A three way match is a check that accounts payable runs before paying a supplier. It compares three documents: the purchase order (what you agreed to buy), the receiving record (what actually arrived) and the supplier's invoice (what you are being asked to pay). If the item and quantity agree across all three, and the invoice price matches the price on the purchase order, the invoice is approved. The receiving record carries no price, so price is checked PO against invoice. If not, it is held until someone resolves the difference.
The goal is simple: pay only for what you ordered, at the price you agreed, and only for what you received. This guide explains each document, walks through a worked example with two problems at once, compares two way and four way matching, and shows which related payment checks US federal rules set out. Those rules do not require a three way match by name.
The three documents
| Document | Who creates it | What it proves | Key fields |
|---|---|---|---|
| Purchase order (PO) | The buyer | What was agreed | Item, quantity, unit price, terms, PO number |
| Receiving record | The buyer's receiving team or requester | What arrived, or what work was accepted | Item, quantity received, date, condition |
| Invoice | The supplier | What the supplier is billing | Item, quantity billed, unit price, total, PO number |
The receiving record goes by many names: goods receipt, receiving report, packing slip check or delivery note. For services, it is usually a sign-off that the work was done.
Sources: Plooto, "Three-way matching components"; Alaan, "The Three Documents Used in 3 Way Matching"; FAR 32.905(c), Authorization to pay
How three way matching works, step by step
- Raise the purchase order. The buyer approves the spend and sends a PO to the supplier.
- Record the receipt. When goods arrive or work is done, someone counts, inspects and records what was received.
- Receive the invoice. The supplier bills, ideally quoting the PO number.
- Compare the three. Accounts payable checks item and quantity across all three documents, and checks the invoice price against the PO price.
- Approve or hold. A full match is approved for payment. A mismatch is flagged as an exception and sent to the right person.
- Pay on time. Approved invoices are paid by the due date, such as within net 30 payment terms.
The buyer is responsible for this check before money leaves the account.
Sources: Alaan, "How Does the 3 Way Matching Process Work?"; Plooto, "Who is responsible for a 3-way match?"
Worked example: a partial delivery and a price change
Most guides show one problem at a time. Real invoices often carry two. Here is an example.
A company orders 40 monitors at $250 each. The PO total is $10,000. The first delivery brings 30 monitors, and 10 are still on the way. The supplier sends one invoice for all 40 monitors, at $260 each, for $10,400.
| Check | PO | Received | Invoice | Result |
|---|---|---|---|---|
| Quantity | 40 | 30 | 40 | Billed 10 more than received |
| Unit price | $250 | n/a | $260 | $10 higher than agreed |
| Total | $10,000 | 30 × $250 = $7,500 | $10,400 | Gap of $2,900 |
The $2,900 gap has two parts:
- Quantity: 10 monitors not yet received × $250 = $2,500.
- Price: 40 monitors × $10 price increase = $400.
What to do:
- Pay only for what was received at the agreed price: $7,500, if your policy allows paying a partial match. US federal agencies work the other way round: under 5 CFR 1315.4 they must pay for partial deliveries after acceptance unless the contract specifically prohibits it, with a proper invoice where the contract requires one.
- Ask the supplier to explain the $10 increase. If the PO or contract does not allow it, ask for a corrected invoice.
- Do not edit the receiving record to make the numbers match. The record must show what really arrived.
- When the last 10 monitors arrive, record them and pay the remaining $2,500.
Sources: LineNow, "A partial-receipt example" and "Matching requires compatible units and scope"; Meridian, "Managing Partial Shipments in the Matching Process"; 5 CFR 1315.4(k), Payments for partial deliveries. The monitor order is an illustration, not data from a real company.
Tolerances: when "close" is good enough
A small gap is not always worth a manual review. Many companies set tolerance rules, so an invoice can pass if a gap is small and has a known cause. Common examples are tax or shipping costs that were unknown when the PO was raised.
Tips for setting tolerances:
- Set limits by item and risk, not one rule for everything.
- Use both a percentage limit and a dollar limit.
- Watch for many small gaps that add up over time.
- Name who can approve an exception above the limit.
Sources: LineNow, "Set tolerance and approval rules deliberately"; ProcureDesk, "Setting Up A Tolerance For Auto-Approval"
Two way vs three way vs four way matching
| Method | Documents compared | Best for |
|---|---|---|
| Two way | PO and invoice | Small, repeat purchases where receipt is rarely in doubt |
| Three way | PO, receiving record and invoice | Goods and services purchases where receipt needs to be confirmed |
| Four way | PO, receiving record, inspection record and invoice | Purchases where quality or condition matters a lot, such as medical equipment |
Two way matching is faster but cannot catch goods that never arrived. Four way matching adds an inspection step, which takes longer but can be worth it when a wrong or damaged item is costly.
Sources: Plooto, "When should you use two-way matching instead?" and "When should you use 4-way matching instead?"; Order.co, "The difference between 2-way, 3-way, and 4-way matching"
How the federal government does it
US federal payment rules do not name or require a "three way match". They do set out related checks before payment: a proper invoice, satisfactory contract performance, and a receiving report or other government document that authorizes payment. The key points:
- Payment needs two things. Payment is based on receiving a proper invoice and on satisfactory contract performance.
- Receipt must be documented. With limited exceptions, every invoice payment must be supported by a receiving report or other government document that authorizes payment.
- Receipt is recorded on time. Agencies must record receipt when goods are delivered or services are completed. FAR 32.905 says the receiving official should forward the receiving report or other government document to the designated payment office by the 5th working day after acceptance. The Treasury rule in 5 CFR 1315.4 sets the same day for acceptance reports to reach the designated agency office.
- Bad invoices go back fast. An improper invoice must be returned within 7 days of receipt, with the reasons it is not proper. The window is 3 days on meat and fish contracts, and 5 days on contracts for perishable agricultural commodities, dairy products, edible fats or oils, and food products prepared from edible fats or oils.
- Small invoices can move faster. For a single invoice under $2,500, an agency may pay as soon as the contract, proper invoice, receipt and acceptance documents are matched, unless a statute or the contract says otherwise.
A proper federal invoice must also include items that make matching easy, such as the contract or order number, line item numbers, quantity, unit of measure and unit price. Private buyers can copy that list into their supplier instructions.
Sources: FAR 32.905, Payment documentation and process; 5 CFR 1315.4, Prompt payment standards; 5 CFR 1315.5, Accelerated payment methods
Benefits and costs
| Benefits | Costs |
|---|---|
| Helps stop payment for goods never received | Takes staff time when done by hand |
| Catches price and quantity errors | Delays payment when documents are missing |
| Makes duplicate payments less likely | Needs receiving teams to record every delivery |
| Leaves an audit trail | Exceptions pile up if suppliers send unclear invoices |
One useful step happens upstream: work with suppliers so every invoice quotes the PO number and the right PO line. ProcureDesk notes that invoices sent electronically against a purchase order, such as through EDI, often need no manual review.
Sources: Plooto, "The advantages and disadvantages of 3-way matching"; Order.co, "The real cost of a manual 3-way matching process"; ProcureDesk, "Focus On Problem Vendors"
Where three way matching fits
The match is one control in a longer chain. The contract, master service agreement or purchase order may set or incorporate the agreed prices. The PO approves the spend. The match checks the bill. For larger purchases, many organizations run a sourcing step such as an RFP process first, depending on their procurement policy.
Frequently asked questions
What is a three way match?
A three way match is an accounts payable check that compares the purchase order, the receiving record and the supplier's invoice before payment. Item and quantity are checked across all three documents, and the invoice price is checked against the purchase order. Any gap is held for review, though a buyer's policy or contract may allow paying for a partial delivery that was received and accepted.
What are the three documents in a three way match?
The three documents are the purchase order, the receiving record and the invoice. The receiving record is also called a goods receipt or receiving report.
What is the difference between two way and three way matching?
Two way matching compares only the purchase order and the invoice. Three way matching adds the receiving record, so it can catch goods that were billed but never delivered.
What is four way matching?
Four way matching adds an inspection record to the three way match. It is used when the quality or condition of goods matters a great deal.
What is the difference between a purchase order and an invoice?
A purchase order is the buyer's document that sets what will be bought and at what price. An invoice is the supplier's request for payment for what it delivered.
Who is responsible for the three way match?
The buyer is responsible, usually through its accounts payable team. Purchasing and receiving teams supply the purchase order and the receiving record.
Sources
- Federal Acquisition Regulation 32.905, Payment documentation and process. acquisition.gov/far/32.905
- 5 CFR 1315.4, Prompt payment standards and required notices to vendors. ecfr.gov
- 5 CFR 1315.5, Accelerated payment methods. ecfr.gov
- Plooto, "What is 3-way matching in accounts payable?" plooto.com
- LineNow, "Three-Way Matching: Process, Partial Receipts and Invoice Exceptions." linenow.co
- Meridian Business, "Three Way Match." meridianbusiness.com
- ProcureDesk, "How to Implement a 3-Way Match Process." procuredesk.com
- Order.co, "3-Way Matching: What It Is, Its Benefits, and the Bottom Line." order.co
- Alaan, "3 Way Matching in Accounting." alaan.com