What is 3-way matching?
3-way matching is an important control mechanism that companies use to ensure that payments to suppliers are accurate and justified. The process compares three documents: the purchase order, the packing slip (or receipt) and the invoice. This helps you spot errors and avoid overpaying or paying for goods you haven't received.
How does 3-way matching work?
The 3-way matching process consists of the following steps:
- Purchase Order (PO): This document is sent from your company to the supplier and contains details about the goods or services ordered, including quantities and prices.
- Packing Slip (Packing Slip of Delivery Note): The supplier includes the packing slip with the shipment. This document confirms the goods delivered and states the quantities and condition of the items. Your company uses this document to check whether everything ordered has actually been received.
- Invoice: The supplier sends an invoice to your company for the goods or services delivered. The invoice contains the prices and quantities as agreed in the purchase order.
Comparison process
In the 3-way matching process you compare these three documents to ensure that: • The quantities on the purchase order match those on the packing slip and invoice. • The prices on the purchase order match those on the invoice. • The goods stated on the packing slip have actually been received and are in good condition. If all details match, you can approve the invoice for payment. If there are any discrepancies, you must investigate and resolve them before making payment.
See this article for a nuance on 3-way matching.
