Three-Way Match

Three-Way Match validates that purchase orders, receipts, and supplier invoices align before authorizing payment.

Overview

Three-Way Match enables you to:

• Verify purchase documents
• Prevent payment errors
• Detect discrepancies
• Control AP processing
• Reduce fraud risk
• Ensure compliance

Understanding Three-Way Match

The Three Documents

Document	Source	Verifies
Purchase Order	Your company	What was ordered
Receipt	Warehouse	What was received
Invoice/Bill	Supplier	What they're charging

Match Process

Three-Way Match Flow

Purchase Order (PO)
├─ Items ordered
├─ Quantities
├─ Agreed prices
└─ Terms
         ↓
    ┌─────────────────┐
    │   COMPARISON    │
    └─────────────────┘
         ↓              ↓
Receipt (GRN)          Invoice (Bill)
├─ Items received      ├─ Items billed
├─ Quantities          ├─ Quantities
├─ Condition           ├─ Prices
└─ Date                └─ Total
         ↓              ↓
    ┌─────────────────┐
    │   MATCH RESULT  │
    └─────────────────┘
         ↓
   ✓ Matched → Approve Payment
   ✗ Variance → Investigation

Accessing Three-Way Match

Navigate to Purchase → Three-Way Match from the main menu.

Match Queue

Pending Matches

Three-Way Match Queue

Filter: [All Status ▼] [Supplier ▼] [Date Range ▼]

┌────────────────────────────────────────────────────────────────┐
│ Bill          │ PO           │ Supplier      │ Amount  │ Status│
├────────────────────────────────────────────────────────────────┤
│ BILL-2026-089│ PO-2026-0156│ ABC Electronics│ $4,567.89│ ✓ Match│
│ BILL-2026-085│ PO-2026-0145│ Global Parts  │ $8,234.56│ ⚠️ Qty │
│ BILL-2026-078│ PO-2026-0134│ Tech Supplies │ $5,678.90│ ⚠️ Price│
│ BILL-2026-065│ PO-2026-0123│ Quality Mfg   │ $3,456.78│ ✓ Match│
│ BILL-2026-045│ PO-2026-0112│ Fast Freight  │ $1,234.56│ ❌ No PO│
└────────────────────────────────────────────────────────────────┘

Summary:
├─ Matched: 12 ($45,678.90) - Ready to pay
├─ Variance: 8 ($23,456.78) - Investigation needed
└─ No Match: 3 ($4,567.89) - Manual review

[Process Matched] [View Variances]

Match Status

Status Types

Status	Icon	Description
Matched	✓	All documents align
Quantity Variance	⚠️ Qty	Quantity mismatch
Price Variance	⚠️ Price	Price mismatch
No PO	❌	Invoice without PO
Partial Receipt	📦	Not fully received
Pending	⏳	Awaiting documents

Match Details

Viewing Match

Three-Way Match: BILL-2026-085

Documents:
├─ Purchase Order: PO-2026-0145
├─ Receipt: RCV-2026-089
└─ Invoice: BILL-2026-085

Supplier: Global Parts
Bill Amount: $8,234.56
Due Date: February 15, 2026

Line Item Comparison:
┌────────────────────────────────────────────────────────────────┐
│ Item          │ PO Qty│ Recv'd│ Billed│ PO Price │ Bill Price│
├────────────────────────────────────────────────────────────────┤
│ Widget Pro    │ 100   │ 100   │ 100   │ $79.99   │ $79.99  ✓ │
│ Gadget Plus   │ 50    │ 45    │ 50    │ $129.99  │ $129.99 ⚠️│
│ Cable Kit     │ 200   │ 200   │ 200   │ $24.99   │ $24.99  ✓ │
└────────────────────────────────────────────────────────────────┘

Variance Detected:
├─ Item: Gadget Plus
├─ PO Quantity: 50
├─ Received: 45 (short by 5)
├─ Billed: 50
└─ Variance: Billed for 5 units not received

[Accept with Variance] [Reject] [Investigate]

Variance Handling

Quantity Variance

Quantity Variance Resolution

Item: Gadget Plus
PO Quantity: 50
Received: 45
Billed: 50
Variance: 5 units ($649.95)

Resolution Options:

○ Accept and Pay Full Amount
  └─ Reason: Backorder expected

○ Pay Only for Received Quantity
  ├─ Pay: 45 units @ $129.99 = $5,849.55
  └─ Hold: 5 units @ $129.99 = $649.95

● Request Correction from Supplier
  └─ Send credit request for $649.95

○ Reject Invoice
  └─ Return to supplier for correction

Notes:
[5 units on backorder - PO-2026-0145-BO. Should    ]
[not be billed until received.                      ]

[Cancel] [Apply Resolution]

Price Variance

Price Variance Resolution

Item: Circuit Board
PO Price: $45.99
Invoice Price: $47.99
Variance: $2.00 per unit (4.3%)
Total Variance: $200.00 (100 units)

Tolerance Check:
├─ Price tolerance: 2%
├─ Actual variance: 4.3%
└─ Status: ⚠️ Exceeds tolerance

Resolution Options:

○ Accept Higher Price
  └─ Update PO to reflect actual price

● Dispute and Request Credit
  └─ Hold payment pending supplier credit

○ Accept with Management Approval
  └─ Requires Finance Manager approval

○ Reject Invoice
  └─ Return for price correction

[Cancel] [Apply Resolution]

No PO Match

Invoice Without Purchase Order

Invoice: BILL-2026-045
Supplier: Fast Freight
Amount: $1,234.56

⚠️ No matching purchase order found

Possible Actions:

○ Create Retrospective PO
  └─ Generate PO to match invoice

○ Link to Existing PO
  └─ Search: [_________________]

○ Approve as Non-PO Purchase
  └─ Requires: Director approval
  └─ GL Account: [Select Account ▼]

○ Reject Invoice
  └─ Return to supplier

Notes:
[Freight charges for emergency shipment on Jan 15. ]
[Verbal approval from John Smith.                   ]

[Cancel] [Process]

Tolerance Settings

Configure Tolerances

Match Tolerance Settings

Quantity Tolerance:
├─ Percentage: [2]%
├─ Absolute: [5] units
└─ Apply: Whichever is greater

Price Tolerance:
├─ Percentage: [2]%
├─ Absolute: $[10.00]
└─ Apply: Whichever is greater

Total Invoice Tolerance:
├─ Percentage: [1]%
├─ Absolute: $[50.00]
└─ Apply: Whichever is greater

Auto-Match Settings:
├─ [x] Auto-match within tolerance
├─ [x] Auto-approve matched invoices
├─ [ ] Auto-pay matched invoices
└─ Approval threshold: $[5,000]

[Save Settings]

Tolerance Examples

Tolerance Examples

Scenario 1: Within Tolerance ✓
├─ PO Quantity: 100
├─ Received: 98
├─ Billed: 98
├─ Variance: 2 units (2%)
└─ Result: Auto-matched

Scenario 2: Exceeds Tolerance ⚠️
├─ PO Price: $100.00
├─ Invoice Price: $105.00
├─ Variance: $5.00 (5%)
└─ Result: Requires review

Scenario 3: Absolute Tolerance ✓
├─ PO Quantity: 1,000
├─ Received: 997
├─ Billed: 997
├─ Variance: 3 units (0.3%, but < 5 units)
└─ Result: Auto-matched

Two-Way vs Three-Way Match

Match Type Selection

Match Type Configuration

Default Match Type:
○ Two-Way Match (PO to Invoice)
● Three-Way Match (PO to Receipt to Invoice)

Two-Way Match Used For:
├─ [x] Services (no receipt)
├─ [x] Subscriptions
├─ [x] Utilities
└─ [ ] Below threshold: $[___]

Three-Way Match Required For:
├─ [x] Inventory items
├─ [x] Fixed assets
├─ [x] High-value items (> $5,000)
└─ [x] New suppliers (first 5 orders)

[Save Configuration]

Approval Workflow

Variance Approval

Variance Approval Queue

Pending Approvals (Finance Manager):

┌────────────────────────────────────────────────────────────────┐
│ Bill          │ Supplier      │ Variance   │ Type   │ Action  │
├────────────────────────────────────────────────────────────────┤
│ BILL-2026-085│ Global Parts  │ $649.95    │ Qty    │ [Review]│
│ BILL-2026-078│ Tech Supplies │ $200.00    │ Price  │ [Review]│
│ BILL-2026-045│ Fast Freight  │ $1,234.56  │ No PO  │ [Review]│
└────────────────────────────────────────────────────────────────┘

Total Pending: $2,084.51

Approval Thresholds:
├─ Auto-approve: < $50
├─ AP Manager: $50 - $500
├─ Finance Manager: $500 - $5,000
└─ CFO: > $5,000

Match Reports

Match Summary Report

Three-Way Match Report

Period: January 2026

Match Results:
┌────────────────────────────────────────────────────────────────┐
│ Status              │ Count │ Amount      │ % of Total        │
├────────────────────────────────────────────────────────────────┤
│ Matched             │ 156   │ $234,567.89 │ 78%               │
│ Quantity Variance   │ 23    │ $34,567.89  │ 12%               │
│ Price Variance      │ 15    │ $18,456.78  │ 6%                │
│ No PO               │ 8     │ $8,234.56   │ 3%                │
│ Pending             │ 5     │ $3,456.78   │ 1%                │
├────────────────────────────────────────────────────────────────┤
│ Total               │ 207   │ $299,283.90 │ 100%              │
└────────────────────────────────────────────────────────────────┘

Match Rate: 78%
Target: 85%

[Export Report]

Variance Analysis

Variance Analysis Report

By Supplier (Top 5):
┌────────────────────────────────────────────────────────────────┐
│ Supplier         │ Invoices │ Variances │ Amount   │ Rate     │
├────────────────────────────────────────────────────────────────┤
│ Fast Freight     │ 23       │ 8         │ $4,567   │ 35% ⚠️   │
│ ABC Electronics  │ 45       │ 5         │ $2,345   │ 11%      │
│ Global Parts     │ 34       │ 3         │ $1,234   │ 9%       │
│ Tech Supplies    │ 28       │ 2         │ $890     │ 7%       │
│ Quality Mfg      │ 56       │ 2         │ $567     │ 4%       │
└────────────────────────────────────────────────────────────────┘

By Variance Type:
├─ Quantity: 65% of variances
├─ Price: 25% of variances
└─ No PO: 10% of variances

Best Practices

Process Efficiency

• Process matches promptly
• Set appropriate tolerances
• Train AP staff
• Monitor match rates

Variance Management

• Investigate promptly
• Document resolutions
• Escalate persistent issues
• Track by supplier

Controls

• Maintain segregation of duties
• Require approvals
• Audit regularly
• Update tolerances periodically

Troubleshooting

Common Issues

Many quantity variances

• Review receiving process
• Check for partial receipts
• Verify PO quantities
• Train warehouse staff

Frequent price variances

• Update supplier agreements
• Improve PO pricing
• Negotiate firm pricing
• Automate price updates

High no-PO rate

• Enforce PO requirements
• Train requestors
• Review exceptions
• Improve PO process

Match processing delays

• Streamline approvals
• Adjust tolerances
• Improve communication
• Automate matching

Related Documentation

Learn about Bills for entering and managing vendor invoices.