoices, and receiving confirmations are often stored in different systems.

Manual checks

It is still common to find companies comparing documents manually or using spreadsheets.

Besides consuming time, this process increases the risk of errors.

Exceptions

Not every purchase follows exactly the same flow.

Services, recurring contracts, and emergency purchases often require specific rules.

That is why the goal is not to automate everything indiscriminately, but to define which situations can proceed automatically and which ones require human review.

How to automate Three-Way Match

As invoice volume increases, manually checking every document is no longer practical.

Today, many companies use automation to execute steps such as:

• automatically reading invoices;
• identifying the supplier;
• locating the corresponding purchase order;
• comparing amounts and quantities;
• applying business rules;
• flagging discrepancies;
• routing exceptions for human approval.

In this model, payments that meet the defined criteria follow the normal flow, while only cases with inconsistencies require team intervention.

This approach reduces operational effort without giving up governance.

Is Three-Way Match mandatory?

There is no legal requirement for every company to use this procedure.

However, organizations with higher purchase volume, more complex operations, or strict audit requirements often adopt this control as part of their internal policies.

In many cases, Three-Way Match is also a recommended practice for strengthening internal controls and reducing financial risks.

Frequently asked questions

What is the difference between Two-Way Match and Three-Way Match?

In Two-Way Match, only the purchase order and invoice are compared. Three-Way Match adds receiving confirmation, increasing security before payment.

Is Three-Way Match only for product purchases?

No. The concept can also be applied to services, although proof of execution usually requires processes different from physical goods receipt.

Does every discrepancy block payment?

Not always.

Each company defines its own tolerance rules. Small differences may go to specific approval, while more relevant discrepancies usually block payment automatically until they are reviewed.

Can Three-Way Match be done without an ERP?

Yes.

Smaller companies can perform the check manually.

As operating volume grows, however, automating part of these validations tends to reduce rework, increase traceability, and improve process reliability.

Conclusion

Three-Way Match is one of the main control mechanisms in accounts payable.

By comparing the purchase order, invoice, and receiving confirmation before payment release, the company reduces the risk of improper charges, strengthens governance, and improves the reliability of the finance process.

Although these checks can be performed manually, higher-volume operations usually benefit from automating validations and handling work by exception. This allows finance teams to spend less time on repetitive checks and focus their effort on the cases that truly require analysis and decision-making.