Goods Receipt as a Pivotal Point in the Purchase-to-Pay Process

A well-structured Purchase-to-Pay process begins with the purchase request and ends with payment to the supplier. In between, there are several points at which an organization can exercise control. The purchase order specifies what may be purchased. The invoice details what the supplier wants to be paid for. But between those two lies a crucial moment: the receipt of the goods or services.

It is precisely this step that often receives less attention within Finance.

A purchase order may have been fully approved, and an invoice may match that order exactly. Yet that does not necessarily mean the supplier has actually delivered what was ordered. Perhaps eight out of ten items have arrived. Perhaps a shipment is damaged. Perhaps part of it has been returned. Or perhaps a service has not yet been fully performed.

Goods receipt records what actually happened.

As such, the goods receipt process forms the link between the operational process and financial accounting. Without reliable recording, Finance can verify whether an invoice matches a purchase order, but not whether that invoice matches the supplier’s actual performance.

This has implications for much more than just invoice verification. Goods receipt is crucial for three-way matching and touchless invoice processing, as well as for inventory management, accruals, month-end closing, supplier performance, and internal control.

For Accounts Payable, it is also a key factor in distinguishing between invoices that can be processed automatically and those that require manual review.

The purchase order authorizes the purchase; the receipt confirms its fulfillment

A purchase order plays a key role within the Purchase-to-Pay process. It specifies what is being purchased, at what price, from which supplier, and under what terms. If the request has been approved in advance, the order also serves as proof that the expenditure has been authorized.

But a purchase order remains an agreement about what still needs to be done.

It is only upon receipt that information about its fulfillment becomes available.

That distinction may seem obvious, but it has major implications for how invoices are verified.

Suppose an organization orders ten laptops for €1,000 each. The supplier then sends an invoice for €10,000. A comparison between the purchase order and the invoice reveals no discrepancy. The price, quantity, and total amount are identical.

If, in reality, only eight laptops were delivered, a two-way match is still insufficient.

With three-way matching, therefore, the receipt is included in addition to the purchase order and invoice. Microsoft explicitly describes this in Dynamics 365 as comparing the price on the invoice with the purchase order and the invoiced quantity with the recorded product receipt. Discrepancies can then be checked against predefined tolerances. [1]

This highlights an important distinction between authorization and performance.

The purchase order confirms that the organization was prepared to purchase ten laptops. The goods receipt confirms how many of those were actually delivered. Only then can the invoice be reliably verified.

This also makes goods receipt an internal control.

In its current Procure-to-Pay guidelines, the British tax authority HMRC describes the Goods Received Note as the internal document used to confirm that delivered goods are in order or to record any discrepancies. Among other key controls, HMRC mentions the accurate recording of receipts and the protection or traceability of changes made after invoices are received. [2]

Incidentally, this does not necessarily refer to a paper delivery note.

Goods receipt is primarily a point of recording. The underlying confirmation can be generated by scanning a barcode, recording in a warehouse system, using a mobile app, an electronic delivery note, or manual confirmation in the ERP system.

For Finance, what ultimately matters is that what, how much, and when goods were actually received is reliably recorded.

Without receipt registration, three-way matching remains a theory

Three-way matching is often cited as an important step toward automated invoice processing. The principle is simple: if the purchase order, receipt, and invoice match, an employee does not need to approve the invoice’s content again.

After all, the original decision to spend money was already made when the purchase order was issued. The receipt then confirms that the supplier has fulfilled the order. The invoice can then be verified automatically.

But this mechanism only works when all three sources of information are reliably available.

An organization may have excellent invoice capture, receive electronic invoices, and manage purchase orders digitally. If employees fail to record goods receipts or do so too late, the invoice will still get stuck.

The problem then shifts to Accounts Payable.

An AP employee sees an invoice for ten items, while the system shows no receipt. It must then be determined whether the goods were not delivered or whether someone simply forgot to record the receipt.

Software cannot make that distinction on its own when the source information is missing.

The scale of these types of exceptions is significant. In Ardent Partners’ *AP Metrics That Matter in 2025*, based on a survey of 212 AP professionals and their organizations, the average invoice exception rate was 14%. Only 32.6% of invoices were processed entirely via straight-through processing without human intervention. According to the study, coding errors, missing information, approval bottlenecks, and missing PO data are among the causes that cause invoices to be excluded from the automated process. [3]

Goods receipt is thus a classic example of an upstream process step whose consequences become apparent downstream in AP.

A missing receipt may initially appear to be a logistical administrative error. For Finance, however, it means that an invoice cannot be automatically released.

This becomes particularly clear in the case of partial deliveries.

A purchase order for 1,000 items does not have to be delivered all at once. For example, the supplier might first deliver 600 units and the remaining 400 later. A correct receipt entry records those first 600, so that an invoice for just that quantity can be matched.

Dynamics 365, for example, explicitly supports linking partial receipt quantities to invoice lines. [1]

Without that information, a binary system of record quickly emerges: the order is either “open” or “received,” while reality is much more nuanced.

It is precisely at the line item level, therefore, that it must be clear what has been delivered in full, in part, rejected, or not yet delivered.

Goods receipt is also financial information

The importance of receipt registration extends beyond Accounts Payable.

As soon as goods are received, the organization’s financial position changes. An asset or expense has been created, and a liability to the supplier exists—even if the supplier’s invoice has not yet been received.

ERP systems therefore often process this through a suspense account for Goods Receipt/Invoice Receipt, usually referred to as GR/IR.

SAP describes the GR/IR account as the suspense account between the receipt entry and the final supplier invoice. Upon receipt, the value of the goods is recorded in the financial system, and an offsetting entry is made to GR/IR. When the invoice is subsequently posted, this interim balance is settled. [4]

This mechanism is important for month-end closing.

Suppose goods are delivered on September 29, while the invoice arrives on October 3. If the organization were to rely solely on received invoices, the goods and the associated liability might be missing from the September records.

A correctly recorded receipt of goods shows that the economic event already took place in September.

Therefore, the quality of the goods receipt recording is directly linked to the quality of accruals and cut-off.

SAP also uses the GR/IR account to track discrepancies between received and invoiced quantities. For example, if more has been invoiced than received, the system expects another receipt. If more has been received than invoiced, another invoice is expected. Such discrepancies remain on the GR/IR account until they are resolved or intentionally written off. [4]

This is relevant information for Financial Control.

A growing balance on “Goods Received Not Invoiced” does not necessarily indicate a problem. There is always some time between delivery and invoicing. However, old, large, or unexpected open items may indicate process issues: missing invoices, incorrectly posted receipts, purchase orders that have not been properly closed, or discrepancies that have never been resolved.

Goods receipt is therefore also a source for close reporting.

Which goods have been received but not yet invoiced? Which invoices have been received without a corresponding receipt? Which GR/IR entries remain open for an unusually long time? Which amounts are material for month-end closing?

Without reliable records of goods received, these questions are much more difficult to answer.

It’s not just boxes that need to be received

The term “goods receipt” quickly conjures up the image of a warehouse worker checking a pallet and signing off on a packing slip.

In many organizations, however, a significant portion of procurement consists of services.

Consulting, temporary staff, maintenance, marketing services, facility management, and other external services aren’t physically delivered to a receiving desk. Yet the same verification question remains: Did the supplier actually deliver what was agreed upon?

That is why procurement and ERP systems include similar mechanisms for service acceptance.

SAP, for example, uses Service Entry Sheets to record which services were actually performed. These sheets allow for the recording of quantities, service periods, and work performed, among other details. After formal acceptance, the service entry can serve as the basis for invoice verification. [5]

Conceptually, this is the same as receiving goods.

For example, a maintenance contract may stipulate that a supplier inspect twenty locations. The purchase order formalizes the agreement. Service acceptance confirms that those twenty inspections have been performed. The invoice then requests payment.

For professional services, acceptance can also be linked to milestones, hours, deliverables, or an agreed-upon period.

Not every purchase, however, requires exactly the same verification process.

A three-way match is particularly valuable when receipt can be objectively verified and the risk of overpayment or early payment is a concern. For rent, subscriptions, or other fixed contractual payments, a contract or payment plan may serve as a more logical verification criterion.

The starting point should therefore not be that every invoice requires a physical receipt of goods.

The better question is: what operational confirmation do we need before an invoice can be paid automatically?

For a hardware delivery, that is a product receipt. For consulting services, it could be an accepted service entry. For a fixed rental payment, the contract may be sufficient.

This makes goods receipt part of a broader control architecture within Purchase to Pay.

Automation starts with fast and reliable registration

For organizations that want to further automate invoice processing, it therefore makes little sense to focus exclusively on the Accounts Payable side.

The quality of goods receipt registration must be part of the same automation strategy.

That starts with speed.

If a shipment arrives on Monday morning but the receipt isn’t recorded in the ERP system until Friday, an electronic invoice that arrives on Monday afternoon could remain in an exception queue for four days unnecessarily.

Modern systems can handle this to some extent.

Microsoft, for example, supports automated processes in which imported supplier invoices are periodically reattempted to be matched with product receipts. If the receipt is posted later, the matching can still be completed without human intervention. [6]

But automation cannot resolve a structurally missing receipt.

That is why the registration process itself must be as simple as possible.

In a warehouse, this can be achieved using barcode or scanner systems. At a construction site or remote location, a mobile app may be more practical. Receipts can be forwarded from warehouse management to the ERP system. Electronic dispatch notifications from suppliers can indicate in advance what is on the way, after which the physical receipt only needs to be confirmed.

The user experience also plays a role.

An employee who has to navigate a complicated ERP screen for a simple delivery is more likely to delay the receipt registration. When the same employee can confirm via a mobile notification with just a few taps that ten out of twelve items have arrived, timely registration becomes more realistic.

Automation also means that not every discrepancy needs to be handled the same way.

Tolerances can prevent minor and financially irrelevant discrepancies from triggering manual review every time. For example, in three-way matching, Microsoft supports tolerances for price and quantity discrepancies; only discrepancies that exceed the set threshold need to be handled separately. [1]

The desired process is therefore not for Accounts Payable to check every invoice.

The desired process is for the purchase order, receipt, and invoice to be automatically compared, and for only the discrepancies to be forwarded to an employee.

The goods receipt is the information that makes this possible.

The goods receipt record also provides insight into how the process is performing

Furthermore, when receipt data is systematically recorded, it generates new management information.

Not only Finance, but also Procurement and Operations can use this to evaluate the process.

How many orders are delivered on time? Which suppliers consistently deliver less than ordered? Where do damages or returns occur frequently? Which suppliers send invoices before the goods have been received? Which internal departments consistently record receipts late?

This makes goods receipt an integral part of supplier performance.

A supplier may offer commercially attractive prices, but at the same time consistently make partial deliveries or supply varying quantities. Without reliable receipt data, a large portion of that performance information gets lost in emails, warehouse records, or isolated complaints.

With structured receipt data, the organization can identify patterns.

The same applies internally.

A large number of invoices awaiting goods receipt does not necessarily mean that suppliers are underperforming. Perhaps goods are being delivered correctly, but certain locations consistently record receipts late.

This suddenly turns a classic AP exception into a measurable process cause.

This is also relevant from an internal control perspective. The Association of Certified Fraud Examiners explicitly identifies invoices that fail the three-way match as transactions that organizations can flag and investigate in anti-fraud analyses. [7] Of course, a three-way match does not prevent every form of fraud, but it makes it more difficult for a financial claim without a corresponding purchase order and goods receipt to slip unnoticed through the process.

Goods receipt, therefore, provides evidence not only for a single invoice.

It creates a dataset showing what suppliers actually deliver and how well the organization itself executes the Purchase-to-Pay process.

This ultimately brings together various objectives.

Procurement wants to know whether suppliers are fulfilling their commitments. Operations wants to know what has actually been received. Accounts Payable wants to be able to automatically match invoices. Financial Control wants to process costs and obligations in the correct period. Audit wants to be able to reconstruct why a payment was made.

The same goods receipt record is relevant to all these functions.

This makes goods receipt much less of a logistical intermediate step than the name suggests.

It is the moment when a planned purchase becomes a reality—and when that reality becomes actionable for Finance.

A well-structured purchase order provides control before the expenditure. Proper receipt registration ensures the transaction was executed correctly. If the invoice is then received in a structured format, the majority of the verification process can take place automatically.

Thus, goods receipt is not the administrative hurdle between ordering and payment.

On the contrary, it is one of the most important conditions for ensuring that the Purchase-to-Pay process runs reliably and is largely automated.

Sources and References

1. Microsoft Learn, “Accounts Payable Invoice Matching Overview” and “Three-Way Matching Policies,” current Dynamics 365 Finance documentation. Covers comparing purchase orders, product receipts, and supplier invoices, as well as applying matching tolerances. learn.microsoft.com
2. HM Revenue & Customs, Procure to Pay (Part 4), updated July 2026. Guidelines for P2P controls related to purchase orders, receipt registration, invoice processing, and payment. gov.uk
3. Ardent Partners, Accounts Payable Metrics That Matter in 2025. A benchmark study of 212 AP professionals and their organizations regarding invoice exceptions, straight-through processing, and other AP performance indicators. datocms-assets.com
4. SAP Help Portal, Postings at Goods Receipt and Invoice Receipt, GR/IR Clearing Account, and Clear GR/IR Clearing Account. About the financial processing of goods receipts, invoices, and variances via GR/IR. help.sap.com
5. SAP Help Portal, Service Entry Sheets and Service Acceptance. About recording and accepting services rendered as a basis for further invoice verification. help.sap.com
6. Microsoft Learn, Automated Vendor Invoicing Processes and Submit Invoices to the Workflow System and Match Product Receipt Lines. About automatically matching received invoices with product receipts recorded at a later date. learn.microsoft.com
7. Association of Certified Fraud Examiners, Anti-Fraud Data Analytics Tests. Covers, among other things, the analysis of invoices that do not meet the three-way match between the purchase order, goods receipt, and vendor invoice. acfe.com