Three-way matching process flowchart

What the three-way matching process is

Three-way matching protects the point where an approved commitment becomes a payable. The purchase order proves what was agreed, the receipt proves what was received, and the invoice proves what the supplier is asking to be paid. A match needs all three records to refer to the same supplier, item or service, quantity and price within the organisation's stated tolerance.

This workflow keeps the three document owners visible. Procurement corrects a missing purchase order, receiving confirms a missing goods or service receipt, and AP owns the match and exception log. A price or quantity difference is not a reason to override the control: it is a named discrepancy with an owner, evidence and a route back through the match once corrected.

What this flowchart covers

In this template

• The three source records and their owners: supplier invoice, purchase order and goods or service receipt.
• A separate branch for a missing or incorrect PO and a separate branch for a missing receipt, so AP does not solve either control failure alone.
• Tolerance-based matching, a discrepancy queue, correction by the supplier or internal owner, and a documented hold when the discrepancy remains unresolved.

When to use this template

• You need an accounts payable control that makes the relationship between purchasing, receiving and invoice processing explicit.
• Invoice exceptions are being cleared by email with no owner, ageing or route back through a full match.
• You are configuring ERP invoice matching rules and need to agree the real tolerance and exception path before automation.

How it works

1. Define the three records

   Name the purchase order, receipt evidence and invoice fields your system can reliably compare. Use a service confirmation where a physical goods receipt is not the evidence.

2. Set tolerances deliberately

   Set price and quantity tolerances in policy and state who may approve an exception. Keep a tolerance from becoming an undocumented manual override.

3. Assign exception owners

   Give missing POs to procurement, missing receipts to the receiving or service owner, and supplier corrections to the supplier contact. Track age and outcome.

Frequently asked questions

What is three-way matching?

Three-way matching compares a supplier invoice with a purchase order and a goods or service receipt. The invoice should only post when the agreed order, delivered quantity or service confirmation, and billed amount agree within the organisation's documented tolerance.

What happens when a three-way match fails?

The invoice is held in a documented exception queue. The owner fixes the PO, receipt or invoice, then AP runs the match again. The control is weakened if a failed match is simply overridden to meet a payment deadline.

Can services use three-way matching?

Yes. Replace the physical goods receipt with a service entry sheet, milestone acceptance or another record that independently confirms the service was received before matching the invoice.