Accounts payable glossary

Plain-English definitions of the terms that come up when you check supplier invoices. For the longer version, see our guides.

Accounts payable (AP): The money a business owes its suppliers for goods and services it has received but not yet paid for. Also the team and process that receives supplier invoices, checks them, gets them approved and pays them.
Purchase order (PO): A document the buyer issues to a supplier before buying, listing the items or services, quantities, agreed prices and delivery terms. Once the supplier accepts it, it is the reference the invoice is checked against.2-way match
Goods received note (GRN): The buyer’s record of what was actually delivered and accepted: which items, how many, and when. Items that were damaged or rejected at delivery are left off or marked as rejected. It is the third document in a 3-way match.Delivery note 3-way match
Delivery note: The supplier’s document that travels with a shipment and lists what was sent. It shows what the supplier says it shipped. A GRN shows what you say you received, and the two don’t always agree.
2-way match: Checking a supplier invoice against its purchase order: the right items, at the agreed prices, in quantities no larger than ordered. It is common for services, where there is no delivery to confirm.Guide: 2-way vs 3-way matching
3-way match: Checking a supplier invoice against both its purchase order and its goods received note, so you only pay for what was ordered and actually received. It catches short shipments and billing ahead of delivery, which a 2-way match can’t.Guide: 2-way vs 3-way matching
Tolerance: The amount of difference between an invoice and its PO or receipt that you accept without a manual review, for example 2% on unit price or a fixed amount on the total. It is usually set per supplier. It is often tighter, or zero, for quantities.
Price variance: The difference between the unit price on the invoice and the unit price agreed on the purchase order. A variance outside the tolerance needs someone to explain or correct it before payment.
Quantity variance: The difference between the quantity invoiced and the quantity ordered (2-way) or received (3-way). Billing for more than was received usually means a short shipment or an invoice issued too early.
Duplicate invoice: The same supplier charge entered more than once. It often arrives through different channels or with the invoice number written differently. Left unchecked, it leads to paying the supplier twice.Guide: how duplicate invoices slip through
Exception: An invoice that fails one or more checks, such as a price outside tolerance, a missing PO or a possible duplicate, and so needs a person to review it before it can be approved.
VAT (value added tax): A consumption tax charged by registered businesses on most sales, used in the UK and EU among others. Businesses can usually reclaim the VAT they pay on purchases, as long as they hold a valid VAT invoice. The UK standard rate is 20%.Guide: VAT and GST errors on supplier invoices
GST (goods and services tax): The equivalent of VAT in Australia, where the rate is 10%, and New Zealand, where it is 15%. Registered businesses claim GST credits on purchases, backed by a tax invoice in Australia or taxable supply information in New Zealand.Guide: VAT and GST errors on supplier invoices
Sales tax (US): The US has no VAT or GST. Sales tax is set by individual states and local jurisdictions, so rates and exemptions vary by location. It is generally charged only on the final sale, and purchases for resale can be exempt.