Rule one: The invoice is tied to the supply, not the payment
Receiving a payment does not replace issuing an invoice, and not receiving it does not delay the obligation to issue one. The tax invoice deadline is tied to the supply date and must not go beyond the fifteenth day of the month following the month of supply. So design your procedures so that the invoice is issued on time whether the customer pays immediately, weeks later, or in instalments. A common mistake is waiting for payment before invoicing credit sales, which causes late issuance and differences in the VAT return.
Rule two: One reference that links everything
The simplest and most powerful tool for controlling collections is a single reference number that appears on: • The quotation or sales order. • The invoice. • The payment request or payment link sent to the customer. • The bank transfer description or the transaction details in the payment gateway. When this number passes through every stage, reconciliation turns from manual searching through bank statements into automatic matching between the system and the bank. Ask your business customers to include the invoice number in the transfer description, and make that part of the payment details on the invoice itself.
Partial payments and instalments
• Partial payments are recorded against the same invoice until it is fully paid, and no new invoices are issued for the same supply with each payment. • A receipt voucher is issued for each payment referencing the invoice number. • In contracts invoiced in stages, such as projects and monthly services, an invoice is issued for each stage or period according to the contract terms and tax point rules, and each payment is matched to its invoice. A receivables ageing report built on this link gives management an accurate picture of what is actually due and who is late in paying.
Advance payments
An advance payment received before the supply has a tax effect that needs attention. Under the general rule of the VAT system, VAT may become due when consideration is received if this happens before the supply, to the extent of the amount received. This means that receiving an advance payment may require a tax document to be issued for it, and then be accounted for when the final invoice is issued so VAT is not counted twice. Because the details vary with the nature of the business and the contract, it is best to design this treatment with your tax adviser and configure it in the system.
Refunds and returns
When money is returned to a customer because of a return, cancellation or price reduction: • A credit note is issued referencing the original invoice and stating the reason. • The refund is processed through the appropriate method, usually the same one the customer paid with. • The refund is linked to the credit note in the system. A common mistake is processing the refund directly in the payment gateway without issuing a credit note, so the original invoice remains at full value in the records and the VAT return even though the money was returned.
Payment gateway fees and settlements
Many payment gateways transfer net amounts to the business after deducting their fees, and sometimes combine several days of transactions into a single transfer. So the amount that reaches the bank does not match any specific invoice. To handle this: • Use the settlement reports provided by the gateway, which break down the transactions and fees in each transfer. • Record total sales at their full value, and record gateway fees as a separate expense; do not reduce the invoice value by the fees. • Reconcile settlements against invoices daily or weekly, rather than letting differences accumulate until month end. • Note that the gateway fees themselves may be subject to VAT, so obtain a tax invoice from the service provider to deduct that VAT where applicable.
Buy-now-pay-later services
With these services, the customer pays the provider in instalments, while the business receives the amount from the provider. Usually the business issues the invoice to the customer for the full value of the supply at the time of sale, and matches collection against what the provider transfers after deducting its fees. Make sure you understand how settlement works with each provider, and handle returns with a credit note even if the refund goes through the provider.
Automation: the lasting solution
As transaction volumes grow, manual reconciliation becomes impractical. The solution is for systems to work together in a single flow: • The invoicing system issues the invoice and generates a payment link carrying its number. • The payment gateway sends an automatic notification back to the system when payment succeeds. • The system records the collection against the invoice automatically. • Gateway settlements and bank statements are imported and matched automatically. • Only exceptions appear on a list for human review. This shifts the finance team from entering and searching for data to following up on exceptions and making decisions.
Frequently asked questions
Must the payment method be stated on the invoice? It is not one of the core required elements in every case, but including it helps reconciliation, and the e-invoice format supports it. Should I reduce the invoice by the gateway fees? No. The invoice carries the full value of the supply, and the fees are a separate expense for the business. What if the customer pays more than the invoice amount? The difference is recorded as a credit balance for the customer or refunded to them; the invoice is not changed. Is the treatment different for card payments and bank transfers? The tax rules are the same. The difference is in reconciliation: cards are matched through gateway settlements, and transfers through the transfer description and the reference number.
Conclusion
E-invoicing ensures your invoice is correct, and disciplined reconciliation ensures your money has arrived. When every riyal is linked to its invoice through a single reference and an automated flow, collection is faster, the VAT return is more accurate, and cash flow is clearer for management. At Shams Solutions, we help businesses prepare their accounting and ERP systems for e-invoicing, from the initial assessment and data cleanup to integration with the FATOORA platform, go-live and ongoing follow-up. Contact us to review your business's setup and agree on the right next steps.