Three way matching is a process in supply chain management that is as easy and functional as it sounds. It brings additional clarity, insight and peace of mind to your procurement process and project management strategy. Simply, three way matching is a system for processing a vendor invoice that ensures a payment is complete and correct.

When managing accounts payable with suppliers there are three bookkeeping documents to review and reconcile:

  • Purchase Order
  • Order Receipt / Packing Slip
  • Vendor Invoice

If you have all three of these documents you are ready to process your account using three way matching.

Purchase Order

First, a purchase agent within your company making an order with a vendor will produce a purchase order, a document to record that an order for a purchase (but not necessarily a payment) has been made. This document contains the order number, line items, quantities, and prices of the order.

Order Receipt

Some time later, the items should be received by your company at which point an order receipt, or a receiving report, is issued by the delivery service. Ideally, this will have all  the same information as the PO. If items are backordered or in a later shipment, there will be more than one receiving report. The recipient individual or department of the shipment should cross reference and ensure that what was ordered was received correctly.

Vendor Invoice

At this point a vendor invoice is issued usually requiring payment. If the order was not paid in advance this is an opportunity to confirm the order was received as ordered and invoiced, the amount due is correct, and that payment is issued from the appropriate department or account.

Essentially, this is a protocol within procurement software that creates steps in the payment process in order to reduce discrepancies, making auditing your company’s accounts payable clear and concise.

Purchase Control, our Cloud based purchase order software, offers an effortless and robust three way matching solution. Watch our video below for a demonstration!

What is three way matching?