3-way matching

Of the 3-way matching It compares three documents of a purchase transaction: the order, the goods receipt and the entry invoice. The goal is to check whether the invoice is correct. Deviations in quantity or price are visible in this process.

The reconciliation is part of the procurement control. It includes the ongoing monitoring of order quantities and delivery dates as well as the accuracy of the incoming invoices.

Document chain in purchasing

The three documents originate from the purchasing process. In their entirety, they cover the entire chain of events: from the framework agreement to the purchase order, the supplier request and the order itself, to the receipt of goods, the initial invoice and the final payment. If necessary, returns and entry credits are also included. There is only one entry for inventory items.

Each item of inventory has a different effect. The order only increases the available quantity, not the storage quantity. Therefore, no journal entry is created when placing an order. The incoming goods book the actual storage quantity. Furthermore, with continuous inventory management, it also increases the value on the inventory account.

In SAP Business One

SAP Business One combines the documents for „Copy to“ (moving documents forward) and „Copy from“ (moving documents backward). With the „Configure“ option, the subsequent document assistant also only takes over parts, such as individual rows or quantities. The beginning of the document chain is selectable. This allows an initial invoice to be generated directly from an order. The initial invoice then takes over the function of incoming goods for inventory planning and financial accounting.

Open quantities make partially processed operations visible. An open quantity in the order means, for example: an item line has not yet been fully processed in an incoming inventory or an incoming invoice. As long as a line is open, the receipt remains open as well.

The goods receipt account (WE/RE account) bridges the time between goods receipt and invoice. It functions as an intermediate account. When goods are received, the system credits the goods receipt account with the WE/RE account. When goods are invoiced, it credits the goods receipt account and the VAT to the supplier. When a return is made, it credits the goods receipt account to the goods receipt account. If only an incoming invoice is generated without any goods receipt, SAP Business One does not need the goods receipt account. Then the system credits the goods receipt account and the VAT directly to the supplier.

SAP Business One automatically takes price differences into account. For example: 100 monitors were ordered and received for 279.00 EUR. The calculation is based on the current price of the day; the invoice amounts to 289.00 EUR. The difference of 1,000.00 EUR is automatically entered into the inventory accounting. With standard costs, the system automatically credits the difference to a variance account.

The linking plan and the „Open Invoices“ report (Purchases • Purchase reports) are available for control. The linking plan shows the invoice links and their status: open, closed, paid or canceled. Additionally, the supplier reference number can be copied into the target invoice (Administration • Invoice settings, tab „Per invoice“). In general, tools such as approval procedures or transaction notifications ensure that a defined process chain is followed.

Additional solutions are used when capturing the invoice. The cks.ADC billing capture checks existing predecessor documents such as orders or incoming goods. If it finds such a document, it links it as a base document and compares the values. cks.ADC highlights deviations in quantity or price.

Link to the post

The 2025 article presents the solution Candis. The automatic 3-way reconciliation is mentioned there as a future function. According to the article, Candis is supposed to automatically reconcile order, incoming goods, and invoice to check for correctness. Similarly, the article announces the linking and processing of orders and delivery receipts in SAP Business One for the future. Whether these functions are available today is not stated in the article.

Demarcation

The 3-way reconciliation checks whether the order, goods receipt, and invoice are in line with each other in terms of content. The invoice approval, on the other hand, is the approval of an invoice by authorized persons. Related entries: Invoice verification, invoice approval, approval process (SAP B1).