Can three-way matching be automated?

Yes. AP automation software can match purchase orders, goods received notes, and invoices automatically, flagging only genuine discrepancies for manual review rather than requiring every invoice to be checked by hand.

What documents are involved in three-way matching?

The purchase order, the goods received note (or service confirmation), and the supplier invoice.

What is the main purpose of three-way matching in accounts payable?

To confirm that the goods or services being invoiced were properly authorised (via the PO) and actually received (via the goods received note) before payment is approved — reducing the risk of overpayment, duplicate payment, and fraud.

When should a business use three-way matching instead of two-way matching?

Three-way matching is most useful for physical goods, high-value purchases, and one-off orders where confirming delivery matters. Two-way matching is usually sufficient for low-risk, recurring, or service-based purchases.

What Is Three Way Matching in Accounts Payable?

Three way matching compares a supplier invoice with the purchase order and the goods received note before the invoice moves through your approval process. It checks whether you ordered what you have been billed for and whether it arrived.

This guide explains how the process works, how to handle partial deliveries and discrepancies, and when two way or four way matching may be more suitable.

What documents are used in three way matching?

Each document answers a different question.

Document	What it records	What you check
Purchase order (PO)	The authorised purchase	Supplier, items, quantities and agreed prices
Goods received note (GRN)	The delivery received	Items, quantities, receipt date and any recorded problems
Supplier invoice	The amount requested by the supplier	PO reference, invoiced quantities, prices and charges

For services, evidence of receipt might be an approved timesheet, confirmation that work is complete, or acceptance of a project milestone.

The records do not always need identical totals. A supplier may deliver and invoice part of an order. The check should establish whether the amount being invoiced is supported by the order and the relevant receipt records.

How does three way matching work?

1. Raise and approve the purchase order

Record the supplier, items, quantities and agreed prices before placing the order. Include delivery charges and other agreed costs where applicable.

Using purchase order software gives the team a shared record to check when the invoice arrives.

2. Record what arrives

The person receiving the delivery records the quantity received and any shortages or visible damage.

If 90 items arrive against an order for 100, record 90. Marking the whole order as received would remove the evidence needed to identify an invoice for the missing items.

3. Check the supplier invoice

Match the invoice to the correct PO and receipt records. Check the invoiced quantities, agreed prices and additional charges.

Include earlier invoices and receipts against the same order in the review. This helps you identify quantities that have already been billed.

4. Investigate differences

A mismatch could be caused by a short delivery, an incorrect price, an unrecorded receipt or an invoice linked to the wrong PO.

Assign the issue to someone who can resolve it. The receiving team may need to confirm a delivery, while the buyer may need to query a price with the supplier.

5. Continue through approval and payment controls

Once the invoice matches within your agreed tolerances, it can proceed through the required approval process.

A successful match supports the decision to pay. Your approval rules, supplier checks and payment authorisation still apply.

Three way matching example: a partial delivery

Your business orders 100 laptops at £1,085 each. The total PO value is £108,500, excluding VAT.

Only 90 laptops arrive.

Record	Quantity	Value excluding VAT
Purchase order	100	£108,500
Goods received note	90	—
Supplier invoice	100	£108,500

The invoice includes ten laptops that have not been received. The AP team should investigate the £10,850 difference before approving the disputed amount.

If the supplier instead invoices for the 90 delivered laptops, the invoice value would be £97,650 excluding VAT. That invoice could match the partial delivery, subject to your purchasing terms and approval policy.

The remaining ten laptops can stay open on the order for a later delivery and invoice.

Why use three way matching?

Three way matching gives your AP team evidence to check an invoice before payment.

It can help you identify:

Quantities billed above those ordered or received.
Prices that differ from the agreed PO.
Charges that need further explanation.
Invoices with missing purchase or receipt records.

It also connects the invoice to the people who authorised the purchase and recorded the delivery.

Keep duplicate invoice checks alongside matching. One PO can legitimately have several invoices, so a repeated PO number does not by itself mean a duplicate payment. Equally, an invoice without a PO needs investigation under your policy rather than an automatic assumption of fraud.

Two way vs three way vs four way matching

Method	Records compared	When to consider it
Two way matching	Purchase order and invoice	Purchases where a separate receipt check is not required under your policy
Three way matching	Purchase order, receipt record and invoice	Purchases where confirming delivery or service completion matters
Four way matching	Purchase order, receipt record, inspection acceptance and invoice	Purchases that require formal inspection or quality acceptance

Two way matching checks the invoice against the agreed order. It does not independently confirm receipt.

Three way matching adds that receipt check. Four way matching goes further by checking whether the received items passed the required inspection.

Choose the method according to the purchase risk, your terms and your internal controls. A recurring subscription may need a different process from equipment delivered to several sites.

Services also need consideration. A monthly subscription may suit a two way match, while a consultancy milestone may require written acceptance before the invoice is approved.

What should happen when the documents do not match?

Start by identifying which record needs checking.

Issue	Practical next step
Invoice quantity exceeds the recorded receipt	Confirm whether the delivery was short or the receipt record is incomplete
Invoice price differs from the PO	Ask the buyer to confirm the agreed price and any authorised changes
Goods arrived damaged	Record the problem and agree the replacement, return or credit with the supplier
Receipt record is missing	Ask the receiving team to confirm what arrived
Invoice has no PO reference	Check whether a PO exists and follow your process for purchases without one

Record who owns the issue, what evidence is needed and when it will be reviewed. A general “on hold” status gives the next person little information to work with.

Deposits, advance payments and other agreed exceptions need their own authorised process because receipt evidence may not yet exist.

How to make three way matching easier

The quality of the purchasing and receiving records affects how quickly an invoice can be checked.

Start with these steps:

Raise POs before committing to purchases.
Ask suppliers to include the correct PO reference.
Record partial deliveries accurately and promptly.
Keep invoices, POs and receipt records accessible to the people checking them.
Define acceptable tolerances and who can approve exceptions.
Give each discrepancy a named owner.

For businesses with several sites, make delivery confirmation part of the receiving routine. Otherwise, the AP team may spend more time chasing evidence than checking invoices.

How can accounts payable automation help?

Accounts payable automation software can reduce manual work by capturing invoice information, supporting matching and routing invoices through approval workflows.

Zahara brings invoice processing, purchase orders and approval workflows together. This gives finance teams a connected process for checking invoices and following up outstanding actions.

When assessing automation, ask how it handles partial receipts, multiple invoices against one PO, missing delivery records and disputed charges. Check which decisions require a person and which can follow your configured rules.

Clear purchasing and receiving processes remain essential. An invoice cannot be reliably checked against a receipt that nobody has recorded.

Put the receipt check into your purchasing process

Three way matching works best when buyers, receiving teams and finance each keep their part of the record up to date.

Choose the matching method for each type of purchase, document how exceptions are handled, and keep payment approval controls in place.

Explore Zahara’s invoice approval software to see how invoices can move through your team’s approval process.

3 Way Matching in Accounts Payable: Guide & Example