Three way matching sounds like an accounting term and is really just a habit: before paying a supplier, check that what you ordered, what arrived, and what you were billed all agree.
The three documents
| Document | Who writes it | What it says |
|---|---|---|
| Purchase order | You, before delivery | What you agreed to buy |
| Goods received note | You, at delivery | What actually turned up |
| Supplier invoice | The supplier | What they are charging for |
A supplier delivery note also arrives with the goods. It says what they think they sent, which is useful but is not the same as what you received. That distinction is the point.
What matching catches
Run the three side by side and the discrepancies fall out:
- Ordered 120, received 118, invoiced 120. You are being billed for two you do not have.
- Ordered at 420, invoiced at 465. A price change nobody told you about.
- Received 120, ordered 100. An over-delivery you may not have to keep.
- Invoiced for an item not on the PO. Something was added by phone and never confirmed.
None of these are unusual. All of them cost money if nobody looks.
A worked check
PO-0184 Pine studwork 38x63mm 120 @ 420 = 50,400
GRN-0091 Pine studwork 38x63mm 118 received, 2 damaged
Invoice 7742 Pine studwork 38x63mm 120 @ 420 = 50,400
Result: pay 118 @ 420 = 49,560.
Ask supplier for a credit note for 2 @ 420 = 840.The GRN is what makes this possible. Without it you have the supplier’s word for the quantity and no independent record.
Who does it
In a small business, the person paying the bill. It takes a minute per invoice, and the first time it catches something it pays for a year of doing it.
The one rule worth holding: the person who receives the goods should not be the only person who approves the payment. Splitting those two roles is the cheapest internal control there is.
Tolerances
Chasing a 40 shilling difference costs more than it saves. Set a threshold below which you pay and move on, and above which you query. Many businesses use a small percentage or a flat figure, whichever is lower.
Write the threshold down so it is a policy rather than a mood.
When they disagree
Do not pay and sort it out later. Once an invoice is paid, recovering an overpayment depends entirely on the supplier’s goodwill.
Instead, ask for a credit note against the difference, or ask them to reissue. Both leave a paper trail. Neither requires you to hold the whole payment, since you can pay the undisputed part and hold the rest.
Services rather than goods
There is nothing to count, but the logic still works. Some organisations raise a service equivalent: a note confirming the work was performed, signed by whoever received it. The PO, the confirmation and the invoice then match the same way.
For repair and maintenance work, a signed job card does the same job.
Keeping the set together
The three documents are only useful together. Save them under the PO number, in one place, and a query six months later is a two minute answer rather than an afternoon.
Next
For raising the order in the first place, see how to raise a purchase order. For recording the delivery, see what is a goods received note. Or open the purchase order generator.