Three Way Matching Ap Definition

In accounting, three-way matching is the process of comparing the purchase order, receiving report, and invoice to ensure that they all match in terms of quantity, price, and product. This is an important part of the Accounts Payable process, as it helps to ensure that the correct products are being invoiced at the correct prices.

The first step in three-way matching is to compare the purchase order with the receiving report. This ensures that the right products were received and that there are no discrepancies in terms of quantity or price. If there are any differences, they need to be resolved before moving on to the next step.

The second step is to compare the receiving report with the invoice. Again, this is to ensure that the right products were invoiced at the correct prices. If there are any discrepancies, they need to be resolved before proceeding.

Only once both of these comparisons have been made and all discrepancies resolved, can Accounts Payable approve payment for the invoice. This process may seem like a lot of work, but it’s important in ensuring that only accurate and valid invoices are paid.