3-way matching for distributors: bills, books and delivery proof
Short answer: a 3-way match checks that three records agree before you accept a purchase — what you ordered or booked, what the supplier billed, and what physically arrived. For distributors, the third leg, proof the goods arrived, is the one most often skipped, and it’s where stock quietly goes missing.
The textbook version
In accounts payable, 3-way matching compares a purchase order, a goods received note (GRN) and the supplier’s invoice before a bill is paid. Its job is to stop you paying for goods you didn’t order or didn’t receive. A 2-way match checks only the order against the invoice; the third leg adds proof of receipt.
Why distributors need a different version
Many distributors don’t raise a formal purchase order for every buy. They order by phone or message, receive bulk stock against a vendor bill, and sell in many small entries from the ledger. The risk isn’t only overpaying — it’s stock appearing in the books that never reached the warehouse, or leaving it with no record. So the three legs change:
| Leg | Textbook (accounts payable) | Distributor version |
|---|---|---|
| What was agreed | Purchase order | The purchase entry in your ledger (Tally, Zoho Books, Xero or QuickBooks Online) |
| What was billed | Supplier invoice | The supplier’s bill, read line by line |
| What arrived | Goods received note | A signed delivery note, delivery challan or gate pass |
What to compare on each purchase
- Item: the same product, in the same unit — cartons are not pieces.
- Quantity: billed quantity against the quantity on the signed delivery proof.
- Rate: this bill’s price against what you usually pay that supplier — price creep hides here.
- Total: the bill total against the ledger entry, tax lines included.
- Invoice number: not entered before — a duplicate is a mismatch too.
Decide in advance what happens on a mismatch: hold the purchase, ask the supplier for a corrected bill or a credit note, and only then let stock move.
Sales need a lighter check
On sales the bill is your own, so there’s nothing to cross-check it against. What matters is proof the goods actually left: the ledger entry plus a signed dispatch slip or gate pass. That two-leg check catches the most common sales-side leak — stock that leaves without an entry, or an entry with no stock leaving.
By hand, or with software
By hand, a 3-way match is a folder of bills, a stack of signed delivery notes and a spreadsheet. It works at ten purchases a week and collapses at a hundred. Software makes it routine: entries sync from the ledger, bills are read automatically, proof is attached as a photo, and mismatches are flagged before anyone approves. If stock is already off, start with why book and physical stock drift apart.
BPS CA runs this check for you. Purchases are matched across your ledger entry, the supplier bill (read by OCR) and the signed delivery proof; sales and samples across the ledger entry and dispatch proof. Stock only moves when an Admin confirms. See BPS CA.
Questions people ask
What is 3-way matching?
3-way matching checks that three records agree before a purchase is accepted: what was ordered or booked, what the supplier billed, and what physically arrived. In accounts payable these are the purchase order, the goods received note and the supplier invoice.
What is the difference between 2-way and 3-way matching?
A 2-way match compares only the order with the invoice. A 3-way match adds proof of receipt, so it also catches goods that were billed but never arrived.
Do small distributors need 3-way matching?
Yes, if purchases arrive short or stock goes missing. Without formal purchase orders, use your ledger entry, the supplier bill and a signed delivery note as the three legs.
Need something built around your own process instead? Start a project — you’ll get a plain-language blueprint before you commit to anything.