All 21 Purchase Orders & 3-Way Matching questions
More in Purchase Orders & 3-Way Matching
What is a goods receipt note (GRN)? What is a requisition and how does it relate to a PO? What information does a purchase order typically contain? What is a contract or catalog PO versus a spot PO? What are common causes of a three-way match failure? How are partial deliveries and partial invoices matched against a PO? What is a blanket (standing) purchase order? What is the accounting flow across PO, goods receipt, and invoice? What does it mean to 'short pay' or 'block' an invoice, and when is each used? What is a PO commitment and how does it aid budgeting?
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Accounts Payable & Receivable › Purchase Orders & 3-Way Matching

What is matching tolerance and why is it used?

Intermediate

Answer

Matching tolerance is an allowed variance (absolute or percentage) between the PO/receipt and the invoice within which the system auto-approves rather than raising an exception. Small tolerances (e.g., 2% or $5) absorb rounding, freight, or minor price changes, reducing low-value exceptions while still catching material discrepancies.
PO price $25.00, invoice $25.30, tolerance 2% ($0.50):
  Variance $0.30 < $0.50 -> auto-match.
Invoice $26.00: variance $1.00 > tolerance -> price exception.
Real-world example Setting a 2% price tolerance eliminates hundreds of trivial rounding exceptions each month while still flagging real overcharges.

Common follow-ups: What's the risk of tolerances set too high? | Should quantity and price tolerances differ?

Invoice Processing Purchase Orders & 3-Way Matching Aging Analysis
All 21 Purchase Orders & 3-Way Matching questions