Procurement
The Three-Way Match, Explained Without Jargon
Purchase order, goods receipt, invoice. If all three agree you pay; if they don't, something specific is wrong — and which pair disagrees tells you what.
The three-way match is the oldest control in accounts payable and still the most useful. It asks three questions before money leaves the building: did we agree to buy this, did we actually receive it, and is the supplier billing us what we agreed?
The three documents
• Purchase order — what we agreed to buy, at what price, in what quantity.
• Goods receipt — what arrived at the dock, counted by someone who is not in procurement.
• Supplier invoice — what we are being asked to pay.
The separation matters as much as the documents. The person who raises the order should not be the person who confirms receipt, and neither should be the person who releases payment. That is the whole control; the paperwork is just how it is evidenced.
Reading the mismatch
A failed match is a diagnosis, not just an exception. Which two documents disagree tells you where to look.
• Invoice price above PO price — an unapproved increase, or an old price list.
• Invoice quantity above receipt — a short delivery, or billing for backorders.
• Receipt with no PO — someone bought outside the process.
• Invoice with no PO or receipt — the highest-risk case, and where duplicate and fraudulent invoices live.
An invoice with no purchase order and no receipt is not an exception to process. It is the absence of one.
Tolerances, and why they need two limits
Exact matching creates more work than it prevents; freight rounding and part-unit deliveries will otherwise stop the run every day. Set a tolerance, but set it as both a percentage and an absolute cap, and apply whichever is tighter.
The percentage keeps small orders sensible. The absolute cap stops a 2% tolerance on a very large order from waving through a five-figure discrepancy.
Where it breaks in practice
Services are the hard case: there is no dock and no receipt, so the match collapses to two documents and a manager's confirmation that the work happened. Treat that confirmation as the receipt, capture it in the system rather than in an email, and require it from the budget owner.
The metric to watch
Track the share of invoices that clear on first pass without human touch. It is a single number that captures supplier data quality, catalogue accuracy, and process compliance at once. When it falls, one of those three has moved — and the exception queue will tell you which.
The two-limit tolerance is the detail most people miss. A flat 2% on a £400k order waves through £8k without a human ever seeing it. The absolute cap is what makes the percentage safe.
Services being the hard case is exactly right. We treat the budget owner's confirmation as the receipt and capture it in the system — the important part being 'in the system' rather than in an email thread.
First-pass match rate as a single health metric has been genuinely useful. When it dropped 6 points last quarter it turned out one supplier had changed their invoice format.