What Is a Three-Way Match?
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Talk to our experts- Three-way match
- A three-way match is an accounts payable check that compares three records before a supplier's invoice is paid: the purchase order, the record of goods received, and the invoice itself. When they agree, the invoice is approved for payment. When they don't, the invoice waits until the difference is resolved, for example with a corrected invoice or a credit memo.
Also called: 3-way match, three-way matching
How it works
Each of the three records answers one question:
- The order: what the buyer approved, in the form of a purchase order or contract award.
- The receipt: what actually arrived and was accepted, which may be recorded on a receiving report.
- The invoice: what the supplier is billing for.
US federal purchasing rules show the three-way match pattern in writing. Under FAR 32.905, payment is based on receipt of a proper invoice and satisfactory contract performance, and invoice payments (apart from interim payments on cost-reimbursement contracts for services) must be supported by a receiving report or other Government documentation authorizing payment. That receiving report must show, at a minimum, the quantities of supplies received and accepted and the date they were delivered.
In Treasury's Federal Financial Management use cases for procure-to-pay, goods ordered by an agency are received and accepted, the vendor submits an invoice, and the agency pays it after performing a three-way match of invoice, receipt of goods, and order or award information. The same use cases assume that tolerance percentages or amounts between expenditure and obligation amounts have been established.
How a three-way match runs
The buyer prepares an order or award and sends it to the supplier.
The buyer records what was delivered and accepted, for example on a receiving report.
The supplier invoices the buyer for the delivered goods.
The invoice is compared with the receipt of goods and the order; a successful match validates the invoice.
The validated invoice is approved and paid.
Two-way, three-way and four-way matching
Treasury's procure-to-pay use cases name several levels of matching:
- Two-way match: the invoice against the award or order information, with no receipt in the comparison.
- Three-way match: the invoice against the receipt of goods and the order or award.
- Four-way match: the invoice against the award, the receipt of goods (the receiving report) and the acceptance information, as in Treasury's scenario where goods are received at one location and then inspected and accepted by the offices that requested them.
In the same use cases, a two-way match finds that one vendor billed the agency too much. The agency requests a credit memo, receives it, and then pays the invoice.
What a seller should put on the invoice
A match can only pass if your invoice repeats what the buyer ordered and received. FAR 32.905 lists what a proper invoice to a federal buyer must include. These items from that list make a useful checklist for any B2B invoice:
- The contract number or other authorization, including the order number and line item number
- A description, quantity, unit of measure, unit price and extended price for what was delivered
- Shipping and payment terms, such as the shipment number and date of shipment
- The invoice date and invoice number, and the name and address of the contractor
Under the same rule, an invoice that does not meet these requirements must be returned by the designated billing office within 7 days after receipt (fewer days for some food contracts), with the reasons it is not a proper invoice.
Example
A distributor ships against purchase order 7710 for 100 cases of gloves at $12 a case, so the PO totals 100 x $12 = $1,200. Four cases are on backorder, and the buyer's receiving team records 96 cases.
The distributor invoices the full 100 cases for $1,200. The buyer's match compares the invoice with the receipt and finds 4 cases billed but not received: 4 x $12 = $48. The invoice is held. The distributor sends a credit memo for $48, or a corrected invoice for 96 x $12 = $1,152, and the match passes.
On Shopify
The purchase order number is the thread that ties the three records together, and Shopify B2B carries it. B2B customers can add purchase order (PO) numbers to an order, and you can also add PO numbers to an order or a draft order from your Shopify admin. PO numbers are available on the Basic, Grow, Advanced and Plus plans.
When one order ships in more than one box or on more than one day, you can print a separate packing slip for each shipment. The packing slip template can show both the total quantity of a product and the quantity being fulfilled in that shipment, which helps the buyer's receiving team record what actually arrived.
How Uncap helps
As Uncap's distributor solutions page puts it, Shopify B2B price lists handle tiers, volume breaks, and contract pricing per account, and Uncap Connect keeps those prices synced from the ERP, so the storefront and the invoice always agree.
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Frequently asked questions
What is a 3-way match in procurement?
It is the check a buyer's accounts payable team runs before paying a supplier: the invoice is compared with the purchase order and the record of goods received, and it is paid only when the three agree.
What documents are needed for a 3-way match?
Three: the purchase order or contract award, the receiving record (for example a receiving report showing the quantities received and accepted), and the supplier's invoice.
What is 2, 3, 4 way matching?
A two-way match compares the invoice with the order. A three-way match adds the receipt of goods. A four-way match also adds acceptance information, as in Treasury's federal use cases, where goods are inspected and accepted after they are received.
