Three Way Matching Definition

In accounting, three-way matching is the process of matching the purchase order, goods receipt, and invoices for a single transaction. The purpose of this match is to ensure that the correct product was received, in the correct quantity, and that the correct invoice was received for payment.

Three-way matching is typically used for larger purchases where there is a higher risk for error. For example, if a company orders 500 widgets at $10 each from Supplier A, they would expect to receive 500 widgets and an invoice for $5,000. If they only receive 450 widgets or an invoice for $4,500, there is a discrepancy that needs to be reconciled. Three-way matching can help prevent overpaying or underpaying for goods and services.

In some cases, four-way matching may also be used. This includes matching the purchase order, goods receipt, invoices, and payment records. This provides an additional level of control and accuracy but can be time-consuming.