Verifying and processing vendors' invoices for procured products or services can be a burdensome task. To simplify such processes and improve organizational efficiency, companies can consider Evaluated Receipt Settlement, or ERS, an automatic way of settling goods' receipts.
In a standard procurement process, a three-step invoice matching process must be carried out before a company authorizes payment to a vendor. The steps include verifying:
- The quantity and price of a material or service shown in the purchase order.
- The delivery of a material or service.
- The vendor's submission of an invoice for the delivered material or service and that payment's authorization.
Implementing ERS eliminates the third step, with authorization of payment automatic upon delivery confirmation, obviating the need of invoicing.
Implementing ERS reduces data entry workload and takes less time for payment processing. Expedited payment processing by companies using Evaluated Receipt Settlement enables vendors to offer favorable pricing, since they know they will be promptly paid on the previously agreed-upon terms and conditions of supply. Integrating ERS in the procurement process works especially well when there's a long and trusted business relationship between the company and the vendor. With ERS, the system expects that, had the vendor submitted the invoice, there would neither be price nor quantity deviation of delivered goods.
While a vendor may supply many products to a company, the system does offer the option for a company to selectively choose products that are eligible for ERS processing. Evaluated Receipt Settlement not only works well in automatically processing the vendor payment, but it can also streamline the return of defective goods to the vendor, along with automatic payment adjustment.
For ERS to correctly work, it is a mandatory requirement to maintain details of the delivery note number while receiving goods. This way, the company can always check in case a dispute arises with the vendor for the delivered goods and payments made using ERS. But in many SAP ERP systems, maintaining details of a delivery note number is optional. With the right settings in place, the system can make it mandatory for warehouse supervisors to maintain information in the delivery note field.
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