How to Organise Purchasing, Sales and Inventory Records
Author: Junanda ConsultingReviewed by: Junanda Service Team2026-09-19
Purchasing, sales and inventory are where the three streams of a manufacturing or trading business — money, goods and documents — meet. The real purpose of organising records is to make every transaction independently reconstructible: who approved it, how the goods moved, how the invoice was issued, and how payment was made or received. Good records mean faster month-end closing, more reliable costing and no panic during a tax inspection. Poor records usually mean scrambling to reconstruct documents at the time of the annual tax settlement or an audit, which is a costly exercise. This article works through the business cycle and sets out a set of methods that can be put into practice directly.
The Purchasing Cycle: Six Steps, All of Them Necessary
A properly documented purchase normally involves six stages:
- Purchase requisition: raised by the requesting department, stating the purpose, quantity and expected delivery date, and subject to approval.
- Purchase contract or purchase order: setting out price, payment terms, quality standards, acceptance method and liability for breach.
- Delivery acceptance note: the warehouse or quality control function confirms quantity, specifications and appearance, and records any quality objection where necessary.
- Goods receipt note: the warehouse records the goods on the basis of the acceptance result, increasing inventory.
- Supplier invoice: the item description, quantity and amount should correspond to the contract and to the goods received.
- Payment voucher: the bank receipt or acceptance record, annotated with the corresponding invoice number and contract number.
The practical point is to record the date the business event occurred separately from the date on the document. Where goods arrive before the invoice, make a provisional receipt of goods; where the invoice arrives before the goods, record it as a payable without recognising inventory. File documents by supplier and month, and attach the monthly statement of account, so that month-end tidying is straightforward.
The Three-Way Match
The three-way match means that the purchase order, the goods receipt note and the supplier invoice corroborate one another in terms of item description, quantity, unit price and amount. In practice, the check has three steps:
- Quantity match: the invoiced quantity should not exceed the quantity received. Any excess needs an explanation, such as reasonable loss, replenishment or free-of-charge items.
- Price match: the invoice unit price should agree with the contract or order price. Where there is a difference, a price adjustment agreement or written confirmation is required.
- Amount match: the tax-inclusive amount should equal quantity multiplied by the tax-inclusive unit price, with the tax amount derived from the applicable rate, and any discrepancy should be explicable.
Where the three documents do not agree, payment should in principle not be released until the reason has been established and documented. This is the single most effective safeguard against fictitious purchases and duplicate payments. In many businesses, the root cause of a mismatch between the books and physical reality is that payment simply bypassed the matching step.
The Sales Cycle: Also Six Steps
The equivalent chain on the sales side runs: sales order, sales contract, goods issue note, customer signed receipt, sales invoice, and payment receipt voucher.
The customer signed receipt is the document most easily overlooked, yet it is the key evidence for determining the point at which revenue is recognised and whether control has transferred. Care is needed where goods have been dispatched but not signed for. Where goods have been signed for but not yet invoiced, the point at which the tax obligation arises determines whether revenue should be recognised. Payment receipts should be checked line by line against invoices and contracts, with advance payments and final payments recorded separately, so that mixing them does not distort the balances on receivables and payables.
Inventory Management: Books and Physical Stock Must Agree
Inventory records should cover at least three categories:
- Stocktake sheets: a full count at the beginning and end of the period, with spot checks during the year. Any surplus or shortage must be investigated and approved.
- Goods receipt and issue ledger: recorded continuously by item description, batch, quantity and date, with daily clearance and monthly closing.
- Slow-moving materials and loss records: define what counts as slow-moving — for example, no movement beyond a set period, cancelled orders or process changes — review periodically, and require approval and records for both impairment and scrapping.
Stocktake differences must not be smoothed over by adjusting the accounts. It is necessary to distinguish between receipt and issue errors, measurement error and management control gaps. Otherwise the figures become increasingly chaotic and costing loses its reference value.
Costing Methods and Provisional Receipt of Goods
There are three common methods of valuing inventory:
- Specific identification: cost is identified item by item, suitable for inventory with a high unit value that can be clearly distinguished.
- FIFO: assumes that goods received first are issued first, and transfers cost accordingly.
- Weighted average: calculates cost using an average unit price, either on a monthly weighted average basis or a moving weighted average basis.
Once a method has been chosen, it should be applied consistently within the same financial year and not changed at will. Where a change is genuinely necessary, it should be treated as a change in accounting estimate in accordance with the accounting standards, with the corresponding disclosure. Switching methods frequently destroys the comparability of cost data and financial statements.
The provisional receipt of goods follows a three-step trail. Where goods arrive before the invoice, record them at the contract price or a reasonable provisional value. At the beginning of the following month, or when the invoice arrives, reverse the provisional entry in red. Then record the goods formally at the actual invoiced amount. Each of the three steps needs documentary support, so as to avoid double entry or distorted costs.
Monthly Reconciliation, Tools and Archiving
Prepare a statement of account with each supplier and customer once a month, confirmed by both parties' seals or within the system, and treat it as the basis for confirming receivable and payable balances. Differences identified in reconciliation should be listed and tracked through to resolution rather than left with a note saying "to be investigated".
On tools: businesses with high transaction volumes and many batches are advised to adopt an ERP system, embedding the three-way match, batch ledger and cost transfer into the system. Businesses with lower volumes can manage perfectly well with well-run manual ledgers plus spreadsheets. What matters is not whether the tool is expensive, but whether records are continuous, traceable and approved.
One final step is easily overlooked: archiving and custody. Purchasing, sales and inventory records are best filed under a three-level structure of year, month, and supplier or customer, with parallel paper and electronic sets. Accounting vouchers, contracts and invoices should be retained for the longer of the periods required under the accounting archives rules and the tax rules, subject to the latest official provisions. On any handover of duties, a document inventory should be completed, so that staff changes do not create gaps in the records.
| Stage |
Records |
Responsibility |
Filing frequency |
| Purchasing |
Purchase requisition, approval record |
Requesting department |
Per transaction |
| Purchasing |
Purchase contract or order |
Procurement department |
Per transaction |
| Purchasing |
Delivery acceptance note, goods receipt note |
Warehouse and quality control |
Per transaction |
| Purchasing |
Supplier invoice, payment voucher |
Finance |
Per transaction |
| Sales |
Sales order, sales contract |
Sales department |
Per transaction |
| Sales |
Goods issue note, customer signed receipt |
Warehouse and logistics |
Per transaction |
| Sales |
Sales invoice, payment receipt voucher |
Finance |
Per transaction |
| Inventory |
Goods receipt and issue ledger |
Warehouse |
Daily and monthly |
| Inventory |
Stocktake sheets and approval of surpluses and shortages |
Warehouse and finance |
Monthly and annual |
| Inventory |
Slow-moving material and loss records |
Warehouse and finance |
Quarterly |
| Receivables and payables |
Supplier and customer statements of account |
Finance |
Monthly |
Self-Check Checklist
This article is general business information prepared by Junanda Consulting. Specific policy positions, tax rates, deadlines and procedural requirements are subject to the latest official versions issued by the competent authorities. To understand how these requirements apply to your business, please contact Junanda Consulting for further information and support.
