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What is three-way matching in accounts payable?

Three-way matching is a process that takes place before the supplier's invoice is paid.

When an organization places an order, it sends the vendor a Purchase Order (PO) that includes the type of items, quantity, , and agreed costs. This document is legally binding.

As the seller ships the order, the receiver checks for the type, amount, and condition of the goods they received. This note is the Goods Receipt Note (GRN).

Then, the vendor sends an invoice detailing the per-unit costs and the amount the buyer has to pay. The Accounts Payable personnel or the invoice automation software matches the details given in PO, GRN, and invoice to ensure no discrepancy exists between the order and the goods received before disbursing the payment. This matching process is known as three-way matching.

If any discrepancy exists, the organization notifies the supplier, and if none is found, it dispatches the payment to the vendor per the contract terms. Invoice automation makes the entire process free of manual input, ensuring accuracy and transparency.