Mostly Harmless, Part XIII
In the last post, reconciliation was defined as the process of comparing and matching figures from the accounting records of one system with the accounting records of another system. This meant that records in the system not only needed to match up, but match any associated records in the inventory system, the human resources system (if temp labor was procured), and the records in the supplier systems. This often requires a number of challenges to be overcome. This post will address some of the challenges of reconciliation, some associated best practices, and a few of the benefits that could be expected from an appropriate e-Procurement solution.
Common Challenges
- Manual SKU Assignment
If a line item can not be automatically matched with a purchase order line item and a corresponding price, then it can be difficult to match an item with the proper item in the buyer’s system.
- Overpayment Identification
As explained in the previous post, sometimes overpayments will slip through the most controlled system, especially if it’s difficult to match a conditional discount against a line item or if a contract is late being entered into the system.
- Tax Verification
Is the tax rate correct? Are the items being taxed subject to taxation? Is the organization exempt? Is the organization eligible to recover (part of the) tax payment? These can all be difficult questions to answer.
Best Practices
- Flagging of Manual Assignments
The system should automatically flag any manual assignment, and queue any manual assignments above a certain value for supervisory review.
- Automatic Identification of Potential Overpayments
The system should automatically identify any off-contract payments for goods and services that relate to existing contracts with suppliers in case the goods or services were covered by general discount clauses or in case the opportunity arises to negotiate them into a (future) contract revision.
- Automatic Tax Rate Verification
The system should automatically verify that the tax rates used are correct, that each tax the organization knows it has to pay is included, and that any taxes it gets to reclaim are appropriately flagged.
Potential Benefits
- Overpayment Detection and Recovery
Good reconciliation support will increases the number of overpayments that are detected and increase the chance of full and timely recovery.
- Tax Recovery
Good reconciliation support will increase the chances that recoverable tax payments are identified.
Once the reconciliation phase is complete, it is time to reclaim any tax payments to which the organization is due, which is the subject of a future post.
Next Post: Payments