Three-Way Matching
Three-way matching is an accounts payable control that compares a purchase order, delivery note, and supplier invoice to confirm all three agree before payment is authorized. It prevents overpayments and catches delivery discrepancies before they cost your business money.
Three-way matching is the process of verifying that a supplier's invoice agrees with both the original purchase order and the delivery note before payment is authorized. The three documents in the match are: the purchase order (what you ordered and at what price), the delivery note or goods receipt (what you actually received), and the supplier invoice (what the supplier is charging). When all three align, payment proceeds. When they do not, the discrepancy is investigated before money leaves the business.
Why Three-Way Matching Matters for Project-Based Businesses
For businesses running multiple simultaneous jobs - each with its own purchase orders, delivery schedules, and supplier relationships - three-way matching provides a layer of control against overpayments, double payments, and invoices for goods that never arrived. Without a formal match process, supplier invoices can be approved against a job that received only a partial delivery, or for quantities that differ from what was ordered.
The process also surfaces delivery failures before they are forgotten. If a delivery note shows 80 units received against a purchase order for 100, that shortfall needs a resolution - either a credit note, a follow-up delivery, or a reorder - before you approve the supplier invoice for the full 100 units.
Partial deliveries are a common matching failure point
When a supplier delivers in multiple batches, each batch typically comes with its own delivery note. If your team processes the invoice after the first delivery without checking for outstanding batches, you can end up paying for goods you have not yet received. Always match delivery notes cumulatively against the purchase order before approving a final invoice.
How Three-Way Matching Works in Practice
- Raise a purchase order for the goods or services required, with quantities, unit prices, and delivery date specified.
- When goods arrive, record the delivery note, noting quantities received and any discrepancies against the purchase order.
- When the supplier invoice arrives, compare it against the original purchase order (quantities, prices, agreed terms) and the delivery note (quantities actually received).
- If all three documents agree, authorize payment. If discrepancies exist, contact the supplier to resolve before payment is made.
Frequently asked questions
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