What is 3-Way Matching?

Business Cost Control Invoice matching

What is a 3-Way Matching Process

A 3-way matching process is an internal control procedure that compares three documents: the purchase order (PO), the goods receipt note (GRN), and the supplier’s invoice. The goal of this process is to ensure that the information on all three documents matches, and that the goods or services that were ordered were actually received and delivered.

The three documents are matched against each other to verify the following information:

  • The item number and description
  • The quantity ordered and received
  • The unit price
  • The total amount
  • The date of the order and receipt
  • The supplier’s name and address

If any of the information on the three documents does not match, the invoice should not be paid. This helps to prevent fraud and errors, and ensures that the company only pays for goods or services that it actually received.

Three-way matching is a critical control for preventing fraud and errors in the accounts payable process. It is a relatively simple process to implement, but it can be very effective in protecting a company’s financial assets.

Here are some of the benefits of using a three-way matching process:

  • It helps to prevent fraud and errors.
  • It ensures that the company only pays for goods or services that it actually received.
  • It can help extracting key information from a purchase order (PO) such as department, project that can be important when booking the invoice.
  • It can help to improve compliance with accounting standards.

If you are looking for ways to improve the efficiency and accuracy of your accounts payable process, then three-way matching is a good place to start.

Here are some of the different ways of matching:

  • Two-way matching: This is the simplest type of matching, and it only compares the purchase order and the supplier’s invoice. This is not as secure as three-way matching, but it can be a good option for businesses that do not have a lot of transactions.
  • Three-way matching: This is the most secure type of matching, and it compares the purchase order, the supplier’s invoice, and the goods receipt note. This is the best option for businesses that want to prevent fraud and errors.
  • Four-way matching: This is a type of matching that also compares the supplier’s invoice to the inspection report. This is used in businesses that need to ensure that the goods that they received meet their quality standards.

The best type of matching for your business will depend on your specific needs and requirements.


Using Software to Automate 3-Way matching

Performing a 3-way matching process in a manual world can prove quite challenging, since documents are often stored in different locations which makes it time consuming to compare the three documents for each invoice.

By implementing a purchase order software, you can improve this process significantly by having all documents in one place and let the software automate a large part of the matching, data population and comparison process.

In CostTracker a client said that “after implementing CostTracker we found that close to 40% of our supplier invoices were incorrect. Earlier we simply could not do the check against order and delivery as it would be too time-consuming”.

For more information about the advantages of using a purchase order software we refer to this article:

8 great benefits of using a purchase order system



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