Three-Way Matching in Dynamics 365 Business Central

Three-Way matching is an Accounts Payable process that is used to verify a vendors invoice by checking it against its corresponding purchase order and receipt.

Three-Way Matching Concept

  • Purchase order - authorizes a purchase. Typically an itemized list of types, quantities, and prices of an order as agreed to by the buyer and supplier. The PO has a unique number to associate this order and should be used by the supplier for tracking and invoicing purposes.
  • Delivery receipt - confirms that the items on the purchase order were delivered. Typically completed by someone in the warehouse.
  • Vendor invoice - lists how much the buyer owes the supplier. Should match the agreed upon purchase order and items received.

Three-Way Matching Process

Typically this process is handled by an Accounts Payable (AP) user. Vendor invoice is sent to AP and that person verifies the delivery receipt in the system prior to entering the invoice. I will go through the basics of this process.
  • Purchase order is issued by Purchasing user. 

  • Delivery receipt has been entered into the system. One of the easiest ways for AP to know if the PO has been received but not invoiced is to add the Amount Received Not Invoiced column to the Purchase Orders screen. Here you can see this PO has been received but not invoiced.

  • Vendor invoice matches the PO quantities and pricing. Next I'll walk through the process of entering a vendor invoice that is using the three-way matching process.

Entering Vendor Invoice

  1. Start a Purchase Invoice and complete the General section:
    1. Vendor Name
    2. Document Date
    3. Vendor Invoice No.

  2. Next is to select the PO and receipt lines that you need to match to this invoice. You won't see lines for anything that isn't received yet. 
    1. Line > Functions > Get Receipt Lines

  3. Select the correct PO and lines you'd like to add to the purchase invoice.

  4. Verify the lines items, quantities, and pricing match the invoice. Make any changes needed and add any item charges that may be applicable. Make sure the Total Excl. Tax field matches the total on the vendor invoice.

  5. Post

Kristen Hosman is a Microsoft MVP in Denver. She works with Dynamics 365 Business Central and related technologies. You can also connect with her through this link: Kristen Hosman | Linktree


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