Receiving and Three-Way Matching: No Match, No Payment

Receiving and Three-Way Matching: No Match, No Payment

In part three the purchase got a verified supplier and a written purchase order carrying the item, quantity, price and terms. But a purchase order is a promise between two parties, and the supplier may deliver less than it says, deliver something close to what was ordered, or invoice at a price that is not the agreed one. None of this shows on paper. It shows at the warehouse gate, on site when the truck unloads, or in the hotel room when the technician finishes the job.

This part covers the two stations where paper meets reality: receiving, which records what actually arrived, and three-way matching, which compares what arrived with what was agreed and with what the supplier is asking for before any money goes out. In part one we described the usual break here: a delivery note signed without counting, then an invoice for the full quantity. This is where we fix it.

Receiving: what actually arrived, not what the supplier's note says

The shipment arrives with a delivery note from the supplier showing what was sent. That note is the supplier's document, not yours. Yours is the receiving record you enter yourself, against the purchase order and its lines, and it carries four things:

• The quantity actually counted, not the quantity written on the delivery note. The difference between the two is the first thing that has to show, and it should show while the driver is still at the gate, not days later.
• The condition: sound, damaged, packaging incomplete, or close to expiry where the material has a shelf life. Attach a photo where needed, because a photo taken at receipt is stronger than any description written afterwards.
• The rejected quantity and the reason: off specification, damaged, or more than was ordered. A rejection recorded with its reason is what the supplier's correction is built on later; a rejection said aloud to the driver is lost before the invoice arrives.
• Who received it, when and where: the main warehouse, the specific project site, or the property. Material dropped straight onto a building site never passes through the warehouse at all, so its receipt has to be recorded from the site itself.

In why your recorded stock never matches the shelf, the first opening in the inventory gap was exactly this: a shipment set down on the floor, with matching it to the purchase order put off until a tomorrow that never comes. The fix here is the same: receipt is recorded the moment it happens, from the site supervisor's phone or the storekeeper's device, against the open purchase order, not on a sheet typed into the system later. In barcodes and scanning we showed how the storekeeper scans the purchase order and then each item, so the difference shows before anyone signs for the delivery.

One practice worth trying: the receiver counts without seeing the quantity ordered, and records what they counted, not the figure on the supplier's note. A receiver who sees the expected number tends, in good faith, to confirm it, especially late in the day with the truck waiting. One who does not see it can only count. The system then compares the count with the order and shows the difference to whoever follows it up. Some items need one more step before acceptance: reinforcing steel whose mill certificate has to be checked, or a raw material that needs a quality check before it reaches the production line. These are recorded as received under inspection, so they are neither issued nor matched until they are accepted or rejected.

And the person who receives is not the person who agreed with the supplier: purchasing agrees, the warehouse or site receives, and accounts pay. Not because anyone is under suspicion, but because each of them proves a part the others cannot.

Services and subcontractors: the completion record

A service does not arrive on a truck, so there is nothing to count at the gate: lift maintenance in a residential tower, insulation work done by a subcontractor on a project, a pump repaired on a production line. Here the receipt is a completion record in which the person who requested the work confirms the work was done as agreed: what was completed, when, and whether anything remains. It is signed by whoever requested the work or is responsible for the place where it was done, not by purchasing, which signed the contract, because the person who requested the work is the one who knows whether it was actually done.

Subcontracted work that runs for weeks is received in stages: how much of each item has been completed to date, the way work is measured in a payment application. So the subcontractor's payment application is set against a receiving record of the quantities actually completed, based not on the subcontractor's estimate alone but on what the requester or site engineer confirms. As with materials, whatever is not accepted is recorded with its reason: work that has to be redone, or an item that is not finished.

Three-way matching: three documents that must say the same thing

When the supplier's invoice arrives, the company holds three documents about the same purchase: the purchase order shows what we agreed, the receiving record shows what arrived, and the invoice shows what the supplier is asking for. Three-way matching means comparing the three before payment, line by line: the same item, an invoiced quantity that, together with anything already invoiced against the same receipt, is no higher than the quantity accepted, and an invoice unit price equal to the price on the latest approved version of the purchase order. If the three agree, the invoice moves to payment without anyone needing to ask. If they do not, it stops until the difference is explained.

The match does not have to be exact to the letter. Material measured by weight or by the cubic metre may arrive slightly different from what was ordered, and rounding halalas can shift a line total. So the company sets a tolerance, and the owner sets it, not the system and not the person entering the invoice; it may differ from one type of purchase to another. What matters is that the tolerance is written down and applied to everyone, and that every difference falling within it is still recorded, however small. If the same small difference keeps recurring with one supplier, it becomes a question worth asking.

Three situations need to be understood by whoever designs the matching:

• One invoice for several receipts. The VAT Implementing Regulations allow a supplier to issue a summary tax invoice covering several separate supplies to one customer within a period of no more than a calendar month (Article 53(4)). A supplier delivering to a site in batches during a month may send a single invoice for that month's deliveries, so matching works on lines and quantities, not on the number of documents.
• An invoice that arrives weeks later. As noted in part one, for supplies between businesses the latest date for issuing a tax invoice is the 15th day of the month after the month in which the supply took place (Article 53(1)(b)). If receipt was not recorded on the day it happened, the invoice arrives and nobody remembers what came in, and matching turns back into a round of phone calls.
• Recurring services with no physical delivery. A monthly software subscription, or a fixed rent on equipment or a warehouse. There is nothing to receive each month, so matching is two-way, between the purchase order or contract and the invoice. That is a decision recorded on the order itself for that type of purchase, not a loophole someone discovers later: the system knows this order matches two-way, and that others do not pass without a receipt. The order also carries an end date and a named person who confirms the service is still needed at each renewal, so invoices do not keep passing after the service has stopped.

In spare parts and inventory across sites and technician vans we mentioned three-way matching in a single line, as the step that prevents paying for a quantity that never arrived, and paying twice for the same supply. The line is right, but the real value of matching does not show when the documents agree. It shows when they do not.

When they do not match: a route for each exception

An invoice that does not match faces two opposite risks. The first is that it gets paid without anyone objecting, because the supplier is calling and the difference looks small. The second is that it stops and nobody knows it has stopped, so it sits for weeks in a drawer or an inbox, and the supplier discovers the hold before you do when it chases payment. The fix is a known route for each kind of difference, a named person who decides, and the decision and its reason recorded on the invoice itself. The four most common differences:

• Short delivery. The invoice is for the full quantity and the receipt is for less. What did not arrive is not paid. Purchasing follows up with the supplier for one of two outcomes: the supplier delivers the rest, which is received against the open balance on the purchase order, or it corrects its invoice with a credit note for the quantity that will not come, and the open balance on the order is then closed with a written reason, as in part three, so no commitment is left that nobody is waiting for.
• A substitute item. A different brand arrives, a similar size, or a different specification. The system does not accept it against the purchase order line, as in barcodes and scanning; the receiver does not decide alone to accept it, and it does not go into stock as if it were what was ordered. It is logged as held outside stock pending a decision, and the person responsible for the technical requirement in the requesting team decides: if they accept it, the purchase order is revised with a new version and a reason, as described in part three; if they reject it, it goes back to the supplier.
• A price above the purchase order. This goes to purchasing, not accounts, because purchasing agreed the price. Either the supplier corrects its invoice with a credit note that refers to it, or there is an acceptable reason for the increase, in which case the order is revised with a new version and goes back for approval if it exceeds what was approved, as in part two. Quietly editing the purchase order to match the invoice, with no recorded reason and no approval, is exactly what destroys the point of matching.
• An invoice number already recorded. The regulations require a tax invoice to carry a serial number that identifies and distinguishes it (Article 53(5)(b)). So the same number from the same supplier usually means the same invoice: a copy that came by email and then on WhatsApp, as described in part one. The system stops it at entry and shows the invoice already on file next to it, and whoever follows it up closes it as a duplicate with a written reason. If it turns out to be a genuinely different invoice, for example because the supplier numbers each branch's invoices in a separate sequence, which ZATCA's detailed e-invoicing guideline allows, it continues to matching. And this check only works if each supplier has one record with an identifier that cannot repeat, as explained in part three. A second invoice for the same delivery under a different number is stopped not by the number check but by matching itself, because the first invoice has already used up the receipt quantity.

When an invoice needs correcting, whether in quantity, price or either party's details, the route is a new document, not an edit to the old one: a credit or debit note issued by the supplier that clearly refers to the invoice or invoices it relates to (Article 54). ZATCA's detailed e-invoicing guideline states that an e-invoice is not modified or deleted once issued, and that cancelling one is done only through a credit note linked to it and a new invoice. So do not ask the supplier for an amended copy of the same invoice; ask for a note linked to it, and keep both together. We cover the notes from the buyer's side in part five; take any question about the effect on your own input VAT to your tax adviser.

Finally, who can release an invoice despite a difference? Not the person who enters the invoice, and not the person who pays it. That is a role the owner sets in the approval matrix; the release is recorded under the name of whoever released it, with a reason, and it shows in a list the owner sees. Each exception also gets a deadline the owner sets, and if it passes without a decision the exception escalates to the next level, the same way a stalled purchase request does. When an invoice is held, the supplier hears the reason the same day from purchasing, not weeks later from accounts when it asks about its payment. Matching does not only protect money; it also protects your relationship with the reliable supplier whose payment is late only because nobody confirmed receipt of what it delivered.

The Origami view

When we build this stage for a company, we start from the places where goods and services actually arrive: the warehouse gate, each project site, the property or hotel where the technician does the work. In each place we ask who signs today, what happens to the paper after it is signed, and how many days pass before it reaches accounts. A receipt that cannot be recorded on the spot, at the moment it happens, will go back to being a sheet in someone's pocket, whatever system sits behind it.

Then we build receiving from a phone, against the open purchase order, with a photo of the supplier's note and the condition of the goods, a completion record signed by whoever requested the work, matching that runs on its own when the invoice is entered, and an exceptions list where each item has a named decision-maker, a deadline and a recorded reason, all connected to the accounting system the company runs on. This is part of the custom systems we build, described in our services.

An exercise for this week: a week at the gate and a month of invoices

This exercise needs no new tool, and the operations manager can run it with the finance manager:

• Choose one receiving point for one week: the main warehouse, your busiest site, or a single hotel. Ask for every delivery to be counted, with the counted quantity written next to the quantity on the supplier's note.
• Ask whoever signs for deliveries: do they actually count, or copy the quantity from the note? Who receives services, and who confirms that a subcontractor's work is finished? You are not looking for someone at fault, but for a step nobody is responsible for.
• Take the supplier invoices you paid last month, find a receiving record or completion record for each one, and count how many were paid with no documented receipt.
• Sort every difference you find into the four categories: short delivery, substitute item, higher price, or duplicate invoice. Next to each, write who decided it and where that decision was recorded.
• Go back to the ten invoices from part one's exercise, and take the price and quantity differences you noted then: put each one into one of the four categories, and check whether a decision was recorded under someone's name, or the invoice was simply paid as it was.

The number of invoices paid with no documented receipt is the clearest figure this exercise produces, and the category that recurs most is the first that needs a written route. If you find receipts are recorded but late, the reason is usually that recording them is slower than the work on the spot, and the fix is easier recording in that same place, not one more signature.

In the next part

Every invoice now has a receipt to compare against and a purchase order to measure against. The next part stops at the invoice itself, from the buyer's side, and what to check in it before you claim its input VAT: the details a tax invoice must carry, what changes when the supplier is in the integration phase of e-invoicing, why a scanned paper invoice does not count as a compliant e-invoice, and how errors are corrected with a credit or debit note.

Sources

• VAT Implementing Regulations, Zakat, Tax and Customs Authority (official Arabic text) — Article 53: paragraph 1(b) (the tax invoice issue deadline), paragraph 4 (the summary tax invoice for several supplies within a calendar month) and paragraph 5(b) (the serial number that identifies and distinguishes an invoice); and Article 54 (credit and debit notes, including correcting an invoice's details, and their reference to the related invoice or invoices).
• Detailed Guidelines for E-Invoicing, Version 2 (May 2023), Zakat, Tax and Customs Authority — electronic credit and debit notes are issued with a reference to the original invoice; an e-invoice is not modified or deleted once issued, and cancelling it takes a linked credit note and a new invoice; invoice serial numbers may follow different sequences, such as one per branch.