{"id":6105,"date":"2024-07-07T21:50:24","date_gmt":"2024-07-07T21:50:24","guid":{"rendered":"https:\/\/www.peeriosity.com\/shared-services\/articles\/?p=6105"},"modified":"2024-07-07T21:50:24","modified_gmt":"2024-07-07T21:50:24","slug":"streamlining-the-goods-receipt-invoice-receipt-process","status":"publish","type":"post","link":"https:\/\/www.peeriosity.com\/shared-services\/articles\/2024\/07\/streamlining-the-goods-receipt-invoice-receipt-process\/","title":{"rendered":"Streamlining the Goods Receipt\/Invoice Receipt Process"},"content":{"rendered":"

Introduction<\/strong><\/p>\n

Nothing is more fundamental in Accounts Payable then the 3-way match process.\u00a0 While many also leverage a 2-way match process using Pay-on-Receipt or Evaluated Receipts Settlement, many transactions continue to be processed by matching the invoice with the receipt and the purchase order. When price and\/or quantity discrepancies are not resolved in a timely manner it creates a range of accounting issues and vendor management issues.<\/p>\n

For many companies, a GR\/IR report is a critical tool for identifying and resolving discrepancies in Goods Receipts (GRs) and Invoice Receipts (IRs). These discrepancies can lead to inaccurate financial reporting and potential liabilities. By using the GR\/IR report, companies can streamline their clearing process, improve efficiency, and ensure accurate financial records. This report is particularly useful for addressing aged, open items. By identifying these discrepancies early, companies can take corrective actions to avoid potential financial issues.<\/p>\n

Company Experience<\/strong><\/p>\n

A Peercast discussion in Peeriosity-100\u2019s Accounts Payable (P2P) research area featured a global company with $20B in annual revenue discussing their efforts to streamline the Goods Receipt\/Invoice Receipt (GR\/IR) process.\u00a0 The year-long project involved analysis, understanding, communication, and participation with all of the various touchpoints in the process to identify disconnects, establish accountability, and provide user training.<\/p>\n

The GR\/IR report details purchases in transit and unbilled payables.\u00a0 The GR value is the total dollar value of the goods or services receipt that is entered by the Purchase Order (PO) initiator or the Receiving department.\u00a0 The IR value is the dollar value of the goods or services receipt entered in Accounts Payable that have either been invoice or paid.\u00a0 Open GRIR then is when either the invoice or receipt record have not been entered or there is a mismatch in value due to either price or quantity differences.<\/p>\n

The original process was to create an open IR\/GR report of items over 90 days and send the reports to the PO initiator (the buyer for inventory purchases, and the requester for non-inventory) for review and action, which might include reversing the receipt, or keeping it open and following up with the vendor for resolution.\u00a0 After collecting all of the replies the report was sent to Finance for review.<\/p>\n

The challenges with this approach included buyers and PO initiators who were non-responsive despite multiple follow-ups and escalations.\u00a0 Resolving discrepancies over 90 days wasn\u2019t considered a priority that should take precedence over current and perceived more important issues.\u00a0 There was no local authority with someone in a senior position locally who could provide pressure and encouragement for the review and resolution to be completed timely and accurately.\u00a0 There were also no decision-making rights in Accounts Payable.<\/p>\n

The solution implemented included setting new dollar thresholds for write-offs and providing training for internal teams with responsibility to resolve the discrepancies.\u00a0 In addition, the company implemented quarterly reporting to local Finance Directors on items pending over 150 days, providing them with visibility to the issues and the responsible parties for follow-up and resolution.\u00a0 They also created a process where Finance Directors were authorized to close outstanding items, further reducing the number of aged items.<\/p>\n

The results were significant, with open items greater than 180 days reduced by over 50% within six months of the process redesign.<\/p>\n

Polling Results Review<\/strong><\/p>\n

A poll was created by the member featured on this Peercast to better understand the process Peeriosity-100 member companies follow for clearing open GR\/IR. The poll results were important inputs to decisions that were made to streamline the GR\/IR process. \u00a0For 50% of responding companies, the primary process is to follow up with the PO Creator.\u00a0 19% primarily follow up with the Supplier, 19% primarily follow up with Receiving, and the balance of 17% use another approach including differing completely to Purchasing to resolve.<\/p>\n

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The second question in the poll asked about the process for reversing or closing open Goods Receipt (GR) after a certain number of days if the invoice is not received.\u00a0 No company indicated they make this decision prior to 120 days.\u00a0 6% reverse\/close between 121 -180 days, 35% reverse\/close between 181 and 364 days, 6% reverse\/close after one year, 24% have no specific time frame, and 29% do not reverse\/close Goods Receipt because the open items over a certain threshold are fully resolved by some combination of efforts between the supplier, AP, Purchasing and\/or Receiving.<\/p>\n

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Here are some of the comments from Peeriosity-100 members:<\/p>\n