Three-way matching connects what was ordered, what was received and what the supplier billed. The useful work begins when those records disagree: identify the line, quantity or price at issue and obtain the evidence that explains it.
Keep the three records distinct
The purchase order records the agreed order. The receiving record describes the delivery accepted into the business process. The invoice states the supplier's charge. Each has its own dates, identifiers and line structure. A shared PO number helps connect them, but does not establish that their contents agree.
Microsoft's invoice-matching documentation describes two-way matching as a price comparison between invoice and purchase order. Three-way matching adds the quantity comparison with selected product receipts. It also distinguishes configured tolerances from the underlying differences. See Accounts payable invoice matching overview.
Decide which record supplies each comparison field. Retain the original values and any transformation, such as converting a box of ten units into individual units. A match produced by an unexplained conversion is difficult to review and can conceal a real discrepancy.
Establish how the receiving quantity was obtained. A receipt prefilled with the PO quantity becomes evidence of acceptance only when the receiving process records or confirms what arrived. Three matching quantities copied from one source do not add three independent observations. Our investigation of matching records and evidence origin examines that distinction through a supplier-bank example.
Work a fictional quantity and price exception separately
In this fictional example, Cedar Works orders 100 replacement sensors from Atlas Components at $48 each. Receiving records show 80 accepted sensors. The supplier invoices 100 sensors at $50 each. Assume no tax, freight or discounts for this illustration.
| Record | Quantity | Unit price | What it establishes |
|---|---|---|---|
| Purchase order CW-1840 | 100 | $48 | The recorded order totals $4,800. |
| Accepted receipt GR-791 | 80 | Refer to the PO. | The supplied receipt supports 80 accepted units. |
| Supplier invoice AC-6208 | 100 | $50 | The supplier has billed $5,000. |
There are two questions. Where is the evidence for the other 20 units? Why does the billed unit price exceed the PO price by $2? The price difference across all 100 billed units is $200. The 80 recorded units at the ordered price amount to $3,840. These calculations describe the discrepancy; they do not determine the contractual payment obligation or establish a loss.
Ask receiving whether a second delivery occurred, was rejected or remains in transit. Ask purchasing whether an approved price amendment exists. A later receipt could resolve the quantity question while leaving the price exception open. Keep those conclusions separate so one new document does not appear to clear both.
Check cumulative allocations when deliveries are partial
A line can look reasonable on its own while exceeding the remaining quantity. Suppose 100 units have been accepted, an earlier invoice used 60 and the current invoice bills 50. Comparing the current 50 only with the total receipt of 100 misses that 110 units have now been billed against the same receipt quantity.
Track which receipt quantities earlier invoices already used, together with reversals and corrections. Reconcile the remaining allocation before approving the new match. Preserve links between invoice lines, PO lines and receipt lines; supplier header totals are too coarse when several deliveries or orders are involved.
Check status as well as quantity. A draft receipt, a returned delivery and an accepted receipt can contain the same item and quantity while supporting different conclusions. If the extract omits status changes, obtain the missing history rather than assuming the latest visible quantity is available to match.
Make tolerances and overrides reviewable
A tolerance determines how the workflow treats a difference. Record the amount or percentage, its scope, its effective date and who can approve an override. Inspect both the original discrepancy and the tolerance applied. A small allowed difference remains a difference; it should not disappear from the record.
Check whether the comparison uses unit price, extended line amount or invoice total. Rounding, freight and discounts can affect those measures differently. An invoice-total tolerance can also obscure opposing line errors: an overcharge on one line and an undercharge on another may cancel at the header.
For services, identify the evidence that stands in for a physical receipt, such as an accepted milestone or an approved service record. Link it to the billed period and deliverable. A manager's broad approval of the supplier relationship does not describe acceptance of a particular service charge.
Route each exception to the person who can resolve it
Receiving owns delivery evidence; purchasing owns the order and amendments; accounts payable owns the recorded invoice and settlement history. Assign a specific evidence request and response date. Keep an item unresolved when the response supplies an explanation without the supporting record.
Record the resulting action: correct an extraction error, update a receipt after investigation, obtain an authorized amendment, request a credit or follow the approved dispute process. Connect replacement documents to their originals to avoid introducing a duplicate. Follow the credit-note reconciliation guide, and preserve the related records across requests as illustrated in the batch-boundary experiment.
Place OpenAuditor's checks within this workflow
OpenAuditor's current financial invoice checks include arithmetic, vendor status, duplicate criteria and whether a PO reference is present when required. They do not perform a three-way match against PO lines and receiving records. A present PO reference cannot establish receipt or agreed pricing.
The contract-compliance workflow supports a different set of supplied contract and invoice conditions. Choose checks that address the review question, and keep the remaining matching work in your purchasing and accounting process. The invoice audit checklist helps connect that wider evidence to a documented disposition.