Why it matters for manufacturers
- Freight, pallets and surcharges come on the bill, but not on the order.
- Receiving is done at the plant dock, often by a different person from whoever raised the order, so the product receipt is the only proof of what came in.
For manufacturers in Dynamics 365 Finance
- Subcontracted operations are modelled as a service product. The cost is the purchase price of that service. It drives the purchase order for the operation. Match those PO lines on price.
- Set the Matching policy for the legal entity and use Allow matching policy override to apply three-way matching to a single item. Microsoft's example sets three-way matching on a production asset item and two-way for others.
- In lean manufacturing, subcontracted work is an activity with the cost group type Direct outsourcing. It is not part of the bill of materials.
- Vendor-managed locations or work cells can be modelled by assigning the vendor account to a warehouse or a resource of a resource group.
What Dynamics 365 Finance does on its own
Invoice totals, 2-way, 3-way and charges matching with tolerances.
Partial price totals are checked on the last invoice for that order line.
What you need and the setup steps: PO matching for Dynamics 365 Finance.
Example
Example Steel Distribution sends invoice 9902 for a purchase order of 12 tonne of steel plate. The plant booked in 8 tonne on Tuesday and 3 tonne on Friday.
| Line | Amount | What the check finds |
|---|---|---|
| Steel plate 10 mm, 11 tonne invoiced | $15,400.00 | Receipts show 11 tonne, so quantity agrees |
| Pallets and strapping | $120.00 | Not on the order |
| Steel plate, 1 tonne invoiced early | $1,400.00 | Not yet received |
In Dynamics 365 Finance the 11 tonne passes against the two receipts. The unreceived tonne and the pallet fee are held until the plant confirms receipt or the buyer adds a code.
Common mistakes
- Booking in goods by order quantity, not what came off the truck, so the match always passes.
- Treating pallet and freight lines as errors instead of landed cost.
Step-by-step guides for Dynamics 365 Finance
- How to match a vendor invoice to a purchase order in Dynamics 365 Finance
- How to handle a partial delivery against a purchase order in Dynamics 365 Finance
- How to set a price tolerance on purchase order matching in Dynamics 365 Finance
What Pulsify adds
Pulsify matches each bill line to a purchase order line and flags extra quantity, a different price or lines not on the purchase order. Pulsify connects to Dynamics 365 Finance. We set up the connection for you. More about PO matching in Pulsify or Pulsify for manufacturers.
More help
- PO matching in Kinetic for manufacturers
- PO matching in CloudSuite Industrial for manufacturers
- PO matching in NetSuite for manufacturers
- Supplier price checks in Dynamics 365 Finance for manufacturers
- Invoice approvals in Dynamics 365 Finance for manufacturers
- Multi-entity accounts payable in Dynamics 365 Finance for manufacturers
- Duplicate invoice checks in Dynamics 365 Finance for manufacturers
- All Dynamics 365 Finance how-to guides
Sources
Last checked 2026-10-19.
- learn.microsoft.com/en-us/dynamics365/supply-chain/production-control/manage-subcontract-work-production
- learn.microsoft.com/en-us/dynamics365/supply-chain/production-control/activity-based-subcontracting
- learn.microsoft.com/en-us/dynamics365/finance/accounts-payable/three-way-matching-policies
- learn.microsoft.com/en-us/dynamics365/finance/accounts-payable/tasks/set-up-accounts-payable-invoice-matching-validation
- www.ato.gov.au/businesses-and-organisations/gst-excise-and-indirect-taxes/gst/tax-invoices
Also confirmed by
Common questions
How does Finance match a subcontractor's invoice to a production purchase order?
The operation is bought as a service product on a purchase order, so the invoice is matched to that PO line on price. For materials you can require three-way matching on chosen items with the matching policy override.
Who should book in the goods?
The person at the dock, on the day the goods arrive. The buyer who raised the order should not also be the receiver, because the receipt is the independent check on the bill.
Does Finance support 2-way and 3-way match?
Yes. The matching policy is Invoice totals, 2-way or 3-way and charges matching. 3-way compares the invoice with the order and the posted product receipt. You can override the policy per item or order line.
Pulsify setup guides
Want this done for you?
Book a call to see how Pulsify handles PO matching in Dynamics 365 Finance for manufacturers.