What is a 3 Way Match? Definition, Process, Examples and Automation
Raj Roy
22 Dec, 2025
What is a 3 Way Match?
- A 3 way match is defined as a post-paid accounts payable process by which a vendor's billing invoice is matched against the corresponding purchase order (PO) that was placed and goods received note (GRN) by the recipient, to validate the payment.
- For example, when a vendor raises an invoice and it reaches the customer's accounts payable team. In order to ensure its validity, the accounts payable team pulls the respective purchase order. If there is a match in the information in the purchase order, for instance, order value, model, cost etc, the GRN for the same order is extracted. The GRN is submitted by the team who had requested the purchase. The purpose of the GRN is to confirm what goods/ services have actually been delivered. If the invoice matches the PO and GRN, the payment is processed, else in case of a mismatch with either of the two, the invoice is sent for enquiry and resolution.
- In comparison to a 2 way match, where the invoice is only matched with a purchase order, the 3 way match process has an additional layer of validation where the GRN is also taken into account before processing the final payout to the vendor.
- The purpose of a 3 way match is to ensure that the goods and services ordered, have actually been received in the expected quality and quality before an invoice is cleared. This added step ensures an assurance layer that the goods/ services were delivered as detailed in the PO.
Key Components in a 3 Way Match
The 3 way match methodology utilizes 3 key components. Let's look at them in details:
- Purchase order:
- The purchase order is the first accounting entity that comes into existence when a purchase decision is approved by the respective hierarchies. In a typical enterprise setting, the purchase order is raised by the purchase team, whereas in smaller and more agile companies, the PO may be raised by a team lead/ manager after approvals.
- Once the PO is created, it is sent to the purchase team for execution, who then places the order for the goods/ services with the respective vendor. The vendor then acknowledges the PO and proceeds to ship the items detailed in the order.
- Vendor invoice:
- The vendor's invoice is raised by the supplier/ seller of the goods/ services for payment of goods/ services after delivery. Once this invoice reaches the accounting team, the 3 way match process is triggered to validate the payment.
- Goods received note (GRN)
- Once the goods/ services are delivered to the team who required the purchase, the team lead/ employee who raised the requirement, is needed to submit a goods received note (GRN) for confirmation of the delivery. This ensures that the vendor has followed the purchase order and has delivered the goods/ services as per the required quantity and quality.
- A GRN format should ideally be set up to ensure smooth accounting function and leave less room for discrepancies that may arise out of lack of details.
3 Way Match Process: Key Steps
The 3 way match is triggered when a vendor raises an invoice and it reaches the accounting desk for clearance. Here is how the process unfolds:
- Vendor triggers the process with an invoice:
- The accounts payable team receives the supplier/ vendor invoice and pulls the corresponding purchase order (PO) and goods received note (GRN) to validate the payment. The goal is to ensure that the invoice has a valid PO and is not fake, and that the order was delivered in the required quality and quantity and therefore must have a GRN to certify.
- Data retrieval of PO and GRN:
- The vendor's invoice is raised by the supplier/ seller of the goods/ services for payment of goods/ services after delivery. Once this invoice reaches the accounting team, the 3 way match process is triggered to validate the payment.
- Typically, an enterprise resource planning (ERP) system or accounting software is where this data rests in enterprises.
- If either or both, the PO and GRN, is not found, the payment is kept on hold till an investigation can resolve the discrepancy.
- If the respective documents are found, then a 3 way match is conducted.
- PO, receipt and invoice - the 3 way match:
- Once the PO and GRN for the vendor invoice is found, the 3 way match is conducted where key fields such as quantity, pricing, product/ service model etc are matched. The PO confirms that the order was placed at a set price, following which the GRN confirms that the correct goods/ services were delivered.
- If the match is successful, then the payment is processed.
- If the match fails at the PO or GRN level, the payment is not processed till the discrepancy is resolved.
- Discrepancy resolution (if any):
- Discrepancies in the 3 way match can occur at various stages. First is, if a PO is not found to validate any such order for which the invoice has been sent. Secondly, if there is a PO, but no GRN. This will mean that the goods/ services were not received by the team, even if it was initiated by the vendor. Then, if the PO and GRN are both found but there is a discrepancy, such as in pricing or quantity received, between what is in the PO and GRN versus the invoice.
- Generally, there are set processes within accounting to handle any such situations that may arise as discrepancies during the match process.
- However, this entire process when handled manually, leads to repetitive and laborious tasks for the accounting team, which can easily be otherwise managed through an automation software such as Rever. Manual accounts payable matching causes enormous time loss, cost and month-end fatigue to any accounting team.
3 Way Matching Using Rever
- Rever seamlessly integrates with your current ERP or accounting software and simply automates the entire accounts payable 3 way match process.
- When your system receives a bill, Rever automatically retrieves the PO and GRN, conducts the 3 way match and sends back the result to the system in the form of a match or error. All of this, in an instant!
- Try Rever for Free or Book a Demo
Benefits of a 3 way match process in enterprise accounts payable
- Ensures financial data accuracy:
- 3 way match is a cornerstone accounting tool for ensuring payment processing accuracy within the larger financial framework. Not only does it play a key role in maintaining the company’s accounting books, the model is also key for ensuring accurate financial data and records for budgeting, financial health analysis, debt management, cashflow forecasting etc.
- Prevents frauds and excess billing:
- The 3 way match process carries all the elements to ensure that any fake invoices or excess bills are caught early and investigated. The PO match ensures that the invoice is accurate upto the order placement stage. The added layer of GRN verification further ensures that the process is air tight when it comes to delivery of the goods/ services as well. Compared to a 2 way match, the 3 way match takes into account the delivery aspect as well, thereby compassing all the stages in the purchase-to-payment cycle of accounting.
- Improves readiness for legal, compliance and audits:
- As we saw, 3 way match is a great tool for financial record keeping and reconciliation. This is a key aspect for any healthy readiness for audits, regulatory compliance or legal investigations. Implementing a strong 3 way match process adds a security layer for ensuring that no illicit/ illegal transfer of cash can take place and that the company books stay clean and accurate.
Best practices for implementing and managing a 3 way matching process
- Defining policies for responding to match errors:
- We saw earlier how match errors from discrepancies can happen in various forms across the stages of the 3 way match process. Each such situation should ideally have a set policy for addressal, and this varies from organization to organization. Some organizations may have the bandwidth for elaborate investigations, while others may choose more limited forms of response. In any case, the goal should always be to limit the chances for such errors, both from the vendor’s side and internally.
- Using detailed and standardized fields for PO, GRN documents:
- Detail is an aid for a good 3 way match process. This means adding all the essential fields for PO and GRN documents, ensuring that the order detail fields match each other for easy tallying.
- Employees need to be informed to submit a GRN in detail, within a set time limit of receiving the goods/ services from a vendor and without leaving behind room for further doubts and queries from accounts payable.
- Conduct periodic system-wide reviews:
- While the day to day 3 way match ensures a higher quality of accounting practices, clutter can creep in from time to time. These may be in the form of pending vendor discrepancy resolutions, data field mismatch, incomplete information, pending GRNs from employees etc.
- A period review of the full accounts payable system, pending tasks and giving time for closing the gaps is key to ensure a smooth accounting flow.
- Automate accounts payable:
- Most of the clutter however, is the result of using manual processes for 3 way match or accounts payable at large. Using an automation software can not only significantly reduce burden on the accounting team, there is also enormous time saving. Both combined can mean a big cost saving for any enterprise.
- Rever is a seamless financial automation software that integrates with your existing accounting or ERP platform. It automatically reads all essential data in the 3 way match process, and instantly feeds back the result into your existing system, with zero manual effort required.
