How to Receive a PO Without Creating a Data Mess

The count at the dock is half of receiving. The other half is the record: what gets posted against the purchase order, in which unit, on which line, and how many times.

The short version: post what actually arrived, in the unit you stock, against the right PO line, once. When a receipt is wrong, reverse it and post it again rather than patching stock with an adjustment, because the receipt is what the invoice is matched against.

What does a PO receipt actually record?

A receipt is a statement that specific goods arrived against a specific order. US federal contracts set a useful minimum. FAR 32.905 requires a Government receiving report that supports payment to include, as a minimum, the contract number or other authorization, a "Description of supplies delivered," the "Quantities of supplies received and accepted," the "Date supplies delivered," and the date and identity of the official who accepted them. For a commercial warehouse, read it as: which PO line, which item, how many, when, and who.

The receipt also feeds the books: in accrual accounting, goods received create a liability before the invoice arrives. The US Department of Energy's financial management handbook puts it plainly: liabilities reflect "an invoice or the accrual of costs for goods or services received," and an accrued cost can be "invoiced or un-invoiced." So a receipt changes the stock record, the PO's remaining balance, and a received-but-not-invoiced amount the vendor's invoice later clears.

What do you do when only part of a PO shows up?

Post exactly what arrived, then decide the rest of the line. Systems differ on what keeps a PO open. In QuickBooks Online, Intuit's item-receipt article says "The Purchase order will be closed only when the Bill is created," and its billing article says the system "automatically closes purchase orders when all quantities are added to bills, expenses, or checks." There, a PO billed for part of its quantity stays open until someone acts. Whatever drives closure in your system, the remainder needs a decision.

There are two valid outcomes for the unreceived quantity:

• Backorder. The supplier confirms the rest is coming. The line stays open, and the next delivery is posted against the same line.
• Short-close. The supplier confirms cancellation, or you tell them in writing that the balance is cancelled. Close the remainder and, if you still need the stock, raise a new order.

Our recommendation: ask the supplier promptly and set a review date for every short line rather than leaving it open-ended. Do not short-close just because the supplier cannot say; if they ship the balance anyway, it arrives against a closed line on top of your replacement order.

Why does the system say we have 12 times as much as we have?

Often a unit-of-measure error: the supplier ships and bills in cases, you stock in eaches, and the two got mixed.

GS1, the barcode standards body, treats each packaging level as a separate trade item: GS1 US says "Each packaging level is identified by a unique GTIN," and the GS1 GTIN rules say a change in "the number of trade items in a case" requires a new GTIN, with the example of a case going from 9 to 12 units. Pallets are usually identified differently: GS1's logistic label guideline says "The SSCC is the single mandatory element for all GS1 Logistic Labels."

So 10 cases of a 12-pack is 120 eaches. Post 120 eaches as 120 cases and the system shows 1,440, twelve times what you have. Post 10 cases as 10 eaches and you are 110 short.

Three rules prevent most of it:

1. Every item record holds its pack sizes: each, inner and case, each with its own GTIN where the supplier provides one (pallets usually carry an SSCC instead).
2. The receipt converts to your stocking unit before it posts, and shows both numbers ("10 CA = 120 EA") to the person confirming.
3. A scanned GTIN that is not on the item record sends that line to an exception queue, where a supervisor verifies the pack count and adds the GTIN while the rest of the receipt continues. A new case quantity should come with a new GTIN, but not every supplier follows the rule, so also spot-check the inner count on the first receipt from a new supplier or after a known pack change.

For scanning, see barcode scanning for warehouse inventory.

What if the wrong item, or a substitute, arrives under a PO line?

Do not receive it as the item that was ordered, or both counts go wrong: the record shows the ordered item, not the one on the shelf. If you are keeping it, the buyer adds it to the PO (or approves it as an authorised substitute on the existing line, if your system supports that) and you receive it as the item it is. If you are not keeping it, it goes to a quarantine or return-to-vendor location, logged with the PO and supplier reference (or is received to a non-available status), until it ships back. The original line stays short.

Over-receipts follow your buyer's tolerance: extra units within it post against the line. Anything above it needs the buyer to raise the PO quantity first, or is held and returned.

What if we received against the wrong PO, or received it twice?

Receiving against the wrong PO reduces a line that is still really open and leaves the real one waiting. Receiving the same delivery twice doubles the stock and the quantity an invoice will be matched against. GAO's May 2000 guide on federal payment controls says the review before payment should "ensure payments are legal, proper, valid, and accurate and that duplicate payments are avoided." A duplicate receipt lets a duplicate payment past that review: the second invoice has a receipt to match.

The practical defences:

• Key every receipt on supplier, supplier reference (packing slip or ASN number) and PO line. One slip can legitimately arrive on two trucks or cover several POs, so do not block a second receipt; warn, with supervisor override, when the total received against one reference exceeds what that slip or ASN lists.
• After the count is entered, show it against the PO's open quantity before the receipt posts, so a receipt larger than what is open stands out.
• Review receipts that push a line over its expected quantity; it may be a duplicate.

How does a bad receipt break the three-way match?

In a three-way match, the purchase order, the receiving record and the vendor invoice are compared before payment. The receipt is the middle document. GAO's guide never uses the phrase, but describes the check as "comparing information on three critical documents": the order, "the receiving and inspection document (normally called a receiving report)," and the invoice. The detail needed is "quantities ordered, received, and billed," and "If necessary, the invoice was adjusted to reflect the items actually received and accepted." The same guide says payment should be authorized "only after matching the types and quantities received with those on the purchase order or contract." It also allows exceptions: federal fast pay, limited to $25,000 per invoice, authorizes payment "without evidence of receipt and acceptance," with receipt verified afterwards.

That means the receipt caps what you pay. On a PO for 120: post 120 when 100 arrived, and an invoice for 120 matches and gets paid for 20 units you never got. Post 100 when 120 arrived, and an accurate invoice for 120 is held, while 20 real units sit off the books until a count finds them.

It also misstates what your stock is worth, by the wrong quantity times its cost, and leaves a received-but-not-invoiced amount that never cleanly clears against the invoice. See the real cost of inventory inaccuracy for what that does downstream.

How do you fix a receipt that was posted wrong?

Reverse or correct the receipt itself, then post the right one against the same PO line. Do not fix a receipt error with an inventory adjustment. Adjustments are for stock lost, damaged or miscounted after a correct receipt.

Intuit says a quantity adjustment in QuickBooks Online changes quantities "without recording a purchase or sale, to match what you actually have in stock," and records the difference to Inventory Asset and to an adjustment account you choose, typically Inventory Shrinkage under Cost of Goods Sold. Our reading of what follows: on a PO for 120, if 120 were posted and only 100 arrived, an adjustment of minus 20 makes on-hand correct, books 20 units of shrinkage that never happened, leaves the receipt and the received-not-invoiced amount at 120, and leaves the PO line showing fully received.

Linked documents need care too. Intuit warns that when you unlink a purchase order from a saved bill, "The purchase order status, however, stays closed," and you have to reopen it by hand.

A correction routine:

1. Find the receipt by PO and supplier reference, not by item.
2. Reverse it (or edit it, where your system keeps an audit trail of the change), with a reason.
3. Post the correct receipt against the correct PO line and unit.
4. Check the PO's open quantity and status, and reopen or short-close it as needed.
5. Tell accounts payable if an invoice has already been matched.
6. If the stock has already been put away, picked or shipped, the period has closed, or the invoice has been paid, involve finance: you may need a current-period correction and a vendor credit rather than a straight reversal.

Then count the location; see what is inventory accuracy.

Where do the ASN and the receiving advice fit?

The 856 is the supplier's description of what it shipped; the 861, where a trading partner uses it, is your notice of what you received. X12, the standards body behind US EDI, says the 856 Ship Notice/Manifest "enables the sender to describe the contents and configuration of a shipment." The 861 Receiving Advice/Acceptance Certificate is for "the notification of receipt" or "formal acceptance of goods and services."

The ASN is the supplier's version. GS1's logistic label guideline allows that, by agreement, "the SSCC may be scanned and the goods accepted as complete as indicated in the Despatch Advice / ASN." If you receive that way for trusted suppliers, audit a sample of those receipts by count and stop accepting ASNs as complete from suppliers whose ASNs fail.

A receipt checklist

1. Key receipts on supplier, reference and PO line; warn when one reference is over-received.
2. Convert cases to stocking units before posting, and show both numbers.
3. Send unknown GTINs to an exception queue; they can mean a pack change.
4. Receive substitutes as what they are; post overages within tolerance; hold the rest.
5. Decide every short line: backorder with a confirmed date, or short-close with the supplier told.
6. Fix receipt errors by reversal and re-posting, not by adjustment.
7. Check the PO status after every correction, and tell accounts payable.

A wrong receipt rarely stays in the warehouse: it ends up as a payment for goods you never got, or an accrual nobody can clear.