Three-way match: the receipt nobody logged

An invoice for 200 monitors arrives. It matches the purchase order line by line: same supplier, same price, same quantity. The ERP approves it, and it goes out in Friday’s payment run.

The monitors never arrived. The delivery went to the wrong office, and nobody at either office recorded a receipt. The ERP had nothing to compare the invoice with, so it compared two documents instead of three.

Three-way match is the last check in procure-to-pay before money leaves. It only works when all three documents exist.

What is three-way match?

Three-way match compares three records before an invoice is paid: the purchase order (what was ordered), the goods receipt (what arrived) and the supplier invoice (what was billed). Lines that agree within tolerance are paid on the supplier’s terms. Lines that disagree become exceptions for a person to resolve.

Why exceptions eat the AP team’s week

1. Receipts aren’t recorded. The person who took the delivery has no reason to open the ERP, so the receipt is missing or late.
2. The match falls back to two-way. With no receipt, the system matches the invoice to the order and pays.
3. Partial deliveries break the match. Half the order arrives, the full invoice comes in, and the match fails on quantity.
4. Tolerances are set once. A price tolerance chosen years ago is too tight for freight and too loose for software.
5. Exceptions have no owner. They land in a shared AP inbox, and AP chases the buyer, who chases the supplier.

What it costs

Every exception is a manual investigation, and they arrive in bulk at month end. Each one means emails to buyers and suppliers while the payment terms run down. The other cost is harder to see: the invoice that matched on two documents and was paid for goods that never came.

What to fix first

1. Make the receipt a step someone owns. The requester confirms delivery from Slack or email, and the confirmation is written to the ERP.
2. Hold payment when there’s no receipt. An invoice for goods with no receipt waits, and the requester is asked whether it arrived.
3. Match line by line, including partial deliveries. Pay for what arrived and hold the rest, so one short line doesn’t stop the whole invoice.
4. Set tolerances by category. Freight, goods and services each get their own price and quantity limits.
5. Send each exception to the buyer who raised the order. Attach the three documents and say which line disagrees.

The guide to building three-way matching has the prompts for each step.

Where it fits

The match needs a captured, coded invoice from the accounts payable process, and it pays to the bank details in the supplier record. Services have no delivery to receive, so they need a different confirmation, such as the requester approving the work.

For the whole procure-to-pay process, from purchase request to paid supplier, see the procure-to-pay process.