Understanding the Three-Way Match: Purchase Order, Invoice, and Receipt

Procurement
April 8, 2025

In the world of procurement and accounting, accuracy is everything. One powerful method to ensure payments align with what was ordered and delivered is the three-way match. This process compares a purchase order (PO), an invoice, and a receipt to verify consistency before money changes hands. Let’s break it down.

What Is Three-Way Match in Procurement?

A three-way match is a control process that cross-checks three key documents:

Purchase Order (PO): The buyer’s request to a vendor detailing items, quantities, and agreed prices.
Invoice: The vendor’s bill requesting payment for goods or services provided.
Receipt (or Delivery Receipt): Proof that the goods were received, often including quantities and condition.

By aligning these, businesses prevent overpayments, fraud, and discrepancies. Here’s how it works and why it matters.

Step-by-Step: How the Three-Way Match Works

Start with the Purchase Order

The Purchase Order is the foundation. It’s issued to the vendor and outlines:

What’s being ordered (items/services).
Quantities and unit prices.
Delivery terms.

This document sets expectations and acts as the first point of reference.

Check the Receipt

When goods arrive, a receiving report or receipt is generated. It confirms:

What was delivered.
Quantities received.
Any discrepancies (e.g., damaged items).

This step ensures the vendor met their end of the deal.

Compare with the Invoice

The vendor sends an invoice requesting payment. The three-way match verifies:

Invoice matches the PO (items, quantities, prices).
Invoice aligns with the receipt (what was actually delivered).

If all three documents agree, payment is approved. If not, it’s time to investigate.

Why Use a Three-Way Match?

Prevents Overpayment

Paying for 50 units when only 40 were delivered? A three-way match catches that.

Reduces Fraud

It stops vendors from billing for undelivered goods or inflating prices.

Ensures Accountability

Both buyer and supplier stay honest, with clear documentation to back every transaction.

Simplifies Audits

Regulators or internal reviews love seeing this level of diligence—it’s a compliance win.

Challenges to Watch For

Manual Errors: Typos in quantities or prices can derail the match. Automation helps.
Timing Issues: If the receipt lags behind the invoice, delays creep in.
Partial Deliveries: When orders arrive in batches, you’ll need a system to track what’s still pending. Lasso procurement software allows you to easily receive partial quantities so you can continue to run a lean operation.

Best Practices

Digitize Documents: Use software like Lasso to automatically store and compare POs, invoices, and receipts.
Set Tolerances: Allow small variances (e.g., $5 or 5%) to avoid nitpicking minor differences.
Train Staff: Ensure your team knows what to look for in each document.
Automate Matching: Tools like procure-to-pay systems lasso can flag mismatches instantly. Lasso will automatically run 3 way match on all procurements and flag any orders with a mismatch between the PO, invoice, or receipt.

How Does Three Way Match Save Money?

Imagine ordering 100 widgets at $10 each (PO total: $1,000). The receipt shows 90 widgets delivered. The vendor invoices for $1,000 (100 widgets). Without a three-way match, you’d overpay $100. With it, you catch the discrepancy, adjust the payment to $900, and resolve the issue with the vendor.

Final Thoughts

The three-way match isn’t just a box to check—it’s a safeguard for your bottom line. By aligning purchase orders, invoices, and receipts, you ensure every dollar spent reflects reality. Implement it thoughtfully, and you’ll save time, money, and headaches. Lasso is free to start and offers built-in automatic three way matching so you can be sure your procurement and accounts payable processes are air-tight.

Get Started with Lasso!

Create Free Account

Features

Admin Tools

Procure to Pay

Supplier Management

Reporting & Analytics

Industries