Home » Three-Way Match Accounting: What Are Its Pros and Cons?

Three-Way Match Accounting: What Are Its Pros and Cons?

Rahul Maingi

By admin, April 25, 2020

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What is a three-way match in accounting and bookkeeping? How can you business benefit from it? Here’s everything you need to know about this process.

When obtaining goods or services, it’s important that the money spent matches the amount leaving your account. In terms of your accounts payable, three-way matching (also known as a 3-way invoice match) verifies these payments by processing the vendor invoice. Its purpose is to prevent fraudulent invoices. The accounts payable department (AP) scrutinizes three documents to make sure the payment due is genuine and that only authorized purchases are reimbursed by matching these documents.

How the Three-Way Match Works

(a) The three documents involved in the process are:

1. The invoice from the vendor (which becomes part of the company’s accounts payable)

2. The purchase order made by the company before the authorization to purchase the goods

3. The receiving report prepared on behalf of your company

  1. The name of the items
  2. The quantity in which they were ordered
  3. The price quoted per unit

These details (and some others mentioned in the vendor’s invoice) are compared with the information on the purchase order and the quantities you actually received. This is known as the “matching,” and only after this process can the invoice be processed for payment. This system works like a gatekeeper for AP and flags any inconsistencies.

Importance of Three-Way Matching

Both two- and three-way matching are used during the payment process. In a two-way match, the purchase order and the invoice are compared. In a three-way match the purchase order(PO) is compared to the invoice and the receipt of the goods. This way you can be certain that you only end up paying for the goods ordered and received.

The Common Reasons for a Mismatch

There are many reasons why there may not be a match across the three documents, including:

This is a major reason behind data mismatch. If your business does international transactions and the value of a currency keeps fluctuating, such errors can happen if not handled carefully.

These human errors can happen in any form of accounting. The only way to rectify them is by checking the data frequently.

This is estimated, never absolute, particularly regarding commercial shipments. If you skip one or two entries or make a wrong one, it will be counted as an error in your three way match accounting.

This is another issue that is posed while doing a three-way match.

It takes a lot of time and effort to detect this problem.

Pros and Cons of Three-way Matching

Even though it’s accurate and considered the best solution when you have a lot of calculations, bills and financial data to audit, it has its drawbacks. Taking note of the pros and cons will help you implement the system wisely:



Three-way matching has big drawbacks that could cost your business valuable resources if you’re not prepared.

Although three-way matching has major drawbacks, its benefits can really help your AP. By using this system, your business can avoid fraudulent invoices and incorrect payments. It’s an important tool to safeguard your organization’s payments and receipts.

Three-way match accounting is a thorough and foolproof method of bookkeeping, if it’s correctly implemented. Initially, it may appear complicated but it’s definitely advantageous in the long run to ensure error-free data. Keeping in mind its pros and cons will help you make an informed decision about whether it’s right for your business.

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