How to do a two-way match in Xero and when you need three-way

Short answer

1. Two-way: bill against purchase order.
2. Three-way: bill against purchase order against proof the goods arrived.
3. Use two-way for routine spend.
4. Add the third check for high-value, site-delivered or easily short-shipped goods.
5. Query the supplier whenever the documents disagree.

Before you start

You need purchase orders in Xero, and the discipline of putting the PO number on supplier invoices. For three-way you also need a delivery docket, a signed packing slip or a goods received note. If nobody on site records what arrived, three-way is not possible yet. Start with two-way.

For a longer look at the difference, see three-way matching vs two-way matching in Australia.

The manual way in Xero

1. Go to Purchases > Purchase orders. Open the approved PO.
2. Open the supplier’s bill. It may be a draft under Purchases > Bills.
3. Compare each line. Check the description, quantity, unit price, account and tax rate.
4. For a three-way match, also take the delivery docket or goods received note. Compare the quantity that arrived with the quantity on the bill.
5. If all documents agree, approve the bill. If not, query the supplier before you pay.
6. When the PO is complete, set its status to Billed.

The limits: Xero holds the PO and the bill. It has no place to record goods received, so the third document lives in a folder, a spreadsheet or a site app. Nothing in Xero warns you when the bill differs from the PO.

Which one do you need?

Situation	Two-way enough?	Why
Office supplies, software, small repeat orders	Yes	Low value, low risk of short supply
Stock bought for resale, delivered to a warehouse	Often	A receiving process usually exists already
Materials delivered to a building site	Add the third check	Goods are signed for by someone other than the buyer
Services billed by progress or time	Use a progress sign-off	There is no physical delivery to count
Large one-off purchases	Add the third check	One error costs a lot

The Pulsify way

Pulsify does a two-way match. It does not take goods received notes.

1. Forward the invoice. Pulsify reads the PO number and links it to the open PO synced from Xero.
2. It matches each invoice line to a PO line on quantity and unit price.
3. It flags a quantity above the PO line, a different unit price and any line not on the PO.
4. A panel on the invoice shows how much of the PO has been claimed and what is left, which helps with partial deliveries.
5. If you need proof of delivery, check your docket before you approve. Pulsify shows the PO side. You compare the third document.

Worked example

Example Plumbing Supplies orders 100 fittings at $4.20 on PO-4001.

Document	Quantity	Unit price
Purchase order	100	$4.20
Invoice INV-912	100	$4.20
Delivery docket	80	n/a

Two-way match: PO and invoice agree, so the bill passes. Three-way match: the docket shows 80 arrived. The bill is for 100. The 20 missing fittings are $84.00 ex GST. Only the third check catches it. For a $420 order the extra check may not be worth it. For a $42,000 order it is.

Common mistakes

• Doing three-way on everything. It slows small orders for little gain. Match effort to value.
• Using the invoice as proof of delivery. The supplier prepared it. It shows what they billed, not what arrived.
• No PO number on the invoice. Both methods depend on it.

Next step

Try an invoice to see the PO match on your own bill. Or book a call to find out how customers have saved hours per week after switching.

The PO matching guide lists every flag. For a wider look, read how to implement PO matching in AP workflows.