Mostly Harmless, Part XII
Reconciliation is the process of comparing and matching figures from the accounting records of one system with the accounting records of another system. In e-Procurement, it generally refers to the reconciliation of the invoice and associated payments against goods receipts, purchase orders, contracts, and / or tax records.
While reconciliation should be done at each step of the process — as the purchase order should be matched against the approval and a contract, the goods receipt against the purchase order(s), and the invoice against the goods receipt(s) and the purchase order(s), there should be a separate, (semi-)manual reconciliation phase as not everything can be reconciled automatically and there will always be new situations and exceptions not accounted for in the automatic rules.
If there is an error in a SKU or other identifying attribute, it may not be possible to automatically match one or more invoice line items against the purchase order(s) they correspond to. In this situation, the e-Procurement system would flag the invoice for manual review, at which point the individual who (first) processed the invoice would do a manual match. If the amount is significant, this match should be rechecked at a later time, because if there were two similar items in the procurement system (catalogs) and the match was made to the wrong, off-contract item, the organization might end up paying a higher price.
A review should also be made of all purchases against a supplier’s account for which there are no contract prices if there are contracts in place with the supplier. For example, a contract with an electronics vendor might be such that the organization gets 10% off of list price for all items for which a contract price is not specified or that the organization gets 15% off of all purchases once it has purchased One Million Dollars worth of goods and services. These situations may not be caught by the system automatically as it might not be easy to encode which goods or services are covered, especially if items are being ordered / purchased not yet in the system.
In addition, a review should be made of all tax payments. Is the tax rate correct? Are the items being taxed subject to taxation? Is the organization exempt? Is the organization eligible to recover some of the payments (such as GST in Canada)? This is a difficult subject and a manual review will be required to ensure that the right taxes are being made at the right amount and that the organization is capturing the right information that will be required for tax reclamation, which is the subject of an upcoming post.
Next Post: Reconciliation, Part I