Three-Way Matching in Xero

What Xero can and cannot do on its own

Xero can raise and approve purchase orders and turn them into bills, but its accounting product keeps no receiving record and does not compare a bill’s prices or quantities with the PO, so the match is manual.

Three-way matching pieces in Xero, per Xero Central
Piece of the match	Xero	Notes
Purchase orders	Yes	Draft, Awaiting Approval, Approved and Billed statuses
Create a bill from a PO	Yes	From an approved purchase order
Bill part of a PO	By editing the bill	Raise a new PO for what is still to come
Receiving record (goods receipt)	Not in Xero accounting	Xero Inventory Plus has receiving; otherwise keep the delivery note
Automatic price and quantity comparison	Not described	You compare each line by hand
Match tolerances and exception queue	Not described	Write your tolerance policy down
PO billed status	Manual	Mark or unmark as billed

From the Xero Central articles listed in Sources, read November 13, 2026. Xero adds features over time; check your plan and region.

How to do a three-way match in Xero, step by step

Approve the PO before ordering, keep the signed delivery note, create the bill from the PO, check every line against the delivery note, then mark the PO billed when nothing more is due.

1
Raise and approve the purchase order
Create the purchase order in Xero with the supplier, items or account codes, quantities and unit prices. Approve it, so it moves from Draft or Awaiting Approval to Approved, and send it to the supplier.
2
Keep the receiving record
Xero’s accounting product has no goods-receipt step, so have whoever takes delivery sign the packing slip or delivery note, mark any shortages, and send it to AP. Xero Inventory Plus, a separate product, does have receiving.
3
Create the bill from the purchase order
When the supplier’s invoice arrives, open the approved purchase order and copy it to a bill. The PO lines fill the bill; attach the supplier invoice and the signed delivery note.
4
Compare each line by hand
Check that the quantity billed is no more than the quantity on the delivery note and that each price matches the PO within your tolerance. Xero does not flag differences, so this check is the match.
5
Bill only what arrived
If the supplier delivered part of the order, edit the bill to what was received. Xero’s part-supply guidance is to bill what arrived and raise a new purchase order for what is still to come.
6
Resolve price differences
Send price differences to whoever raised the PO: either an agreed change, recorded on the bill, or a request to the supplier for a credit note. Save the bill for approval only at the amount you agree to pay.
7
Mark the purchase order as billed
Once nothing more is expected on the PO, mark it as billed so it leaves the approved list. If you mark it too early you can unmark it, which returns it to its previous status.

Worked example: a short delivery billed in full

PO-0087 orders 120 printer toner cartridges at $42.00 ($5,040.00). The delivery note shows 100 arrived. The supplier invoices all 120 at $42.00.

PO-0087: purchase order, delivery note and supplier invoice
Line	PO	Received	Invoiced	Result
Toner cartridges	120 @ $42.00	100	120 @ $42.00	Price matches; 20 billed but not received
Total	$5,040.00	$4,200.00	$5,040.00	Hold

Illustrative numbers. Received value is 100 × $42.00.

Copying PO-0087 to a bill without checking gives a $5,040.00 bill for goods worth $4,200.00. Instead, edit the bill to 100 cartridges ($4,200.00), ask the supplier for a corrected invoice, raise a new purchase order for the 20 still due, and mark PO-0087 as billed.

Common mistakes when matching in Xero

Most errors come from copying the whole PO to the bill without the delivery note, which pays for goods that never arrived.

Copying the full PO by default. The bill reflects what was ordered, not what was delivered.
No attachment. Without the delivery note on the bill, nobody can later see that a receipt was checked.
Leaving POs approved forever. Old approved POs make it hard to see what is still due; mark them billed or follow up.
Raising the PO after the invoice. The bill matches, but the control is gone.

How to automate three-way matching for Xero

An AP tool can import your Xero purchase orders, match each supplier invoice line to the PO and the delivery note within tolerances, and create only the approved bill in Xero.

1
Connect Xero
In Aequo AP, connect Xero from the Integrations page. Contacts, the chart of accounts, purchase orders and bills are imported.
2
Set tolerances
Set price, quantity and tax tolerances, and override them for individual suppliers where needed.
3
Record receipts
Upload each delivery note as the receiving record, so the match can compare quantity billed with quantity received.
4
Capture invoices
Forward invoices to your Aequo inbox or upload them. Each is matched line by line to the Xero purchase order and the delivery note, and checked for likely duplicates.
5
Review only the exceptions
Clean matches move on to approval; variances go to the exception queue with the reason, such as 20 units billed but not received.
6
Create the bill in Xero
Each approved invoice becomes a Xero bill with account code, tax and currency on each line. You keep paying bills in Xero, and payments recorded there update the invoice in Aequo AP.

See what syncs with Xero and three-way matching in Aequo AP.

Frequently asked questions

Can Xero do three-way matching?

Not automatically. Xero lets you raise purchase orders and create bills from them, but its accounting product has no goods-receipt record and does not compare bill prices or quantities with the PO. You check the bill against the PO and the delivery note yourself, or use an AP tool that matches them before the bill is approved.

How do I bill only part of a purchase order in Xero?

Create the bill from the purchase order and edit the lines down to what was supplied. Xero’s help on part supply suggests raising a new purchase order for the items still to come, then marking the original PO as billed.

Does Xero have a goods received note?

Not in Xero’s accounting product. Xero Inventory Plus, sold separately, lets you receive purchase orders and close short lines you will not receive. Without it, keep the signed delivery note and attach it to the bill.

Who can approve purchase orders and bills in Xero?

It depends on the user role. Xero’s article on user role access to purchases lists which roles can draft, approve and pay bills and purchase orders. Xero approvals are single-step; multi-level rules by amount or department need an add-on.

What is the difference between two-way and three-way matching in Xero?

Copying a purchase order to a bill and checking the price is a two-way match: bill against PO. Three-way matching also checks the quantity billed against what was actually delivered, which in Xero means checking the delivery note by hand.

Automate matching, approvals and exception handling

Aequo AP captures invoices, matches them to purchase orders and receipts, routes approvals and flags duplicates and exceptions, then syncs with QuickBooks Online, Xero, FreshBooks, Zoho Books or Business Central.

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Sources

Checked on November 13, 2026. Vendor capabilities and prices change; confirm current details with each vendor.

Xero Central, Create bills from purchase orders — bills created from approved purchase orders
Xero Central, Mark or unmark a purchase order as billed — approved POs marked billed; unmark returns the previous status
Xero Central, Account for a part supply of items in your purchase order — part deliveries against a PO
Xero Central, Receive a purchase order in Xero Inventory Plus — receiving and close short, Inventory Plus only
Xero Central, User role access to purchases in Xero — which roles can approve and pay