How should a retail store match supplier invoices, packing slips, and POS reports?

What does each document prove?

Each document comes from a different point in the store's day and proves one thing:

None stands in for another, and a slip signed without counting only repeats the supplier's claim. Improving the Effectiveness of Your Claims Auditing Process, a New York State Comptroller guide for local governments, says a claim should come with documentation confirming the goods were received, such as a receiving slip.

Which comparisons are meaningful, and which are not?

Two comparisons are direct and run line by line:

• Invoice to checked slip. Each invoiced item and quantity is compared with what the marked slip shows arrived.
• Invoice to agreed terms. Each unit price and term is compared with your purchase order, price list, quote or written confirmation.

Purchase orders supply the agreed price and quantity. Without them, get prices in writing when you order; the marked slip is then your only independent evidence of quantity.

The sales report is not a matching document. It is priced at retail, covers a period rather than a delivery, and may count units where the invoice counts cases, so a line-by-line comparison produces differences that are not errors. It tests purchases only through quantity movement, item by item:

Quantity on hand at the start + quantity received (from marked slips) − quantity returned to suppliers − quantity disposed of or taken for own use (each from its record) − quantity sold = quantity that should be on hand.

Compare the result with a count or your perpetual record; the Comptroller's guide The Practice of Internal Controls recommends this kind of periodic reconciliation of purchases, usage and amounts on hand, for fuel, to show whether significant amounts are unaccounted for. It needs a POS report of units sold by item. A report of sales value alone allows only a value check, such as the one IRS Publication 334 describes for retail businesses: gross profit divided by net receipts, compared with your markup policy.

How should a delivery be checked at the door?

Do these steps before the goods join your stock:

1. Before signing the driver's paperwork, count the cartons and note any missing or visibly damaged ones on it.
2. Open the cartons and check every slip line against the goods for item, quantity and condition.
3. Mark each line with the count received and any shortage, damage, substitution or extra, then sign, date and print your name.
4. Compare what arrived with what was ordered.
5. Set damaged, wrong and extra goods aside, labeled, off the sales floor.
6. The same day, report each problem to the supplier, within any deadline its terms set, and pass the marked slip to whoever matches bills.

The Practice of Internal Controls says slips should be verified against the quantity, type and condition of the goods received and compared with amounts ordered, so that payment is made only for quantities ordered and received in satisfactory condition, and that receipt should be segregated from whoever requested or authorized the purchase.

Two common setups need a change:

• Goods go straight to the sales floor. Count against the slip before anything is shelved; once mixed with existing stock, a delivery cannot be counted on its own.
• Standing orders arrive without a slip. Require a ticket for every drop; the claims-auditing guide says claims for repeated deliveries of similar items should be supported by delivery tickets signed by the person accepting delivery.

How is the invoice matched to the checked slip?

Do this before the bill is approved:

1. Compare each line's item and quantity with the marked slip.
2. Compare each unit price and term with the agreed terms.
3. Recheck each line total and the invoice total.
4. Approve only what the slip and the terms both support, and hold the rest with a note of why.

The claims-auditing guide says a claim should be held while original documents such as invoices or receiving slips are missing, and, if its arithmetic is wrong, should be approved only for the corrected amount. On the accrual basis, enter each bill at its invoiced amount once it is matched; approval decides what is paid, and a held amount stays in the payable, marked held, until its closing document is posted. What you can approve depends on what has arrived:

Each kind of difference has its own closing document:

What does a short shipment look like in the books?

Suppose an invoice bills 18 candles at 4.00, or 72.00, and the marked slip shows 15 received and 3 short. On the accrual basis, the bill is first recorded at its invoiced amount:

The marked slip shows both balances overstated by 12.00, so the bill is held and approved only for 60.00. The supplier's credit memo for 3 candles at 4.00, quoting the invoice number, is then applied:

Inventory and the payable now stand at 60.00, or 15 at 4.00, supported by the marked slip and the credit memo. If the 3 candles are a backorder, no credit comes; the later marked slip closes the 12.00, and if a period ends before it arrives, treat the 12.00 as a bill without goods. Adjusting the ledger with neither document is the mistake to avoid. On cash-basis books, if your preparer confirms the cash basis applies, nothing is posted until the bill is paid.

How do sales reports test whether purchases are accounted for?

One delivery shows where the sales record fits. The slip lists 24 mugs, 12 tea tins and 20 notebooks, all counted and marked complete. The invoice bills 24 at 6.00, or 144.00, 12 at 9.50, or 114.00, and 20 at 3.60, or 72.00: 330.00 in all, at the agreed prices. Once matched, it is posted at its invoiced amount on the accrual basis; if your preparer confirms the cash basis applies, cash-basis books post nothing until payment:

Two weeks later the mugs are checked: 6 on hand before the delivery, plus 24 received, less 17 sold on the POS item report, with none returned, disposed of or taken for own use, means 13 should be on hand. The shelf holds 12, so 1 is unexplained. The sales record never entered the match or the entry; it only tested quantity.

A difference shows that something is off, not what. IRS Publication 334 says a large gap in its gross profit check may show that you did not accurately figure sales, purchases, inventory or other items of cost, and that you should determine the reason. The documents separate some explanations, but not others:

Treat a shortfall as unexplained until a document explains it; do not book it as theft or breakage on the count alone.

What changes with a perpetual inventory record?

Post each receipt the day it arrives, from the marked slip's quantities rather than the invoice's, or a short receipt posted at the invoice quantity will later look like missing stock, and an unposted receipt like surplus. When a count disagrees with the record, log the difference and investigate before adjusting; any adjustment carries its reason and the owner's sign-off. The Practice of Internal Controls says a periodic verification of an equipment inventory listing should be done by someone without custody of the asset, since otherwise an opportunity exists to disguise theft or loss. Apply the same rule to stock: have someone other than the person who received the goods do the count.

How are returns, credits and refused goods documented?

Build the trail in this order:

1. Get the supplier's return authorization, if it issues one, before goods go back.
2. Write a return record of items, quantities, reason, and the original invoice and slip numbers.
3. Keep the signed receipt from whoever collects the goods.
4. Chase the credit memo, add it to the open-items sheet and check that it quotes the original invoice.
5. Apply the credit to that invoice and file it with the delivery's documents.

IRS Publication 334 says you must deduct all purchase returns and allowances from total purchases; a credit never received, or never linked to its invoice, leaves cost and the supplier balance overstated and unverifiable. For damaged goods the supplier does not want back, record the disposal and who approved it. Recording the credit in the books is a separate question.

How are unmatched deliveries and bills shown at period end?

Your accounting basis decides. IRS Publication 538 says that if you must account for an inventory, you must use an accrual method for your purchases and sales; it lets a small business taxpayer choose not to keep an inventory, but that taxpayer must still use a method of accounting for inventory that clearly reflects income. If that taxpayer chooses to keep an inventory, Publication 538 says it generally must use an accrual method and value the inventory each year. Confirm which applies with whoever prepares your return before using the cash-basis column.

If your system already posts stock and a received-not-billed liability when you enter a receipt, do not post the goods-received entry above; check that liability's balance against the goods-received items on your open-items sheet instead, and post each bill against that liability rather than to stock.

The accrual column applies IRS Publication 538: under an accrual method, an expense is generally deducted or capitalized once all events fixing the liability have occurred, the liability can be determined with reasonable accuracy, and economic performance has occurred, which for property provided to you is as it is provided. Publication 538 also counts purchased merchandise in inventory once title has passed to you, even in transit, so check the supplier's terms for when title passes. Keep a period-end sheet of every open item with its documents.

How should the documents be filed so a delivery can be pulled back up?

Keep one package per delivery: the marked slip, the invoice, the order or price confirmation, the approver's signed, dated approval (showing the amount approved and any amount held, with the reason), and any credit memo, return record or dispute note, each marked with the others' numbers and attached to, or filed under, the recorded bill. The Practice of Internal Controls describes such a package: the verified receiving slip, the approved purchase order (if applicable), the original invoice and the department head's signed approval that the goods were received. A sales record belongs to a period's quantity check, not to one bill, so file the POS item report used in each check with that check. Link the two: write on each quantity check the slip numbers of the deliveries it covered, and on each delivery's package the date of the check that tested its items.

IRS Publication 583 counts invoices and sales slips among a business's supporting documents and says you must keep your business records available at all times for inspection by the IRS; for electronic records, it says the storage system must index, store, preserve, retrieve and reproduce them in legible format. How long to keep the set is a separate question.

How often is each check run, and where does the supplier statement fit?

Each check has its own trigger:

The statement is the supplier's own running record, so tying it out catches what per-delivery checks miss: an invoice you never received, a payment applied to the wrong invoice, or a credit owed to you that has not appeared. Query each line you cannot tie and each item missing from the statement, and add each to the open-items sheet. Approve payment only against individually matched invoices, never a statement balance, which bundles items never matched and credits never applied; the claims-auditing guide likewise recommends not paying aggregate past-due amounts unless the original invoices are attached.

Who should receive deliveries, and what if that person also approves bills?

The Practice of Internal Controls lists custody of assets, approval of transactions and recording as duties that ideally sit with different people; receiving goods is custody, and approving the bill is approval. When splitting them is neither practical nor cost-effective, it says compensating controls should be considered, and that these frequently provide for regular review of the work of people who hold assets and also approve or record transactions. Where staff on shift receive and may also approve bills, a workable routine is:

• No one approves the bill for a delivery they received; the owner or manager approves it from the original marked slip, not a retyped summary. The exception is a delivery the owner received: the owner approves its bill, checked by the weekly spot count and the statement tie-out; if an outside bookkeeper works for you, have them compare those bills with their marked slips each month.
• Supplier statements come straight to the owner, who does the tie-out.
• Each week the owner picks one recent delivery and counts two or three of its lines on the shelf against the expected quantity.
• Only the owner signs off adjustments to the stock record.

When the owner alone receives, approves and records, nothing can be split, so the routine's job is catching errors: match on a different day from the receiving, from the documents alone, and keep the statement tie-out.

What should you do when the documents cannot settle a difference?

Work through these steps:

1. Approve the undisputed part and hold the rest.
2. The same day, send the supplier a written query with copies of the marked slip and invoice, naming the document that would close it: a credit memo, a corrected invoice or, where you dispute whether a delivery or a carton arrived at all, its signed proof of delivery; a proof of delivery signed for cartons does not close a shortage inside a carton that your marked slip records.
3. Log the item with the supplier, invoice and slip numbers, the amount, what is disputed, the date raised and who raised it.
4. Keep the item open until that document arrives or the owner decides in writing to accept or write off the amount, giving the reason; staff who received or approved the delivery do not close it themselves.
5. Carry every open item into the statement tie-out and the period-end sheet.

No difference is cleared by an adjusting entry without one of those two closures.