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How to automate 2 or 3 way matching for accounts payable

Matt Wald
Author:Matt Wald

3 way matching for accounts payable is the obvious ‘best practice’ move for large enterprises. But without the same resources, 2 way match during invoice processing is the better option for many accounting departments. 

Fortunately, both are ‘good enough’ for AP departments to comply with the rules, prevent fraudulent invoices and keep on top of inventory records.

At the same time, manual 2 or 3 way matching for accounts payable can be tedious and time consuming. Invoices that are ‘line item heavy’, meaning that your procurement team must match ten pages of items, line after line, can bring down team morale. 

In this post, you’ll learn:

Want to skip ahead to the automation? Simply contact us for a demo and we’ll show you how.

Or, read on to find out more about 3 way matching and our integration for accounts payable automation.

The Problem: Manual Matching is Inefficient and Painful

With so many details to review, 3-way matching can be a tedious process if done manually. It stretches the entire accounts payable process.

Typically with a manual match, a member of the accounts payable team gathers all the relevant paper documents in a transaction in order to satisfy the matching procedures. He or she looks at each line of each document to make sure they all match.

Now imagine a transaction with a 10 page line item PO. Someone has to match it to a 10 page PO invoice. AND match it to a 10 page packing slip. That’s a LOT of lines to match. And that’s for ONE invoice!

Manual invoice matching is even more difficult when a PO remains open for months or even years. Forget about those early payment discounts.

And, worse, people can lose paper documents, pay duplicate invoices and misread figures. Any manual system is subject to both human error as well as fraud.

Plus, managing stacks of paperwork and invoices is a repetitive and soul-sucking task that is incredibly inefficient and destroys employee morale.

Manually matching purchase orders is a nightmare!

Same Content in Video Format

We know that some people learn better from videos than from reading. So we created this video that has the same content as this article.

If you prefer to read more about 3-way match, you can do so below the video.

Video: How AP Automation Makes 3-Way Match Touchless

What are 3 Way Match and 2 Way Match?

3 way matching and 2 way match are part of the purchase order (PO) invoice process. They exist to prevent fraudulent invoices from slipping through the cracks and make sure that each supplier invoice has been recorded and paid correctly.

  • 2 way matching is when you match the PO to the PO invoice.
  • the 3 way matching process is when you match the PO to the PO invoice and the packing slip or order receipt.
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How Does 3 Way Match and 2 Way Match Work?

A purchase order is an official commercial document. It commits a buyer to pay a seller for a specific product or service that will be delivered in the future.

The seller then ships the products or provides the service. At that point, the seller invoices the buyer. The seller references the PO number so the can be matched with the delivery information. This is a PO invoice.

The seller also provides a packing slip or receipt that describes the goods sent or services rendered.

In reality, A PO is basically a pre-approved PO invoice. The supplier, purchased goods or service, and amounts are approved as part of the PO purchase requisition process leading up to creation of the purchase order. So a PO invoice should look almost identical to the PO itself. And the packing slip or receipt should reflect the items or services identified in both the PO and the PO invoice.

But what if part of your order is back ordered? Or services will be provided over a period of several months?

This makes a PO ‘partially received’. The PO remains in the ‘open’ status as more invoices are processed and matched against it. You move the PO status to ‘closed’ when all items have been received and the items and pricing all ‘match’ between the PO, the packing slip/receipt and the PO invoice.

The purpose of 3 way match process is to identify any discrepancies in the three critical PO purchasing documents: purchase orders, invoices and receipts/packing slips.

2 way match only compares two of the documents, typically the PO to the PO invoice.

You send the invoice for payment only if the information on the documents match. And if you discover a discrepancy between the PO, PO invoice, or packing slip/receipt in the match process? Then you send the vendor invoice to the purchasing department for review and action.

In this way, 3 way match and 2 way match save businesses from overspending or paying for an item that they did not receive. It’s also a critical element in protecting your business from invoice fraud.

Automating Invoice/PO Matching

So many companies are turning to AP automation solutions that include automated 3 way and 2 way PO matching. And A/P One Enterprise for enterprise-sized companies, as well as A/P One AP automation for small and medium sized companies provides automated PO matching.

Use our savings calculator to see how much you could save

How to automate your three way matching

There are two ways to automate three way matching within the CoreIntegrator platform. After your vendors send through their invoice, it may look something like this:


Our technology then automatically compares this data to the other critical documents, such as the PO and receipt or packing slip. This utilises optical character recognition (OCR) technology; able to extract the data from scanned documents and PDFs. Any discrepancies would then be highlighted and flagged with your chosen procurement specialist. 

At CoreIntegrator, we also provide another way to achieve automated 3-way matching. SmartMatch is an upgrade to the standard OCR technology, and uses algorithms and AI to match invoices down to the line. 

For retailers, manufacturers and farmers working in ‘line item heavy’ industries, this technology has become vital. 

Smartmatch works by assessing each of the products or services received (line by line), and then evaluating this against the total. It calculates which combination of the invoice lines are being added together and cuts an enormous amount of time from the manual three way match process. 

Even if two items have the same price, the system let’s you clarify which was delivered, and which wasn’t. Genius!

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Bottom Line: 3 Way Match or 2 Way Match Automation

3 way match and 2 way match are critical aspects to the purchasing and invoice payment process. Automating them brings massive efficiency to processing PO invoices, freeing your AP staff up to save your company money.

And it can also enable you to be eligible for early pay discounts on invoice payments.

At the same time, CoreIntegrator’s AP automation solutions bring accounts payable best practices to your accounting department.

They protect your company or organization from over payments, under- delivery as well as outright fraud. While full accounts payable automation doesn’t stop there, it’s a great start to taking some tasks of the hands of the ap department.

The manual PO match process is massively inefficient and prone to error. But invoice reconciliation doesn’t have to be so complex and lethargic. Especially when your vendor bill comes on time and the business gets access to special rates, saving time and money.

So take a look at AP automation software that automates not just 3 way and 2 way PO matching, but provides so much more for automated invoice processing. Including verified automated invoice data entry, automated approval processes, and even the ability for your AP staff to work from home!

Get a free consultation with an AP automation expert