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Managing company finances becomes increasingly complex as businesses scale. While every operational expense impacts a company's bottom line, the accounts payable process often presents one of the most challenging areas for finance teams to manage efficiently and securely.
Three-way matching has long been the gold standard for preventing payment errors and fraud in accounting. However, this traditional manual process often creates bottlenecks in modern business operations. Let's explore how three-way matching works and why modernising this essential process through automation is crucial for growing businesses.
What is three-way match accounting?
Three-way matching is a crucial verification process where accounts payable teams compare three essential documents before authorising payment.
Key documents in three-way matching:
The purchase order (PO): The original order detailing what the company requested, including specific quantities, prices, and terms.
The supplier invoice: The bill requesting payment for goods or services provided, containing the invoice number, payment terms, and total amount due.
The receiving report: Confirmation that ordered items were delivered as specified, typically signed by the receiving team and shared with relevant internal departments.
According to the London accountants at Accounts & Legal, maintaining traditional or outdated accounting systems in a growing company exponentially increases the risk of invoice fraud, delays and duplicate payments, cash flow problems, and strained relationships with vendors and employees.
How three-way matching works
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The three-way matching process follows a structured workflow.
A purchase request initiates the process, requiring proper internal authorisation before generating a purchase order. Once approved, this PO goes to the selected supplier who fulfils the order. Upon delivery, the receiving team documents exactly what arrived, creating the receiving report.
When the supplier's invoice arrives, the accounts payable team begins the crucial matching process. They verify several key elements: that items and quantities match across all documents, pricing aligns with agreed-upon terms, delivery dates and conditions meet requirements, and all necessary approvals are present.
Any discrepancies found during this verification process must be investigated and resolved before payment can be authorised. While this thorough checking process is essential for accuracy, performing it manually can significantly slow down payment cycles and strain resources.
Benefits of automating three-way matching
As companies scale their operations and supplier networks grow, manual matching becomes increasingly unsustainable. Modern accounts payable automation transforms this traditionally laborious process into a streamlined workflow, offering several key advantages:
1. Centralised source of truth
Modern invoice automation creates a unified digital environment where all relevant documents and data are instantly accessible to authorised team members. This centralisation eliminates the need for physical document storage and enables real-time visibility into the entire process.
2. Enhanced accuracy and control
Automated matching systems can instantly flag discrepancies between documents and enforce compliance with predefined rules. This systematic approach significantly reduces the risk of payment errors and potential fraud while maintaining consistent control standards.
3. Improved supplier relationships
Faster processing times and more reliable payments help maintain positive vendor relationships. Automated systems can track payment terms and deadlines, ensuring timely settlements while maintaining clear communication channels between buyers and suppliers.
4. Simplified audit preparation
Digital automation creates a complete audit trail of all matching activities and approvals. Every document, verification step, and payment authorisation is automatically logged and easily retrievable, significantly reducing the time and stress associated with audit preparation.
5. Streamlined team efficiency
By eliminating manual document handling and cross-referencing tasks, automation frees up finance team members to focus on more strategic activities. This reallocation of resources can lead to improved productivity across the entire department.
Modernising your three-way match process
The traditional three-way match remains fundamental to sound financial controls, but its manual execution no longer suits modern business needs. Automating this process allows finance teams to maintain rigorous verification standards while dramatically improving processing speed and accuracy.
By centralising spend management and accounting workflows into a unified platform, companies can achieve greater visibility and control over their financial operations. This systematic approach not only secures the payment process but also positions the business for scalable growth.
Ready to streamline your invoice processing? Book a demo to see how Spendesk's invoice automation can help you match purchase orders and invoices automatically.
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Chris Dunne
Chris Dunne is our Content Marketing Manager. Based in Derry, he brings over 15 years of marketing experience to our content strategy. Outside of work, Chris loves spending time with his two young children, playing football, and exploring Ireland.
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