By Safock Procurement Research Team9 min read
Set a three-way match to accept only exact matches, and on the 320 sample invoices in our tolerance simulator, 226 of them (71%) land in the exception queue. Someone has to open each one, check the receipt, email the site, and approve or dispute it. At $18 an exception, that review costs $4,068 to stop $7,084 of overbilling.
A 2% price tolerance with a $50 cap per line sends 121 invoices to review instead, and still stops $6,290 of that $7,084. The whole policy costs $2,973. The tighter setting looked safer and cost more.
A three-way match compares three documents before an invoice is paid: the purchase order (what you agreed to buy, at what price), the goods receipt (what actually arrived and was accepted), and the invoice (what the supplier is billing). The tolerance is how far the invoice can differ from the other two and still be paid without anyone looking.
Most systems let you set it in two ways, often together:
An invoice passes when every line is inside both. If any line fails, the whole invoice goes to a person.
Insisting on an exact match sounds like the careful choice. In practice, three things make invoices differ from the PO by small, legitimate amounts every day:
Each one becomes an exception if the tolerance is zero. The AP team spends the morning approving variances of $3, and the exceptions that matter wait in the same queue as the ones that don't.
Any tolerance policy has a total cost with two parts:
Total cost = overbilling paid automatically + (exception invoices × cost to resolve one)
Loosen the tolerance and fewer invoices need review, but more overbilling slips through. Tighten it and you catch more overbilling, but you pay a person to look at every small variance. The right tolerance is the one where the total is lowest. You can only find it with your own invoice data and your own cost per exception.
Cost per exception is the part most teams never measure. It is the time an AP clerk spends on a held invoice (reading it, checking the receipt, emailing the site or supplier, recording the outcome), multiplied by the loaded hourly cost, plus any time the site manager spends answering. Our simulator defaults to $18, which is a planning assumption: replace it with your own.
The simulator ships with 320 sample invoices from a restaurant group: 968 lines across produce, proteins, dry goods, supplies and repair parts, worth $414,229 in total. Overbilling across the whole set comes to $7,084. Every policy below catches some of it and lets some through.
| Policy | Paid automatically | Exceptions | Overbilling paid | Review cost at $18 | Total cost |
|---|---|---|---|---|---|
| Exact match on price and quantity | 29% | 226 | $0 | $4,068 | $4,068 |
| 1% price, $50 cap | 48% | 167 | $447 | $3,006 | $3,453 |
| 2% price, $50 cap | 62% | 121 | $795 | $2,178 | $2,973 |
| 3% price, $50 cap | 66% | 109 | $956 | $1,962 | $2,918 |
| 4.25% price, $50 cap | 70% | 95 | $1,174 | $1,710 | $2,884 |
| 5% price, $50 cap | 73% | 85 | $1,366 | $1,530 | $2,896 |
| 10% price, $50 cap | 81% | 60 | $1,994 | $1,080 | $3,074 |
| 10% price, no cap | 84% | 52 | $2,665 | $936 | $3,601 |
Every row except the first allows a weight variance of 5% on produce and 3% on proteins, and zero on everything else. Invoices billed below the PO price or quantity always pass.
At $18 an exception, the lowest total on this sample comes at a 4.25% price tolerance. Change only the cost per exception and the answer moves:
| Cost to resolve one exception | Lowest-cost price tolerance | Exceptions | Total cost |
|---|---|---|---|
| $10 | 2% | 121 | $2,005 |
| $18 | 4.25% | 95 | $2,884 |
| $35 | 7% | 60 | $4,094 |
A team that clears exceptions quickly can afford a tight tolerance. A team where every exception means chasing a site manager for a signed delivery note should loosen it, and spend the saved time on the invoices that are actually wrong. Copying another company's 2% doesn't account for either.
A percentage treats a 6% variance the same on a $4 item and a $160 item. A dollar cap per line limits how much any single line can be over, whatever the item costs.
In the sample, one invoice bills salmon fillets at $172.54 a case against a PO price of $162, 6.5% over, across 11.25 cases. The line is $118.57 over. Under a 10% tolerance with no cap, it is paid automatically. With a $50 cap, it goes to review.
At tight percentages the cap rarely matters: at 2% it changed nothing on this sample. At 10% it cut overbilling paid from $2,665 to $1,994 for eight more exceptions. If you loosen the percentage to cut the queue, add a cap at the same time.
Remove the 5% and 3% weight allowances on produce and proteins and keep everything else at 2% with a $50 cap. Exceptions rise from 121 to 156. Those 35 extra exceptions cost $630 to review at $18 each, and recover $460 of overbilling. The allowance pays for itself.
Whole-unit goods are different. Nobody delivers 12.4 boxes of gloves. Keep quantity tolerance at zero for anything counted, and never pay for a line that has no receipt at all.
Change the price tolerance, the cap and your cost per exception. The figures come from the same 320 sample invoices, and "Open with this policy" takes your settings into the full simulator, where you can upload your own invoice lines.
Try it on 320 sample invoices · same maths as the simulator
At $18 an exception, the lowest-cost price tolerance on this sample is 4.25% ($2,884 in total).
Open with this policyFree tool
Three-Way Match Tolerance Calculator
Upload your invoice lines as a CSV, set price, cap and per-category quantity tolerances, and see the cost curve across every tolerance from 0% to 10%. Download the result as a tolerance policy for audit.
Runs in your browser. No sign-up.
Matching is only as good as the receipt. If receiving staff copy the delivery note instead of counting, the receipt matches the invoice and the short delivery is paid in full. Count at the door and record rejections line by line, which the Goods Receiving Note Generator is built for.
A tolerance also can't fix a wrong PO price. If the PO was raised at an off-contract price, the invoice will match it perfectly. That is maverick spend, and our guide to maverick spend covers how to find it.
It is the difference your accounts payable process accepts between an invoice, its purchase order and the goods receipt before the invoice is held for review. It is usually set as a percentage of the PO price, a dollar amount per line, or both, plus a separate allowance for quantity.
There isn’t a universal number. The right price tolerance depends on how much overbilling it lets through and what each exception costs your team to resolve. In the sample in this guide, the lowest-cost tolerance was 2% when an exception cost $10 to resolve, about 4% at $18, and 7% at $35. Pair any percentage with a dollar cap per line.
For goods counted in whole units, yes: an invoice should never bill for more than was received. Goods sold by weight, such as produce and proteins, need a small allowance, because the invoiced weight rarely equals the ordered quantity exactly.
Two-way matching compares the invoice with the purchase order: right item, right price. Three-way matching also compares it with the goods receipt, so you only pay for what actually arrived and was accepted.
It is held from payment and sent to someone to resolve. They check the receipt, ask the site or the supplier, and either approve the variance, request a credit note, or have the invoice corrected and resubmitted.