Three-Way Matching in Accounts Payable: Fraud Prevention and Spend Control

Key points

• Three-way matching is an accounts payable term for using three data sources to evaluate whether an invoice should be paid.
• The three documents are the vendor invoice, the company's purchase order (PO) and the goods receipt (receipt, packing slip or statement).
• Two-way matching compares only invoice and PO and is commonly used for low-cost or non-delivery purchases such as subscriptions, utilities or consulting fees.
• Three-way matching is a good idea whenever physical goods are involved or the purchase value is high.
• Main benefits include fraud prevention, spend control, error reduction and financial accuracy.
• Common challenges: tedious manual work, data inconsistencies, partial deliveries and split shipments, purchases outside the PO process, and systems not sharing data in real time.
• Best practices include automating matching, integrating procurement/warehouse/AP systems, enforcing a PO policy, setting tolerance thresholds, regular audits and tailoring the matching approach.