Three-way matching is a check done before paying a vendor. It compares three documents:
- The purchase order — what was ordered, at what price.
- The delivery record — what was actually received, usually a signed delivery order or a goods received note.
- The vendor's invoice — what the vendor is asking to be paid for.
If all three agree on the items, quantities and prices, the invoice is cleared for payment. If they don't, the difference is investigated first.
What It Catches
- Billing for goods not delivered — the invoice shows 100 units, the delivery order shows 80.
- Price differences — the invoice price is higher than the PO price.
- Items that weren't ordered — extra lines on the invoice with no PO behind them.
- Duplicate invoices — the same delivery billed twice.
Two-way matching (PO against invoice only) catches price and ordering errors, but not whether the goods arrived. The third document — the delivery record — is what proves receipt.
Why It's Hard on Construction Sites
On paper, three-way matching is simple. In practice, the three documents are often in three different places: the PO in the office, the delivery order in a site cabin or a truck, and the invoice in finance's inbox. Matching them means chasing site staff for signed DOs, often weeks after delivery.
That's why matching starts long before the invoice arrives. If every PO is linked to its requisition and approval, and deliveries are recorded against the PO when they happen, the check at payment time becomes a lookup instead of an investigation.
Bilaro keeps delivery and payment records matched to their purchase orders, with every step linked on one unbroken audit trail. For the full flow, see our guide to purchase order systems.
What is three-way matching in procurement?
Three-way matching is the process of checking a vendor's invoice against the purchase order and the delivery record before payment, to confirm that what's being paid for was ordered, received and billed at the agreed price.
What are the three documents in a three-way match?
The purchase order, the delivery record (such as a delivery order or goods received note), and the vendor's invoice.
What is the difference between two-way and three-way matching?
Two-way matching compares only the purchase order and the invoice. Three-way matching adds the delivery record, so it also confirms that the goods or services were actually received.