Your PO Called: It Wants Its Mom and Dad : Three-Way Matching for Humans

“Remember when my kid tried to pay the pizza guy with Monopoly money? Accounts Payable had a similar panic attack back in 1994 and invented three-way matching.”

What Are the “Parents” in This Story?

• Purchase Order (PO) = Mom. She sets the ground rules: quantity, unit price, delivery site.

• Product Receipt = Dad. He checks the boxes (literally) when the goods show up.

• Vendor Invoice = Teenager. Wants allowance now, rules later.

Three-way matching makes sure Teenager can’t cash out until Mom and Dad agree. D365 Finance & Operations handles the family meeting automatically. Microsoft Learn

Flip the Switch : Core Setup Steps

Step	Path in F&O	Rookie-Friendly Tip
Pick Three-way vs Two-way default	Accounts payable > Setup > Accounts payable parameters > Invoice validation	Start strict, relax only where needed. Microsoft Learn
Create Matching policies by item, vendor, or combo	Accounts payable > Setup > Matching policy	Flags luxury items tighter than copy-paper.
Define Price / Quantity tolerances	Accounts payable > Setup > Price tolerances	0–3 % price wiggle is common in consumer packaged goods.
Enable Over-receipt tolerance	Procurement & sourcing > Setup > Policies > Receipt tolerance	Lets receiving log that pallet of 101 widgets without breaking AP.
Tie it all to Invoice workflow	Accounts payable > Setup > Workflow	Block posting unless Match status = Passed.

Live-Fire Walkthrough (Copy-Paste Ready)

1. Create PO USMF-000001 for 100 LED panels @ $50.

2. Receive 102 panels. The 2 % over-receipt squeaks inside a 5 % tolerance.

3. Enter Vendor Invoice for 100 panels @ $52.

4. F&O batch job checks quantity (OK) then price (4 % over, tolerance is 3 %). Match status = Failed. Microsoft Learn

5. Invoice lands in the Resolve invoice matching discrepancies workspace, flashing a red icon that even your CFO can spot from orbit.

6. Buyer attaches new price agreement, updates PO unit price, clicks Revalidate. Status flips to Passed and posting succeeds.

Five Rapid-Fire Troubleshooters

Symptom	Likely Culprit	Quick Fix
“Invoice can’t find receipts.”	Items are Service lines (no receipts).	Switch to two-way or require timesheet evidence.
Match OK, but Totals fail.	Freight or tax blew past tolerance.	Increase charges tolerance or separate freight line. Microsoft Learn
Intercompany invoice refuses to post.	Sales-side totals differ.	Balance both sides or enable approval with discrepancies. Microsoft Learn
Batch job retries forever.	Max attempts too high.	Lower in Vendor invoice automation parameters. Microsoft Learn
Users keep overriding.	Policy too loose or workflow missing.	Audit overrides, tighten policy, enforce approver hierarchy.

Dad Joke Intermission

My PO told the Invoice, ‘No receipt, no allowance.’ The Invoice replied, ‘Fine, I’ll get a receipt… from Amazon.’ Mom called it fraud, Dad called it grounding, and F&O called it a match variance.

Industry Snapshots

1. Food & Beverage Distribution

(Think: perishable pineapples, commodity cheese blocks, and a buyer who lives on the Chicago Mercantile Exchange.)

Dimension	Typical Setting	Why It Works in F&B	F&O Tricks to Nail It
Quantity tolerance	± 2 % to ± 5 %	Cartons split in transit, catch-weight items vary by a pound or two, and receivers round up to full pallets.	• Receipt tolerance groups let you apply 2 % to dairy SKUs and 5 % to produce in one shot. Microsoft Learn  • Enable Allow negative posting so you can back out spoiled lots without scrapping your match history.
Price tolerance	Up to 8 % for commodity goods, ≤ 3 % for contract items	Cheese and meat prices swing daily; contract canned goods less so.	• Use Trade agreements to lock canned-goods pricing and let commodities float. • Run the Price tolerance violations report each morning so purchasing can renegotiate before AP screams.
Gotcha to watch	Catch-weight items generate receipts in lb or kg while the PO was in each.	Map the catch-weight quantity to a separate info code and let three-way match compare by primary unit only.
Dad-level pro tip	Create a Power Automate flow that pings the buyer when the Chicago butter index moves > 5 %—update the PO price before the truck even leaves Wisconsin.

2. Discrete Manufacturing (Electronics, Industrial Equipment)

(Your margins are thinner than a circuit board trace, and you count screws in dozens—twice.)

Dimension	Typical Setting	Why It Works in Discrete Mfg	F&O Tricks to Nail It
Quantity tolerance	0 % or 1 % over / 0 % under	You can’t build a turbine with 99.5 % of a bearing set.	• Set Over-receipt = 0 % on BOM-critical items; allow 1 % on packaging. • Tie the tolerance to item model group so engineering changes inherit the rule automatically.
Price tolerance	≤ 1 % on A-class parts, ≤ 2 % on B/C-class	Cost rollups explode if a microchip jumps 4 %.	• Use Approved vendor lists; unapproved vendor invoices fail matching up-front so finance never sees them.
Totals tolerance	0 (no freight baked into inventory)	Freight is capitalized via Landed cost module instead.	• Turn on Landed cost auto-charges to split freight to inventory while leaving invoice totals squeaky clean.
Gotcha to watch	Intercompany POs: the sales company confirms at one price, the buy-side PO never adjusts.	Require the selling entity’s price update workflow to fire before the receiving entity posts its product receipt.
Dad-level pro tip	Display the Manufacturing lead-time class on the Invoice Matching Variance workspace grid—lets AP prioritize long-lead items before month-end shutdowns.

3. Professional Services & Project-Based Work

(No pallets, just hours and expenses. Your “goods receipt” is a signed timesheet, and the consultant still hasn’t filled it out.)

Dimension	Typical Setting	Why It Works in Services	F&O Tricks to Nail It
Matching policy	Two-way for labor, Three-way for expense-backed POs (hardware, software, travel)	Labor has no receipt document; expenses have physical deliverables.	• Put service items in a procurement category with Two-way default; leave expense items in a category that inherits Three-way.
Document evidence	Require Timesheet or Service report attachment	Prevents “phantom hours” from hitting the GL.	• Add a required document field in the vendor invoice workflow; block posting if missing.
Quantity tolerance	Unlimited (labor) or ± 10 % (T&M parts)	Consultants round to the nearest half-hour; hotels add city tax at checkout.	• Use the Vendor invoice automation retry with Max attempts = 5 so the invoice waits until the timesheet is approved, then re-matches automatically.
Price tolerance	Negotiated rate cards make over-billing the main concern—set 0 % price tolerance.	Better to fail and escalate than pay a $50-per-hour premium.
Gotcha to watch	Drop-ship laptops billed on the same invoice as labor lines.	Split the PO: labor category to two-way, hardware to three-way—or the whole invoice will stall.
Dad-level pro tip	Configure a Power BI tile that shows “Hours invoiced > Hours approved” by project manager. It’s the fastest way to sniff out missing approvals before payroll closes.

Stay balanced, stay matched, and may your invoices fear your tolerances.

DynamicsDad signing off.... headed to the fridge before someone tries a two-way match on my snacks.