Manual Three-Way Matching: Is It Killing Your Finance Department?

Your business is evolving. You have successfully automated HR and payroll and investing heavily in marketing and sales departments. Then, why does it take time for you to process your invoices and make payments?

When your organization starts to scale, the number of invoices your finance department is managing can enhance significantly. Purchase orders, invoice matching, and getting information is a swift win that can yield excellent results. But with a manual matching method, it can turn out to be a headache for your finance team.

Understanding Two-Way and Three-Way Matching

Two-way matching is a way to process vendor invoices by matching things like the amount and quantity of the invoice to the related details on the PO. Whereas, three-way matching takes a step further by linking this detail by receiving a note. It helps to make sure that any payments made are appropriate and complete.

  • Purchase order (PO) is a document that confirms an order officially. It is sent from a purchaser to the vendor and includes organization name, product or service type, number of items purchased, payment details, PO number, and invoice address.
  • Receiving note signifies the proof that the service got correctly delivered. It’s included by the vendor with products that were delivered to the purchaser and include information on the content of the order along with delivery details. This detail gets matched to the PO to make sure that whatever was ordered has been delivered.
  • Invoice is a request for payment of a purchase. It is sent from the vendor to the purchaser and includes the same information to the PO and an invoice number and discounts for early payments, if any.


Top Reasons to Prefer Three-Way Matching

Before paying an invoice, there are many steps the finance department takes to examine the payment. It includes prices and terms from the PO, matching the received goods and the amount charged on the invoice, and ensuring quantities. You will be surprised to know about the far-reaching advantages of three-way matching

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1. Streamlines Audits

Invoices and PO are two comprehensive documents that auditors utilize while examining an organization. Matching these two documents continuously makes auditing easier.

  1. Completes Payment Method

Any matched invoice can get approval for payment, enabling the finance to close out the PO and complete the transaction. Nothing remains unsolved, and there lies no confusion on whether a payment was made or not.

  1. Eliminates Payment Errors

Three-way matching removes the chance of making wrong or duplicate payments as all corresponding documents are interconnected.

  1. Saves Money

Assessing that data is consistent across PO, receipts, and invoices aids organizations in preventing overpaying, paying for duplicate goods, and paying for items that they have not received. Keeping close tabs on finances aids to minimize fraudulent activities.

  1. Ensures Best Supplier Relationships

Professional suppliers respect the significance of invoices, receipts, and purchase orders to the AP process. Frequent errors on the receipt and invoice can be a sign of a massive business problem and may signify that it is high time to start shopping around.

Automating Matching Process: Why is it Important?

Although the three-way matching process is vital for an organization’s financial operations, yet conducting these manually can be cumbersome in the finance department as well as on the company. It is ineffective, time-consuming, and error-prone. Automating this process provides your team with the details and time they require to conduct strategic planning and ensures accuracy.

  1. Easy to Capture Discounts

Several vendors offer early payment discounts that can be useful to an organization’s cash flow. If managing invoices takes a long time, then the enterprise is unable to capture the discounts. Moreover, paying invoices once or early can aid the business’s credit ratings.

  1. Prevents Late Payments
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Paying late does not only add statutory interest and fees but also impacts business reputation. Accounts payable automation minimizes invoice handling times, thus saving the organization from additional expenses and also from bad credit rating. Paying on time can improve vendor relationships and negotiations.

  1. Enhances Visibility

By showing what is owed to vendors, invoices provide the finance department a window into the past. PO, on the other side, gives them complete visibility into the future committed spend. Being able to review document types aids with financial planning.


The method of gathering details about invoices, PO, getting reports, and three-way matching them is fragmented. In several cases, a purchase order is developed in a single platform, invoices are housed someplace else, and receiving notes in another place.

Hence, if these solutions do not communicate with each other, then automating the process turns useless.

A successful AP automation needs robust integrations that enable data to flow from one platform to the other seamlessly. When it is about three-way matching, it is the harmonious and constant sync which allows finance departments to examine payments in real-time.


Author Bio : Marissa Levin is a marketing consultant, freelance writer at SutiAP, who regularly writes articles on Business, Finance, ERP, and Cloud/SaaS trends

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