Three Way Match
What fields are normally matched?
PO number, supplier, item/SKU, description, quantity, unit price, extended amount, taxes, terms, and receipt quantity/condition; matching engines typically compare line-level quantities and prices, not just header totals.
What happens when quantities differ?
The system may allow a partial match if the received quantity is within tolerance, pay only the accepted portion, and hold the balance until the rest is received or the discrepancy is approved.
Why is three-way matching especially important for direct materials?
Because direct materials affect both cash disbursement and physical inventory; a mismatch can create simultaneous AP, inventory, and production-record errors, which is why the goods receipt leg is considered non-negotiable in these workflows.
Three-way match is an accounts payable and procurement control process that compares the purchase order, goods receipt note, and supplier invoice before payment is approved. In manufacturing and inventory-controlled environments, it verifies the company ordered the material, physically received it, and is being billed for the same item, quantity, and price.
On the shop floor, three-way match guards against paying for raw material that was never received, was received short, or was billed at the wrong price. Procurement issues a purchase order for steel coil, resin pellets, fasteners, or packaging SKUs; receiving records actual quantity and condition on the goods receipt note; accounts payable then compares the supplier invoice line by line before releasing payment. The receipt step updates ERP stock on hand, lot status, and quality-hold status, so matching ensures the invoiced quantity aligns with what entered inventory and what production can consume. For direct materials, the receiving document anchors traceability, discrepancy resolution, and partial-payment decisions when a shipment arrives short, damaged, or split across deliveries. Systems also validate PO reference, flag duplicate invoices, and apply tolerance bands so minor quantity or price deviations auto-clear while exceptions route to buyers or AP leads.
Short-shipment overpayment: A supplier invoices the full PO quantity while the dock receives less; an inaccurate or late goods receipt lets AP overpay, inventory shows less stock than finance believes, and production shortages follow.
Receiving backlog delayed payment: When warehouse receiving lags, the goods receipt is missing, so an invoice cannot clear even though material arrived; payment stalls, supplier relationships strain, and replenishment of critical raw materials is delayed.
Price and part-number drift: A buyer updates a PO line, the supplier invoices an old price, or receiving posts the wrong SKU or unit of measure; the match fails, exception handling triggers, and the master-data error later corrupts inventory valuation.