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GuideThree way matching is the oldest control in accounts payable and the one most often implemented badly. The difference is almost entirely in how tolerances are set.
Three way matching compares three documents before releasing payment. The purchase order, the goods receipt and the supplier invoice.
The order says what you agreed to buy and at what price. The receipt says what actually arrived. The invoice says what you are being asked to pay. When all three agree, paying is safe. When they disagree, something needs a person.
The control is not complicated. What makes it succeed or fail is whether the goods receipt exists at all, and whether the tolerances are set so that genuine problems surface without burying the team in noise.
Line by line rather than in total, which matters more than people expect. An invoice that matches on total can still be wrong on every line, and totals matching by coincidence is common enough to be worth guarding against.
The comparison covers quantity, unit price, and usually tax and freight as separate checks, because those behave differently and deserve their own tolerances.
| Document | What it establishes | Who creates it | Common failure |
|---|---|---|---|
| Purchase order | What you agreed to buy, at what price | Procurement, from an approved request | Amended after issue without a new version |
| Goods receipt | What physically arrived and in what condition | Whoever receives the delivery | Never created, which breaks the whole control |
| Invoice | What the supplier is asking to be paid | The supplier | Arrives before the goods, which is not an error |
The goods receipt is the one that most often does not exist, and without it a three way match is really a two way match.
Paying for goods that never arrived. The single most valuable thing it does, and impossible without a receipt.
Being billed for more than was delivered. Short deliveries are common and rarely announced by the supplier.
Price differences from what was agreed. Sometimes an error, occasionally a supplier applying an increase you did not accept.
Duplicate invoices. Not strictly part of matching, but usually implemented alongside it and worth as much.
Worth being clear about, because overconfidence in the control is its own risk.
It does not tell you whether you should have bought the thing, whether the price was reasonable in the market, or whether the supplier is one you should be using. Those are procurement questions and matching is blind to all of them.
It also does not help with spend that has no purchase order behind it, which in most organisations is a meaningful share. Utilities, professional fees and one off services need a different control.
This is where implementations succeed or fail. Set tolerances too tight and everything becomes an exception, so the team starts clearing them without looking. Set them too loose and the control stops catching anything.
Use both an amount and a percentage, and apply whichever is more generous. A one percent tolerance is meaningless on a small line and dangerous on a large one, so the two together behave more sensibly than either alone.
Different categories deserve different settings. Freight varies legitimately. Unit prices on contracted items should not vary at all.
| Check | Suggested starting point | Why |
|---|---|---|
| Unit price | Tight, especially on contracted items | A contracted price should not move without a conversation |
| Quantity | Zero tolerance, but allow partial receipts | Short deliveries should always be visible |
| Freight | Looser, by amount rather than percentage | Genuinely variable and usually small |
| Tax | Small amount tolerance | Rounding differences are normal, larger gaps are not |
Start tighter than you think and loosen based on what the exception queue actually contains after a month.
An exception is only expensive because of what happens next. Finding the order, finding the receipt, emailing the supplier, waiting.
If the exception arrives with the order, the receipt, prior invoices from that supplier and the variance already calculated, the work becomes a decision rather than an investigation. That single change does more for accounts payable throughput than tightening any tolerance.
If you are implementing matching for the first time, do not start with matching. Start by making sure goods receipts exist, because without them there is nothing to match against and the control will appear broken.
Receiving has to work where deliveries arrive, usually on a phone at a dock. A receiving step that requires somebody to return to a desk does not happen reliably, and everything downstream inherits that gap.
Thresholds that catch real risk without creating delay.
Read it AnalysisHow to calculate what eight days actually costs.
Read it AnalysisRecording spend at approval rather than at invoice.
Read itIncluding the awkward ones. We will run them through matching live rather than describe what should happen.
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