A three-way match checks a supplier bill against two other documents before it is paid: the purchase order, which says what was ordered and at what price, and the goods receipt, which says what actually arrived. The bill is cleared for payment only when all three agree within a set tolerance.
What is a three-way match?
The three documents come from three different people: purchasing raises the order, the warehouse or the requester confirms receipt, and the supplier sends the bill. When all three agree, the company has good evidence that it is paying for something it ordered and received, at the agreed price.
A two-way match checks only the bill against the order, which suits services with no physical receipt. A four-way match adds an inspection or quality check. The three-way match is the standard control for goods bought on credit in accounts payable.
How does a three-way match work?
- Link the documentsLink the bill to its purchase order and to the goods receipt for the same delivery, line by line.
- Compare quantitiesThe quantity billed should not exceed the quantity received, and the quantity received should not exceed the quantity ordered.
- Compare pricesThe unit price on the bill should equal the order price, within a small tolerance set in advance.
- Check the tax invoiceConfirm the supplier's VAT number and the VAT amount, because input VAT can be deducted only with valid evidence.
- Clear or holdBills that agree go forward for approval and payment. Exceptions are held and routed to the buyer or the requester.
- Resolve the exceptionsAsk for a credit note, record the missing receipt, or approve a price change with a reason. Never edit the bill to fit.
What does a three-way match look like in practice?
Why does three-way matching matter for GCC finance teams?
It stops overpayment, duplicate billing and payment for goods that never arrived, before money leaves the company. Because the order, the receipt and the bill come from different people, it also supports segregation of duties.
In Saudi Arabia, input VAT can be deducted only where the business holds evidence of the tax, normally a valid tax invoice (VAT Implementing Regulations, Article 49, paragraph 7). Checking the tax invoice as part of the match catches a bill without valid VAT details before its VAT reaches the VAT return.
Questions people ask
What tolerance should a three-way match allow?
Set it small and in writing, for example a fixed riyal amount or a small percentage per line, so rounding passes and real price changes do not. Anything outside it needs a person's approval.
Does every bill need a three-way match?
No. Services, utilities, rent and subscriptions have no goods receipt, so they use a two-way match against the order or contract, or approval by the budget holder.
What happens to bills that fail the match?
They are held, not paid, and routed to whoever can resolve them: the buyer for price, the warehouse for quantity, the supplier for a credit note. Record the reason for any override.
Official and primary sources, read on the date shown. Rules change: confirm with the authority or your adviser before you act.