3 way matching in accounts payable is a comparison of three documents made before an invoice is paid. What was ordered, what arrived, and what is being billed. If the three agree within a defined tolerance, the invoice can be paid without anybody investigating it. If they do not, the disagreement names a specific problem that somebody can go and resolve.
The three documents and where each comes from
The purchase order comes from your purchasing process and records what was agreed. The goods receipt comes from whoever took the delivery and records what actually arrived. The invoice comes from the supplier. Two of the three are yours, which is why the quality of this control is mostly within your own organisation's gift.
What agreement means
Supplier, unit price, quantity and total, compared at line level, within tolerance. Tolerance exists because real invoices differ from real orders in small ways constantly, through rounding, freight added at billing and partial deliveries. Setting it as a percentage with an absolute cap keeps small proportional differences on large invoices from passing unexamined.
What happens when they disagree
An exception is raised carrying the reason and the two numbers involved, and it is routed to whoever can resolve it: price to purchasing, quantity or a missing receipt to whoever takes deliveries. Exceptions without reasons and owners become a queue somebody works through rather than a set of short, specific conversations.
Questions people ask about what is 3 way matching in accounts payable
Why not just check invoices by eye?
You can, and many small teams do. The match is the same check performed consistently and recorded, which is what makes it a control rather than a habit.
What if there is no purchase order?
The match cannot run. The invoice is approved on its own merits by whoever authorised the spend, which is the most expensive path an invoice can take.
Is it worth the upstream effort?
That is the real question, and it should be answered by what it prevents: paying for undelivered goods, at unagreed prices, or twice.