Every finance team has a story about paying an invoice twice, paying for a delivery that arrived short, or paying a price that was never agreed. Three way matching is the control that stops all three, and it is one of the easiest wins in accounts payable automation.
What three way matching means
Before an invoice is paid, three documents are compared:
- The purchase order. What you agreed to buy, the quantity and the price.
- The goods received note. What actually arrived, and how much of it.
- The supplier invoice. What the supplier is asking you to pay.
If all three agree, the invoice can go for payment. If they do not, the difference is stopped and explained before any money leaves the account.
Two way matching compares only the order and the invoice. It catches price differences, but not short deliveries, which is why most businesses that buy physical goods need the third document.
What it catches
A good matching process stops four common problems:
- Price variances. The invoice price is higher than the price on the order.
- Short deliveries. You were invoiced for 100 units, but the goods received note shows 90.
- Missing goods receipts. The invoice arrived, but nobody has confirmed the goods arrived.
- Duplicate invoices. The same invoice number from the same supplier, captured twice.
Each of these should be stopped with the reason shown, so the person resolving it knows exactly what to query.
Why manual matching breaks down
Matching by hand works when there are a few dozen invoices a month. As volumes grow, three things happen. The checking becomes a tick box exercise, because nobody has time to compare every line. Goods received notes sit in a branch or warehouse and never reach finance. And exceptions get resolved by email, so there is no record of why a variance was accepted.
How to automate it
Automated matching follows the same logic, but the system does the comparison:
- The invoice is captured by scan or email and read automatically, including every line item.
- The system finds the matching purchase order and goods received note.
- Each line is compared on quantity and price, within tolerances you set. A tolerance lets a small rounding difference through without stopping the invoice.
- Fully matched invoices continue to approval. Small, fully matched invoices can be approved automatically.
- Anything that does not match goes to the right person with the reason shown.
The tolerances and approval limits should live in a table finance can change without a developer.
What you need in place first
Automation cannot match documents that do not exist. Before you start, make sure that:
- Purchase orders are raised in a system, not on paper or by phone
- Someone confirms receipt of goods, at the branch or warehouse, in a way the system can read
- Supplier master data is clean, so invoices can be linked to the right supplier
Three way matching in BCMFlow
BCMFlow, built on the DocMGT platform, reads supplier invoices in any layout, runs the three way match against the order and the goods receipt, and stops price variances, short deliveries, missing goods receipts and duplicates with the reason shown. Matched invoices route for approval by amount, and approved invoices are batched for payment and ready for your accounting system.
See accounts payable automation in BCMFlow or book a free 30 minute consultation.
Anriët Pretorius
General Manager