Purchase & store glossary
Three-Way Match: PO, GRN & Invoice Explained
Three-way match, in short
Three-way match is the check done before paying a vendor: the purchase order (what you agreed), the GRN (what you actually received and accepted) and the vendor's invoice (what they are billing) must agree on item, quantity and rate. Any difference is resolved before payment.
Also called: 3-way matching, PO-GRN-invoice match
Paying a vendor's bill without checking it against what you ordered and what you received is paying on trust. Three-way match is the simple control that stops that.
The three documents
- Purchase order: item, quantity and agreed rate.
- GRN: quantity actually received and accepted after quality check.
- Vendor invoice: quantity and rate being billed.
If all three agree, pay. If they don't, pay only for what matches and raise the difference with the vendor.
Example
| PO | GRN | Invoice | |
|---|---|---|---|
| Quantity | 1,000 nos | 950 accepted (960 received, 10 rejected) | 1,000 nos |
| Rate | ₹5,652 | – | ₹5,700 |
Two mismatches. The invoice bills 50 nos more than were accepted, and the rate is ₹48 higher than the PO. The correct payable is 950 × ₹5,652 = ₹53,69,400, not the ₹57,00,000 invoiced. The difference, ₹3,30,600, is exactly what three-way matching protects. (Illustrative figures.)
Two-way vs three-way match
A two-way match compares only the PO and the invoice. It catches rate differences but not short supply. For material bought into a store, three-way is the standard.
What to do with a mismatch
- Short supply: pay for the accepted quantity and ask the vendor for a revised invoice or a credit note.
- Rejected material: return it on a non-returnable gate pass and record it against the GRN.
- Rate higher than PO: pay the PO rate unless an amended PO was approved.
Why it breaks down in practice
The PO is in one file, the GRN in the store register, and the invoice with accounts. Matching them means someone walks between three places. So it gets skipped for "regular" vendors, which is exactly where small differences add up.
How IndustryPrime handles it
In IndustryPrime the GRN is recorded against its PO, and the vendor's invoice is attached to the GRN. Short supply, rejections and the invoice sit together on one screen, so accounts can see what to pay. Payments and advances are tracked against each PO. See GRN software.