2-Way vs 3-Way Invoice Matching: Which Do You Need?
By the BillsLinked team · Last updated 21 October 2026
2-way matching checks a vendor invoice against the purchase order (PO) to see whether the billed items, quantities and prices agree with what was ordered. 3-way matching adds a goods receipt or equivalent receiving record to check whether the billed goods were recorded as received.
Two-way matching is commonly used for PO-backed services where no separate receipt record is required. Three-way matching is commonly used for physical goods and can also apply to services when a separate service receipt or acceptance record is maintained.
What is 2-way matching?
2-way matching compares two documents before an invoice is approved: the purchase order and the vendor invoice. It checks that the items, quantities and prices on the invoice agree with what was ordered.
It answers one question: is the vendor charging what we agreed? It does not confirm that anything was delivered.
What is 3-way matching?
3-way matching compares three documents: the purchase order, the goods received note and the vendor invoice. On top of the 2-way checks, it confirms that the quantity being billed was actually received.
It answers two questions: is the vendor charging what we agreed, and did we get it?
Side by side
| Comparison | 2-way matching | 3-way matching |
|---|---|---|
| Documents checked | PO + invoice | PO + receipt + invoice |
| Checks invoice price against PO | Yes | Yes |
| Checks invoice quantity against PO | Yes | Yes |
| Checks billed quantity against recorded receipt | No | Yes |
| Common use | PO-backed services without a separate receipt record | Physical goods and purchases with a receipt record |
When should you use 3-way matching?
Use 3-way matching whenever you buy physical goods. Short deliveries, damaged items and partial shipments are common, and without a receipt check you can pay in full for goods that never arrived. It is also the stronger control for audits, because it shows the order, the delivery and the bill all agree.
Using QuickBooks Online? See how to do 3-way matching in QuickBooks Online.
When is 2-way matching enough?
2-way matching is usually enough for PO-backed services where no separate receipt record is kept: consulting, maintenance, software subscriptions, cleaning and similar work. If your organization records service delivery separately, for example through service-entry sheets, timesheets or acceptance records, that record can serve as the receipt in a 3-way match.
What if an invoice has no purchase order?
Standard PO-based two-way and three-way matching requires a purchase order. When an invoice has no PO, it needs a different control route, such as sending for approval from the appropriate approvers. Make the approval route clear, so these invoices don't sit in someone's inbox.
What is a variance, and what is a tolerance?
A variance is a difference between the invoice and the PO (or the goods receipt), such as a higher unit price or a larger quantity than was received. A tolerance is the size of difference you are willing to accept, usually set as a percentage. Small rounding or freight differences can fall inside it; anything beyond it needs a person to review. A tolerance of 0% means only an exact match passes.
What happens when a goods invoice has no receipt yet?
It should not be treated as matched. The usual reasons are a delivery that hasn't arrived, or a receipt that hasn't been recorded. Hold the invoice, record the receipt when goods arrive, and match again. Silently falling back to a 2-way match removes the receipt check that three-way matching is meant to provide. Follow your organization's procedure for resolving missing or unrecorded receipts instead.
How BillsLinked handles 2-way and 3-way matching
In BillsLinked, matching runs when your team chooses. A user reviews the invoice and selects Match Invoice:
- Goods purchase → 3-way matching against the PO and the goods receipt.
- Service invoice with a PO → 2-way matching against the PO.
- Service invoice without a PO → sent to your approval workflow, with up to three approvers.
You set your own tolerance. BillsLinked displays the result of the matching check, including statuses such as Matched, Variance and Matched – Auto Approved. If a required goods receipt cannot be found, it reports that issue instead of silently falling back to two-way matching. Auto-approval is off by default; if you turn it on, only matched invoices within the amount limit you set are approved automatically. Approved invoices can then be exported to your ERP.
See how invoice matching works in BillsLinked →