Paying Suppliers on Schedule and Reconciling Statements

Paying Suppliers on Schedule and Reconciling Statements

In part five the supplier invoice became complete, matched to its purchase order and receiving record, and kept in its original file. One station remains, the one where money actually leaves: payment. When payment has no schedule, the phone sets the order. The ready-mix concrete supplier who calls every morning gets paid first, the subcontractor who finished on time and did not chase waits, and the lift maintenance company in the residential tower finds out at month end that nobody asked for its matched invoice to be paid.

This part covers four things: how to pay matched invoices by due date in one scheduled batch approved once, how to confirm any request to change a supplier's bank details, what the VAT Implementing Regulations say about a balance still unpaid twelve months after the month following the supply, and how to reconcile each supplier's statement every month. We close with two obligations that may fall on your company when it buys a service from a non-resident supplier. We report what the texts say, with their article numbers. Questions about a particular case in your company belong with your tax adviser.

Pay by due date, not by who calls most

Every invoice has a due date, and nobody should have to remember it. In part three we put the agreed payment terms on the supplier record and said they carry over to every purchase order automatically. So when an invoice arrives and passes matching, the system works out its due date from those same terms: on delivery, or a set period after the invoice date or the receiving date, whichever you agreed. The periods themselves are agreed with each supplier under a policy the owner sets, not by this article.

Then comes the payment run. Instead of paying each invoice on its own when its supplier chases it, the system prepares, on a fixed day the owner chooses, one list of every matched invoice that is due or will fall due before the next run. For each invoice the list shows the supplier, the invoice number, the purchase order and receiving record linked to it, its due date and its amount, then the total against the cash available. Whoever holds the authority in part two's approval matrix approves it once, instead of a separate approval for each invoice, and the transfers are made from it exactly as approved.

• No invoice enters the run before it matches. An invoice held on a quantity or price difference stays out of the run with its reason, and the supplier hears that reason from purchasing before the payment day, not after it.
• An advance payment is tied to its purchase order. When a supplier's terms call for an advance, it is recorded against the purchase order it was paid for, so it is deducted from what is owed when the supply invoice arrives. An advance with no link to its order is the easiest way to pay the same amount twice.
• Subcontractor retentions have a release condition. When a subcontract provides for part of each payment to be retained until final handover, the system carries the retention and release terms from the contract, so the retained amount appears in a run when its condition is met, not when someone remembers it. We covered where retentions sit in a project's margin in cost control and payment applications.
• An urgent payment outside the run is possible, but recorded. There will always be a supplier who has to be paid today. That happens, but with a written reason and approval from whoever holds the authority, and it shows on a list the owner sees. If that list grows long, it is telling you that the run does not come often enough, or that the payment terms with some suppliers need another look.
• Statements are not paid; invoices are. A supplier statement is a reconciliation tool, not a payment document. What enters the run is the matched invoice, by its number, and that is what prevents the case from part one: an invoice paid once from its email and once from the statement.

A payment run does more than control. A supplier whose invoice is complete and matched knows when it will be paid, so the daily calls ease off, and the finance manager knows days ahead how much cash will leave and on which day, instead of learning it from the bank statement afterwards.

A request to change bank details: call the number you already have

An email arrives from a supplier you have dealt with for years, with its usual signature and logo, saying its bank account has changed. It attaches a new IBAN and asks for this month's payment to go there. The request may be entirely genuine; companies do change banks. Or the email may come from the supplier's own mailbox after it was compromised, or from an address one letter different from the real one, and in both cases it looks like every earlier message. An accountant who changes the IBAN on the strength of that email has not been careless. They trusted a message nothing distinguished from the real ones. So the rule does not assume anyone will spot the forgery by eye. It stops a change from passing through a single channel:

• Confirm with a call you place yourself, to a number already on the supplier record, not the number written in the email asking for the change, and not by replying to that email. If the email is forged, its number and its replies are part of the forgery.
• The same route the IBAN took the first time. In part three we required the IBAN to come on an official letter from the supplier, with the account holder's name matching the supplier's registered name. A change goes through the same conditions, not fewer.
• The person who enters the change is not the person who approves it. One person records the request and its documents, another approves it after confirmation, and both are logged by name and date.
• The first payment to a recently changed account is flagged in the run, so whoever approves the run sees it knowing the account is new.
• A notice after the change goes to the supplier's known contact, saying its bank details have been updated in your records. If the supplier did not ask for the change, it finds out before the money leaves.

Even a call you receive is not enough proof, because voices can now be imitated with readily available tools, as we explained in deepfakes and AI fraud. What matters is that you place the call, to a number you held before the request. And one question comes before all of this: who can edit the IBAN field on a supplier record in the first place? If anyone who opens the supplier file can, the rule rests on good faith alone. That is what we set out in permissions: who sees what. In a system, one defined role edits this field, and every edit is logged with the name, the date, and the value before and after. The rule protects more than money. It protects an honest accountant from carrying the blame alone for a message they had no way to tell apart.

A balance still unpaid twelve months after the month following supply

Some invoices are not paid on time for good reason: a subcontractor's invoice held over a dispute about the quality of the work, a maintenance invoice at a hotel waiting for a completion record nobody has signed, an invoice waiting on a credit note the supplier promised and has not issued. Such invoices can sit in the books for months, while their input VAT was already deducted in an earlier return. Here the VAT Implementing Regulations tie payment directly to VAT.

Article 40(10) says that a taxable person who has deducted input VAT on a supply it received, and has not paid for it in full twelve months after the month following the month in which the supply took place, must adjust its deductible input VAT by the VAT calculated on the consideration still unpaid at that date, by including the adjustment in the return for the tax period covering the month in which the twelve months end. The same paragraph excludes supplies of goods under financing contracts, such as finance leases, murabaha and lease-to-own arrangements, received from a taxable person licensed to carry on those activities and paid for in periodic instalments, provided that the contract remains in force, there is no court dispute over it, the supplier has declared the full VAT due in the return for the tax period of that supply, and the customer holds a written certificate from the supplier confirming this.

Article 40(11) then provides that, where input VAT was adjusted this way and the taxable person later pays the consideration, the input VAT deduction may be increased by the VAT calculated on the consideration paid, in the return for the tax period in which payment was made or any later period. Article 40(12) makes all of these adjustments subject to the time limits in the law or the regulations. So, once that period has passed, the text ties the deduction to payment: it is adjusted when the period passes without payment, and it may be increased again when the consideration is paid, within those limits.

In practice this needs a list, not a memory. A system that holds each invoice's date of supply and what has been paid against it can show unpaid and part-paid invoices sorted by age, and flag the ones approaching the end of the twelve months, so the list reaches the finance manager and their tax adviser before the return is prepared, not after. The flag is an alert, not a ruling: whether the text applies to a particular invoice, whether it falls under the exception, and how the adjustment is made are for your tax adviser to decide. The same list helps beyond VAT: an invoice left unpaid for many months may be a dispute with a supplier that nobody has settled, and settling it beats letting it grow.

Reconciling each supplier's statement every month

At month end a supplier sends a statement showing the balance it believes you owe, and your books show another balance for the same supplier. The two figures may not agree at first sight, and that does not mean anyone made a mistake. Reconciling a supplier statement means knowing the reason for every riyal of the difference, not clearing it with an adjusting entry. The usual differences are four:

• An invoice you never recorded. The supplier sent it and it never reached the invoice inbox, or it arrived and is held waiting for receipt or matching. The question is: did it arrive at all? And if it did, why is it not recorded?
• A payment in transit. It went out on the last day of the month, so it shows in your books but not yet on the supplier's statement. This is a timing difference that clears itself next month, and it only needs recording with its date.
• A credit note that never arrived. The supplier accepted a return or agreed a reduction and took it off its balance, but the note itself never reached you, or the reverse: a note it promised and has not issued yet. Either way, you ask for the note linked to the invoice, as explained in part five.
• An invoice recorded twice, on your side or the supplier's. On your side, this is the case the duplicate check stops at entry, and reconciliation catches it if one slips through.

Every difference gets a status, an owner and a date: a timing difference followed up next month, an error on your side corrected, or an error on the supplier's side that you ask it to correct. Reconciliation starts from an agreed opening balance, because an old difference that was never settled mixes into every new one after it. You do not need to reconcile every supplier every month from day one. Start with the suppliers you buy from most, or those where differences keep recurring, and leave the order of priority to what the owner decides.

This is a tiring hunt when purchase orders live in a spreadsheet, invoices in email and payments on the bank statement. When the system has held the purchase order, the receiving record, the invoice, any note and the payment from the start, all linked to one number, reconciliation becomes a comparison, not a search: the supplier's statement goes in, the system matches each line by invoice number and amount, and you are left with only what did not match, along with what the system knows about each invoice: whether it was received, whether it is held, and whether a note has been issued against it.

Suppliers outside the Kingdom: two obligations that may fall on your company

When you buy a service from a non-resident supplier, such as a design software subscription for the technical office, a maintenance contract for a production line with its manufacturer abroad, or engineering consultancy for a project, two obligations may arise that you do not see with a local supplier, and where they apply they fall on your company, not on the supplier: declaring the VAT in the first case, and withholding the tax and paying it over to ZATCA in the second. We describe them here as mechanisms; the details, and the conditions for each to apply, are in their sources:

• Reverse-charge VAT. Article 47(1) says that where the GCC Unified VAT Agreement makes the taxable customer liable to pay VAT on a supply received from a non-resident supplier, the VAT is paid through the reverse-charge mechanism: the customer declares the output VAT on the supply, and any deductible input VAT to the extent it can benefit from the deduction, in the VAT return for that tax period. So the absence of Saudi VAT on a foreign supplier's invoice does not mean the supply carries no VAT. It may mean that declaring it has passed to you.
• Withholding tax on payments to non-residents. ZATCA's General Guideline for Withholding Tax explains that payments from a person obliged to withhold to a non-resident, from a source in the Kingdom, fall within the scope of withholding, and that the person obliged must file a monthly withholding statement covering any amounts paid in that month that are subject to withholding, filing it and paying the tax withheld within the first ten days of the month following the month of payment to the beneficiary. The guideline's example: a royalty paid to a non-resident on 20 January is declared and its tax paid by 10 February at the latest, and the beneficiary is given a certificate showing the amount paid and the tax withheld. If a month has no payments subject to withholding, no monthly statement is required. Withholding rates by type of payment, and the effect of double tax treaties, belong in the guideline itself and with your tax adviser. The guideline also states that income from supplying goods is outside the scope of withholding, and that a contract to supply goods into the Kingdom falls within it only for accompanying work performed inside the Kingdom, such as inland transport, installation, maintenance or training. It sets further obligations for whoever withholds, including registration with ZATCA and an annual statement.

The operational side starts on the supplier record: a field showing that the supplier is non-resident, carrying both effects with it. Its invoice reaches accounts flagged as needing a reverse-charge review, and its payment appears in the run flagged as possibly belonging in that month's withholding statement, so whoever is responsible knows before the tenth what has to be filed and paid, instead of piecing it together from the bank statement. The system prepares the list, and your tax adviser makes the final classification of each payment.

The Origami view

When we build the payment stage for a company, we start with two questions: how is it decided today who gets paid first, and who can change a supplier's bank details? Then we build the payment run from the payment terms on each supplier record, so only matched invoices enter it and it is approved once under the approval matrix, and we make an IBAN change a two-step route with a log that cannot be erased.

We make supplier-statement reconciliation a comparison the system runs on documents it already holds, we prepare the ageing list of unpaid invoices and the list of non-resident suppliers for whoever prepares the returns, and we leave tax decisions to your adviser. All of it connects to the accounting system the company already runs on rather than replacing it. This is part of the custom systems we build, described in our services.

An exercise for this week: three months of payments

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

• Pull the supplier payments for the last three months from the bank statement, and note against each one: was its invoice matched? Was it paid on its due date, before, or after? Who asked for it to be paid?
• Count the payments that went out outside any schedule, and write down the reason for each one if you know it.
• Collect every change to a supplier's bank details over the past year, and ask of each one: how did the request arrive? How was it confirmed? Who approved it?
• Sort unpaid invoices by age from their date of supply, flag those approaching twelve months from the month after their supply, and send the list to your tax adviser.
• Ask your three largest suppliers for a statement and reconcile it, classifying each difference: an invoice not recorded, a payment in transit, a note not received, or a duplicate.

The exercise gives you a clear picture of where to start. If most payments went out outside a schedule, start with the payment run. If bank-detail changes have no documented confirmation, start there before anything else, because that is the gap through which money leaves for the wrong hands. If statement differences are frequent, look for their cause at the stations before payment: receiving, matching and the invoice inbox.

In the next part

Every riyal that goes to a supplier now has a complete route: an approved request, a purchase order, a documented receipt, a matched invoice, a scheduled payment and a reconciled statement. The seventh and final part brings all of this into one view of spend: how much you have committed and not yet been invoiced for, who your largest suppliers really are, and which categories are bought outside purchase orders. Then it sets out a ninety-day plan for digitizing purchasing, in an order that never stops the buying for a single day.

Sources

• VAT Implementing Regulations, Zakat, Tax and Customs Authority (official Arabic text) — Article 40(10), (11) and (12) (adjusting input VAT on consideration unpaid twelve months after the month following the month of supply, the exception for supplies of goods under financing contracts, increasing the deduction on later payment, and the time limits); and Article 47(1) (reverse charge where the GCC Unified VAT Agreement makes the taxable customer liable for VAT on a supply received from a non-resident supplier).
• General Guideline for Withholding Tax under the Income Tax Law and its Implementing Regulations (second edition, May 2026), Zakat, Tax and Customs Authority (Arabic) — the scope of withholding on payments to non-residents from a source in the Kingdom, the monthly withholding statement and payment of the tax withheld within the first ten days of the month following the month of payment, no monthly statement for a month without payments subject to withholding, the withholding certificate to the beneficiary, and income from supplying goods falling outside the scope of withholding.