Are you finding it difficult to ensure the accuracy of your accounts payable transactions? Managing financial records manually often leads to errors, which can result in payment discrepancies and strain relationships with suppliers.
Mistakes and delays in accounts payable pose a challenge to Singapore businesses. The Coface Asia Corporate Payment Survey 2025 reveals that 60% of firms reported overdue payments in 2024, indicating ongoing delays despite stricter credit terms. These delays disrupt cash flow and harm supplier trust, making efficient accounts payable processes crucial.
Luckily, there is a solution: 3-way matching. This process ensures that your purchase order, receiving report, and invoice are aligned before payment is made, helping prevent errors and making the accounts payable process more efficient.
Businesses that automate 3-way matching report faster payments, fewer errors, and improved supplier trust. In this article, we’ll explain how 3-way matching works, its benefits, and how automation can enhance your accounts payable process.
Key Takeaways
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Table of Content:
Table of Content
What is 3-way Matching?
3-way matching is a vital accounts payable process that validates invoices before payment. It compares the invoice with the relevant purchase order (PO) and delivery receipt for alignment. This method is crucial for preventing invoice fraud and significant financial losses from discrepancies.
When the details from the purchase order, delivery receipt, and invoice match, businesses can easily identify any discrepancies or unauthorized transactions. This extra step provides a safeguard, helping companies approve only verified invoices and preventing unnecessary financial risks.
2-way vs. 3-way matching
Two-way matching compares only the invoice and PO, while 3-way matching includes the delivery receipt. The additional step makes 3-way matching more accurate, ensuring the ordered items were delivered and match the agreed-upon terms.
| Documents | Purpose | 2-Way | 3-Way |
| Purchase Order | Confirms the purchase was authorized | ✓ | ✓ |
| Goods Received Note/Order Receipt | Proves the purchase was delivered | — | ✓ |
| Supplier’s Invoice | Verifies amount owed and payment terms | ✓ | ✓ |
The key difference between 2-way and 3-way matching is the additional step of checking the goods receipt in 3-way matching. This makes the process more thorough by confirming that the goods have actually been delivered and match the order.
In accounts payable, the 3-way match ensures that the purchase order, supplier’s invoice, and goods receipt note all align before payment is approved. This process prevents errors and fraud, and if there is a mismatch, it places a hold on the invoice until the discrepancies are resolved.
By using a 3-way matching process, businesses can ensure that their financial records are accurate and that payments are only made for legitimate orders, which is essential for maintaining financial control and preventing fraud.
Components of 3-Way Matching
3-way matching requires verifying three key documents to ensure accuracy in the accounts payable process:
Purchase Order (PO)
The 3-way matching process starts with the purchase order authorising goods or services. It specifies items, quantities, and prices, aligning both parties. The PO includes a unique reference number to track the purchase in the accounting system, ensuring accurate financial records.
Receiving report (Delivery Receipt)
The receiving report, or delivery receipt, confirms the delivery of goods or services as outlined in the purchase order. This document verifies that the quantity and condition of the items match what was ordered, providing an essential cross-check in the 3-way matching process to ensure that no discrepancies exist.
Supplier’s invoice
The supplier’s invoice outlines the total amount owed, including payment terms and due dates. This invoice is checked against the purchase order and delivery receipt in the 3-way matching process to confirm the accuracy of the order and payment, ensuring the company only pays for what was correctly delivered.
How Does the 3-Way Matching Process Work?
3-way matching verifies a supplier invoice by comparing it with a purchase order (PO) and delivery receipt. It ensures payments are made only for correctly matched purchases. Discrepancies trigger further checks to resolve issues.
Step-by-step breakdown
- PO Verification: The first step is to ensure the purchase order is complete, including the correct amount, vendor details, and necessary general ledger (G/L) codes.
- Delivery Information: Next, the AP clerk checks whether the delivered quantity matches the order on the purchase order, as reported by the receiving department.
- Invoice Verification: Finally, the invoice is verified against the purchase order (PO) and delivery receipt. If there’s any discrepancy in quantity or price, the AP department flags the invoice for further review.
For instance, consider a company that builds homes and issues a purchase order (PO) for 12,000 square feet of siding. When the siding arrives, the company verifies the invoice against the PO and delivery receipt. If only part of the order is received, they may hold the payment until the full delivery is made.
Common issues in manual matching
Manual invoice matching can be a significant burden for companies, often resulting in several challenges. Among the most common issues are cost, time consumption, late payments, and human error.
- Costly: Manual processes lead to significant expenses for large volumes. In contrast, a more efficient accounting system can minimize these costs by automating the matching process.
- Time-Consuming: With a backlog of invoices, manually matching them can be a considerable time-consuming task. This delays payments and disrupts workflows, making it difficult to maintain smooth operations within the managerial accounting structure.
- Late Payments: Missed or delayed invoices can tarnish a company’s reputation, potentially harming future business relationships with suppliers.
- Human Error: Manual matching is prone to mistakes. Physical records are susceptible to loss or damage, and manual data entry can lead to errors that delay the matching process.
These inefficiencies make it evident why many companies are opting for automated solutions to streamline the 3-way matching process. Moving away from manual methods can improve the speed, accuracy, and overall efficiency of the process, avoiding the issues outlined above.
Benefits of 3-Way Matching for Businesses
3-way matching provides key advantages for businesses by ensuring accurate, timely, and secure financial processes. Below, we explore the benefits that make it essential for companies, particularly in error reduction, financial accuracy, and operational efficiency.
Reduces errors and fraud
3-way matching helps businesses prevent fraud by cross-checking the purchase order, invoice, and delivery receipt. This comparison ensures that payments are only made for valid purchases. 3-way matching in accounts payable significantly reduces errors and protects against fraudulent activities.
Improves financial accuracy
By verifying all aspects of a purchase, 3-way matching ensures that businesses pay only for the correct quantity and price. This process boosts financial accuracy in accounts payable, preventing discrepancies between the PO, invoice, and delivery receipt.
Streamlines payments and operations
Automation of the 3-way matching process helps speed up payment cycles, making it easier to process invoices. With 3-way matching automation, businesses can reduce manual errors, prevent delays, and improve workflow efficiency in the accounts payable department.
Automating the 3- Way Matching Process
Manual matching is often a labor-intensive and time-consuming process that can impede your business’s growth. As your operations scale, maintaining manual accounts payable (AP) processes can hinder efficiency. By automating the 3-way matching process, you can easily manage an increased workload without missing a beat.
Sifting through paper documents to match purchase orders (POs) with invoices and delivery receipts is frustrating. Finding the correct documentation can be daunting, and errors waste time. However, 3-way matching automation eliminates these inefficiencies, ensuring accuracy without hassle.
When everything is digitized, businesses can rest assured that their AP workflow is seamless. The automated process keeps all documents in a centralized, accessible location, reducing errors and preparing businesses for audits without the added stress. This process paves the way for growth, enabling your business to scale efficiently.
Automating 3-way matching allows your business to streamline financial operations and save both time and money. If you’re ready to modernize your accounts payable process, HashMicro’s accounting software can help. Plus, you may qualify for the CTC grant, making this transition even easier.
Optimize Your Accounting Processes with HashMicro’s Accounting Software
For businesses looking to streamline their financial processes, HashMicro Accounting offers a comprehensive solution tailored for efficient managerial accounting. It eliminates the need for manual processes, reducing the risk of errors and delays while improving overall decision-making accuracy.
HashMicro Accounting helps managers make strategic decisions by automating data collection, providing real-time reporting, and customizable dashboards. It simplifies budget forecasting, cash flow tracking, and visualizing financial health with S-curves and budget comparisons for actionable insights.
Integrating HashMicro Accounting into your workflow means reducing inefficiencies, gaining clearer insights, and ultimately making smarter, more informed business decisions.
- Enhanced budgeting and forecasting
Leverage historical financial data and future projections to create strategic resource allocations and make more informed budgeting decisions. - Financial statement with budget comparison
Compare actual financial results to budgeted expectations, helping businesses identify variances and assess financial health more effectively. - Budget S curve visualization
Track budget consumption over time with an intuitive S-curve chart, making it easier to visualize spending trends and how they compare to the original budget. - Comprehensive cash flow reports
Gain a detailed overview of cash inflows and outflows, improving liquidity management and supporting more informed financial decisions. - Automated currency updates
Automatically refresh foreign exchange rates from trusted sources, ensuring accuracy in international transactions without manual adjustments.
Conclusion
In summary, the 3-way matching process is essential for verifying invoices. It ensures that payments are made only when all three related documents (purchase order, delivery receipt, and supplier’s invoice) are properly aligned. This process reduces errors and fraud while improving financial accuracy and streamlining operations.
Automating the 3-way matching process boosts accuracy, reduces errors, and improves financial efficiency. With HashMicro’s accounting system, businesses can integrate this smoothly, benefiting from real-time updates, enhanced precision, and optimized financial tracking to streamline operations.
To experience the full benefits of automated 3-way matching and see how it can enhance your financial processes, book a free demo with HashMicro today. Our solution can optimize your workflows and provide a smoother, more efficient experience for your business.
FAQ About 3-Way Matching
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What is an example of a three-way match?
A three-way match ensures accurate purchases. If a company orders 100 chairs, the purchase order lists the details, the delivery receipt confirms the quantity received, and the invoice requests payment. All must match before payment is authorized.
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Who is responsible for a 3-way match?
The AP department is responsible for performing a 3-way match, ensuring that the purchase order, delivery receipt, and supplier invoice align before approving payment.
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What is a 3-way match in internal control?
A 3-way match in internal control prevents fraud and ensures accurate financial transactions by verifying that purchase orders, receipts, and supplier invoices align before payments. This control measure helps avoid overpayments and unauthorized transactions.
