Has anyone put in any system constraints around AP invoice variances (PO vs invoice)? What constraints have you implemented and how? Has it worked well? How do you deal with constraints that have already passed inspection?
Are you getting a price confirmation from your supplier? If so, are you updating your PO?
Yes, but the user still put in the wrong unit price - dropped the decimal point on the PO.
You should get a Purchase Variance (PUR-VAR I believe) that corrects your inventory at Invoicing then.
You need a business process that will handle those situations.
Possibly a BPM that looks at any price change between the invoice and the PO line and stops the AP invoice entry until the pricing is corrected.
The business process I have used is a matching system with a copy of the PO and the AP invoice:
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Validate the invoice against the PO prior to Invoice Entry.
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If Error,:
2.1 delete the PO Receipt
2.2 update the PO pricing
2.3 re-enter the PO Receipt
2.4 Enter the AP Invoice
Charlie
This doesn’t account for material used between the PO receipt entry, and the AP Invoice entry. Or for the various ways that Cost Method will affect what happens and what needs to be done to fix things.
Calvin, I don’t disagree.
Remembering that the PO receipt will go one of 2 ways. Either to inventory or to the job. If it is a misc purchase, it doesn’t matter.
If the cost goes directly to the job (either materials or subcontract), the costs to the job will be adjusted. The only problem would be timing (say the job was shipped or received to stock). In which case you would have a manufacturing
variance because the WIP did not get relieved.
If the receipt is to inventory and the material had been issued to a job, the material costs would be from the time of the issue and the inventory costs would be out of whack. Job Adjustment required.
In any case the problem of accounting becomes an issue any time somebody screws up. Once that happens, everything goes to the …… . Accounting has to clean it up. Journal Entries, Job Adjustments, Inventory Adjustments, reversals, etc.
Preventing things from happening in the first place is the key.
One thing I thought of was on PO Entry/Maintenance for a part item might be a BPM to check the PO price vs the last cost and if there is a variance of a specific percent, flag it. For a subcontract op PO, check the PO against the job op
estimate and look for a variance. Granted many companies don’t enter a subcontract estimate, but it’s doable.
Each operation needs to look at the business process and learn from the problems that crop up and determine ways to prevent it from happening again. Continuous Improvement.
In her case is was a missed decimal. How does the organization learn from it? Send it to a CI team.
Charlie
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