One challenge often faced in accounts payable is how to handle variances in the three way match when posting invoices. SAP has a very robust process for ensuring that invoices are matched against the PO and GR. In this three part series, first, we’ll review the business process and how SAP enables it. Second, we’ll discuss handling variances through posted invoices in MIRO. Third, we’ll discuss handling variances through parking invoices and MIR6.
Three Way Match with Invoices
A three way match is an accounting control that ensures that the purchase order, inventory receipt, and invoice all match in terms of product, quality, quantity and price.
- The process starts when purchasing creates an order and sends it to a vendor. The purchase order includes important information such as the materials, quantity, price, the location to ship to, tax information, and so forth.
- The vendor ships the product to plant specified on the purchase order. The plant staff print out a receipt form for the order. The receipt contains the vendor and the expected materials, but not the quantities The quantities are entered onto the form. Additionally, the product is checked for damage, spillage, quality, and so forth.
- The vendor sends an invoice to the accounts payable department for the company. The invoice specifies the purchase order, the quantities, price, and total price for the shipped product.
- Accounts payable must now verify that the quantities on the PO match those of the receipt and invoice. Additionally, the prices must be checked between the PO and the invoice. Any variance must be researched and dealt with as a collaboration between procurement, the warehouse, and AP.
The three way match is one of the most important accounting controls as inventory is often one of the biggest assets that a company will have on their balance sheet. The control also ensures that inventory and other assets are properly obtained with the correct process.
How does SAP enable a 3-way match for posting invoices??
SAP enables a similar process through purchase order (PO), goods receipt (GR), and invoice receipt (IR). Purchasing and goods receipt configuration are not in the scope of the article, but we’ll touch on those processes. The key for the process is to consider the quantities and price on the PO, GR, and IR. SAP will be verifying the quantities of these throughout the process.
In the above flow, the purchase order is issued to the vendor for a quantity of eight at a price of $12.50. The PO does not make any entries in accounting. When the goods are received, they’re always received at the PO price for the quantity counted by the receiver. That posts inventory and puts a credit on the GR/IR account. The GR/IR account is a kind of super clearing account in SAP that ensures the three way match.
So now, let’s look at the SAP screens. First, we have a purchase order:
(1)Posted with ME21N, displayed with ME23N
Next, we have the goods receipt. The GR will debit inventory and credit the GR/IR account.
(2)Posted with MIGO, displayed with MB03
Next, we have the invoice receipt that is posted through MIRO. Notice that the AP vendor is credited and the GR/IR is zero’d out with a debit.
And there we have it. In the next posts, we’ll discuss the challenges of detecting and resolving variances withe MIRO.
T-Codes, Config Paths, etc [ + ]
|1.||↑||Posted with ME21N, displayed with ME23N|
|2.||↑||Posted with MIGO, displayed with MB03|
|3.||↑||Posted with MIRO and displayed with MIR4|