---
title: "Three-way match: Definition, example and journal entry"
description: "Three-way match explained: how it compares the PO, goods receipt, and invoice, tolerance rules with numbers, the GR/IR entries, and one worked example."
url: https://emptyspaces.ai/glossary/three-way-match
language: en
---

[Home](https://emptyspaces.ai/) [Glossary](https://emptyspaces.ai/glossary) Three-way match

# What is three-way match? Definition, example, and journal entry

Updated November 13, 2026[Accounts payable and procure-to-pay](https://emptyspaces.ai/glossary#browse)

Definition

Three-way match is a control that compares the purchase order, goods receipt, and supplier invoice before payment, confirming what was ordered, received, and billed all agree. In accounts payable, the match decides whether an invoice gets paid. The goods receipt records a GRNI liability, and posting the invoice moves it to trade accounts payable, even when payment is blocked.

Type

AP control

Documents matched

PO, goods receipt, invoice

Records a liability

No, the receipt does

Related balance

GRNI

## How does three-way matching work in accounts payable?

Three-way matching checks each invoice line against the purchase order and the goods receipt, and releases the invoice for payment only when item, quantity, and price agree within tolerance.

| Document | Who creates it | What it proves |
| -------------------------------- | ------------------------------------------------ | ----------------------------------------------- |
| Purchase order (PO) | Buyer or procurement | What you agreed to buy, at what price and terms |
| Goods receipt (receiving report) | Warehouse or the person who received the service | What actually arrived, and when |
| Supplier invoice | Supplier | What you're being asked to pay |

Billed quantity generally can't exceed received quantity, and billed price should match the PO. A failed invoice is held until resolved.

## What are three-way match tolerances?

Tolerances are the small differences you accept without a person reviewing them, often a price limit set as the lower of a percentage and a dollar cap, and a quantity limit of zero.

2% or $50 price tolerance, whichever is lower

A percentage alone isn't enough: 2% on a $500,000 PO lets $10,000 through.

Procurement usually resolves price exceptions, receiving resolves quantity exceptions, and AP holds the invoice.

## Three-way match example

Harbor Supply Co. issues PO 4501 on Monday, October 5, 2026, for 200 units at $25 ($5,000), net 30. Its price tolerance is the lower of 2% or $50 per invoice; quantity tolerance is zero. The entries use perpetual inventory at a $25 standard cost, with price differences to purchase price variance. All amounts are illustrative.

- **October 15:** 190 units arrive and post to GR/IR at $4,750
- **October 20:** The invoice bills 200 units at $25.40 ($5,080) and fails twice: 10 units weren't received, and the $0.40 difference is 1.6% but $80 on the 200 invoiced units, over the $50 cap
- **October 22:** A corrected invoice bills 190 units at $25.20 ($4,788); the $38 difference (0.8%) is inside tolerance, so it matches
- **November 20:** You pay, on day 29 of the terms

| Date | Account | Debit | Credit |
| ------------ | ----------------------- | ------ | ------ |
| Oct 15, 2026 | Inventory | 4,750 | |
| | GR/IR clearing (GRNI) | | 4,750 |
| Oct 22, 2026 | GR/IR clearing (GRNI) | 4,750 | |
| | Purchase price variance | 38 | |
| | Accounts payable | | 4,788 |
| Nov 20, 2026 | Accounts payable | 4,788 | |
| | Cash | | 4,788 |
| Total | | 14,326 | 14,326 |

| PO 4501 check, October 31, 2026 | Amount |
| -------------------------------------------------------------- | ------- |
| Received at PO price (190 × $25) | $4,750 |
| Less: invoiced quantity cleared at PO price (190 × $25) | (4,750) |
| GR/IR balance for PO 4501 | $0 |
| Accounts payable: GR/IR cleared $4,750 plus price variance $38 | $4,788 |
| Corrected supplier invoice (190 × $25.20) | $4,788 |
| Difference | $0 |

The 10 units still open on the PO carry no liability until they arrive.

## Three-way match journal entries

A three-way match posts no entry itself: the receipt credits GR/IR, and the posted invoice moves that balance to accounts payable. Under standard cost, as in the example, price differences go to a variance account; under moving-average cost, SAP can post them to inventory when stock still covers the received quantity.

In SAP, MIRO enters the invoice, tolerance keys such as PP (price) and DQ (quantity) set limits, and an invoice over an upper limit is blocked for payment. In NetSuite with Advanced Receiving turned on, item receipts post to Accrued Purchases; without it, receiving and billing happen together.

## What is three-way match confused with?

Three-way match is most often confused with two-way match, which skips the receipt, and four-way match, which adds an inspection result.

| Term | What it is | How it differs from three-way match |
| ---------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- |
| Two-way match | Control comparing the supplier invoice to the purchase order only, confirming quantities and prices agree without checking a goods receipt | Skips the receipt, so it can't catch goods billed but never delivered |
| Four-way match | Matching control that adds a quality inspection result to the purchase order, goods receipt, and invoice before the invoice is approved | Adds a fourth document, usually for items that must pass inspection |
| Invoice matching | Comparing an invoice against supporting documents such as the purchase order and receipt to confirm quantities, prices, and terms before approving payment | The umbrella term; three-way is one type |
| GRNI (goods received not invoiced) | Accrued liability for goods or services received but not yet invoiced by the supplier, recorded so expenses and inventory land in the right period | A balance, not a control: the receipt side of the match waiting for its invoice |

Usually three-way matched:

PO-based purchases of inventory, materials, equipment, and services someone signs off as delivered

Usually not:

Utilities, rent, and subscriptions, which get approval routing when there's no PO, or a two-way match when there's a PO but no receipt

**Quick test:** if someone can count it or confirm the work, you can three-way match it.

## Three-way match at month end

At month end, receipts without a matched invoice are your GRNI balance, and you review them in the [month-end close](https://emptyspaces.ai/resources/blog/month-end-close).

1. **Age open receipts:** Chase receipts uninvoiced after 60 days
2. **Accrue what the system misses:** Services and non-PO costs with no receipt need a manual accrual
3. **Review held invoices:** A blocked SAP invoice is already in accounts payable; only payment stops
4. **Tie out:** Match the open-receipts report to the GR/IR account; a debit balance usually means invoiced but not received

AdaptHealth's fiscal 2023 Form 10-K, filed with the SEC on February 27, 2024, reported a material weakness because it "did not design and implement a three-way match control" over medical equipment bought through a third-party distribution channel; its fiscal 2024 10-K reported that weakness remediated during 2024. For cash planning, only matched invoices are ready for the next payment run. Our [Close Agent](https://emptyspaces.ai/product/close) prepares AP accruals and the AP subledger tie-out, and nothing posts until a named approver signs off.

## Common three-way match mistakes

The most common mistakes are waiting for the match to record a liability the receipt already created as GRNI, and loose tolerances.

- **Waiting for the match to record the cost:** An unmatched receipt at month end still belongs in GRNI
- **Treating every service as two-way:** Services can be receipted when the requester confirms the work
- **Percentage-only tolerances:** Add a dollar cap for large POs
- **Auto-approving favorable variances:** A price below the PO can signal the wrong item
- **Overriding a receiving error:** Correct the goods receipt, or GR/IR won't clear

## Related terms

Two-way match Control comparing the supplier invoice to the purchase order only, confirming quantities and prices agree without checking a goods receipt.

Four-way match Matching control that adds a quality inspection result to the purchase order, goods receipt, and invoice before the invoice is approved.

Purchase order (PO) Document a buyer sends a supplier authorizing a purchase of specified goods or services at agreed quantities, prices, and terms.

Goods receipt Record confirming that ordered goods have arrived and were checked, used to update inventory and support matching against the invoice.

[ GRNI (goods received not invoiced) Accrued liability for goods or services received but not yet invoiced by the supplier, recorded so expenses and inventory land in the right period. ](https://emptyspaces.ai/glossary/grni)

Purchase price variance (PPV) Difference between the standard price of an item and the actual price paid, multiplied by quantity purchased.

Full guides: [Accrued expenses](https://emptyspaces.ai/resources/blog/accrued-expenses), [AP and AR reconciliation](https://emptyspaces.ai/resources/blog/ap-ar-reconciliation), and [Month-end close checklist](https://emptyspaces.ai/resources/blog/month-end-close-checklist).

Clear GRNI and AP accruals every month without the spreadsheet.

Our Close Agent prepares AP accruals and the subledger tie-out. Your team approves before anything posts.

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[All 721 glossary terms](https://emptyspaces.ai/glossary)