Three-way matching in accounts payable: how it works, with examples

The match runs line by line. The invoice quantity should not exceed the quantity received, and the invoice unit price should equal the PO price within tolerance. Totals, tax and freight are checked last. See also the short definition in our three-way matching glossary entry.

In the price case, the buyer either confirms an agreed price change and updates the PO, or asks the supplier for a credit note. In the short-shipment case, the receiver either records the late delivery or the supplier reissues the invoice for 180 units.

A percentage alone lets large invoices drift by large amounts, and an absolute cap alone flags trivial differences on small ones. Most teams use both and add per-supplier limits:

• Price tolerance: a small percentage and a dollar cap per line, to absorb rounding and currency differences.
• Quantity tolerance: often zero for counted items, higher for goods sold by weight or volume.
• Supplier overrides: tighter limits for suppliers with a history of overbilling, looser for long-standing contracts with known freight variation.

Read more in our two-way matching guide.

Ardent Partners' State of ePayables 2025 found that on average 65.4% of invoices are linked to a purchase order, rising to 84.0% for Best-in-Class AP teams against 47.3% for all others (Ardent Partners). The rest have no PO to match. For those invoices, use an approval from the budget owner instead, routed by amount and department as described in invoice approval routing.

Keep a running invoiced amount and remaining balance per PO line. A second invoice for the remaining 20 units in the example above should match against the 20 still open, not against the original 200. Without that running balance, partial invoices look like overbilling and clog the exception queue.

1. 1

   Step 1

   Require a purchase order for goods and for any spend category you want matched, with item, quantity and unit price on each line.
2. 2

   Step 2

   Record receipts against the PO when goods arrive, line by line, including short or damaged deliveries.
3. 3

   Step 3

   Set match tolerances for price and quantity, as a percentage and an absolute amount, with tighter limits for suppliers that cause problems.
4. 4

   Step 4

   Capture each invoice with its PO number and line detail, then match it line by line against the PO and the receipts.
5. 5

   Step 5

   Approve matches within tolerance automatically and route variances to the buyer or receiver with the reason attached.
6. 6

   Step 6

   Track partial invoices against the PO balance so later invoices match what is still open, not the original order.

• Receipts not recorded. If receiving is not logged, every invoice fails the match and AP starts approving around the control.
• After-the-fact POs. A PO raised to match an invoice that already arrived proves nothing.
• Header-only matching. Matching invoice totals to PO totals hides a price increase on one line offset by a short bill on another.
• Unreviewed tolerances. Wide limits set during rollout to clear a backlog are rarely tightened again.

Exceptions from these causes drive up both exception rates and cost per invoice. See invoice exception rate benchmarks.

It also tracks partial invoices against the PO's remaining amount, so installments are not flagged as overbilling, and syncs approved bills to QuickBooks Online, Xero, FreshBooks or Zoho Books. See three-way matching in Aequo AP.