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The pitfalls of 3-way matching in accounts payable: Is there a better way?

We explore the pros and cons of the 3-way matching process and share helpful information on how to reduce its weaknesses.
Three puzzle pieces being put together by three hands, to signify 3-way matching in accounts payable

Three-way matching is a critical best practice step for accounts payable teams across the world. Despite the process finding many errors, duplicates and overpayments still manage to slip through the net. If they aren’t found before the payment run, that can become costly and time-consuming. We delve into why 3-way matching doesn’t always work in this blog.

What is 3-way matching?

A 3-way match is an accounting control that cross-references purchase order, invoice and goods receipt to ensure they match. A 2-way match features only the purchase order and invoice document. You can complete it manually or automate it via accounting software or an ERP.

Pros of 3-way matching

The primary purpose of 3-way matching is to ensure accounting accuracy and reduce business costs.

On an operational level, 3-way matching is a great check to ensure you get exactly what you are paying for. It is a simple, systemic and effective way to validate your transactions, check processes, and reduce errors. Some of those errors include differing POs, transaction amounts, extra item lines, and lower numbers of goods than expected. The cause could be an automation error such as OCR mistakes or a human error. But this can also indicate a fraud attempt.

Yet, the process is far from infallible. It overlooks the complexities of modern P2P where data formats are diverse and payments process through various channels.

The pitfalls of 3-way matching

Manual 3-way matching suffers from the same issues as many other manual processes. Human error. Fatigue and haste lead to errors creeping in.

Unfortunately, sometimes automated 3-way matching fails to detect duplicate invoices, discrepancies and fraudulent activity. This leads to erroneous matches and potential overpayments.

While it appears to be robust, your ERP only matches values for product, quantity or price, but doesn’t interrogate data further. So it fails to adapt to the diverse procurement practices and invoice formats prevalent in today’s finance landscape. We can see this in the following limitations:

Matching Limitations.

The rigid criteria of 3-way matching does not accommodate for all your transactions. It leaves a chunk of them unmatched, including non-PO invoices, utility bills, and Purchase Card spending. If those missed transactions aren’t addressed, it leaves your organisation vulnerable.

Open or Call Off Purchase Orders. Open purchase orders can processed twice when we add a new goods in note or invoice to the system. If unnoticed this leads to overpayments. Also, since we reconcile multiple invoices against one purchase order, fraudsters can exploit this.

Duplicate Documents. Duplicate purchase orders increase double payment likelihood, particularly in time-constrained situations or due to supplier misallocation. Inaccurate or misallocated goods received notes can also create duplicated work.

Retrospective Purchase Orders. Post-receipt creation of purchase orders circumvents the logic behind 3-way matching.

Incorrect documents. 3-way matching confirms matching information, but not whether it is correct. For example, a PO inputted wrongly may be copied over to the invoice and the receipt, resulting in a match.

Supplier Management Challenges

With unwieldy, possibly outdated supplier files, misallocation is an easy mistake to make. This increases the risk of processing valid invoices from unrecognised or unauthorised vendors. Due to this, despite matching the documents, the payment can still be incorrect.

Limited Supplier Analysis

Three-way matching overlooks broader supplier relationships and transaction histories. It neglects crucial factors such as transaction frequency and consistency.

Human Intervention

Issues can occur if there is a complete bypass of the process. This could be due to lack of corresponding documents available or if an order is fast-tracked. It pays to be vigilant against this behaviour as these compliance breaches could result in fraud.

A screenshot of the FISCAL software, showing transactional risk, a control to alleviate missed risks in 3-way matching
Our software provides you with the tools you need to identify duplicate invoices, erroneous POs, incorrect supplier information, fraud and more.

Enhancing procure-to-pay controls beyond 3-way matching with FISCAL

FISCAL’s risk management software analyses your ERP data with AI and forensic tests. When you log in, you can see a list of risky transactions immediately for review. It adds an essential layer of protection, complimenting existing controls and negating human error or interference.

Instead of only matching documents, it uses cross-examines your transaction and supplier data to identify discrepancies. That includes where certain orders look irregular, despite everything else looking above-board. For example, if an order is usually £100, but instead is £1000, with the same quantity of product.

The software can identify duplicate suppliers, incorrect invoice numbers, differing dates, erroneous or identical POs and duplicated invoices on your system. A more comprehensive control than the average 3-way match is capable of.

The benefit of catching these errors before the payment run is that you pay suppliers correctly and on time. So ledgers are more accurate, you eradicate overpayments and duplicate payments, and your team don’t work on costly or time-consuming recoveries.


Although 3-way matching is an excellent control, it has limitations. Accounting teams cannot rely on it to be the sole safeguard against double payments, overpayments and fraud.

You need stringent internal controls, continuous oversight of transactional and supplier data, and solutions that interrogate that data. We recommend using our software with your existing controls as a comprehensive way to mitigate transactional risks in accounts payable.

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