Purchases Clearing Report - I was cleaning up some old files when I encountered a word document that I sent to Wayne 10 years ago. The topic was what are the issues with the purchases clearing report. Based on the amount of programming that has taken place since it was written, I imagine most of it is still relevant. Let me know what you think.
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Wayne,
A couple more thoughts. I agree with the real time statement. This makes it extremely difficult to balance when the PO unit price really isn't the one that was posted. We tried writing a RM report but we never had much luck making the auditor happy. It only made him think that I was incompetent. Here are some more issues that I have with this report/concept.
The PO cost is changed to agree with the invoice price when the invoice is posted. In talking to Best three years ago (when I used MAS 90 in a mfg environment), I was told that this was a ""feature"" that many companies liked. I guess some companies like the ability to look up PO's and see what they actually paid for it, not what they thought they should have paid for it. This made it difficult for us when we would process the invoice and then forward the a/p variance report to the buyer to research. At this point, the po price agreed with the invoice so he wasn't sure what we were talking about. Perhaps this is a feature for some companies, it certainly wasn't for us. And I am sure that in the larger companies that have segregated departments, this isn't the case either. Perhaps a compromise is to add a flag to setup to give control to the individual company.
The purchase price variance report needs a little work. Currently, it only prints when a quantity received is completely invoiced. (e.g. Received 10, invoiced 10). So let's say that say that on day one, line one has five items posted ($10 each). On day two, another five items come in at $10. On day three, the invoice arrives for the first five and is posted for $15. No PPV report is generated at this point. However, $75 is transferred from purchases clearing to A/P, thus creating a ""hidden"" variance of $25. The PO costs has also been changed by the system to the higher $15 cost, even though the buyer only authorized a $10 unit cost. Now on day four, another five items arrive, they get posted to purchases clearing at the higher unit cost, even though the buy hasn't had a chance to investigate the problem. At this point, we have a hidden variance trapped in purchases clearing, we have another five items that posted in at $10, and we have another five items that posted in at $15. If you run the purchases clearing report at this point valued at $150. Then general ledger will show a $100 balance.
This all happened on the last day of the month. It also happened to be year-end. In a lot of companies, the buyer took a week's vacation. In an effort to tie accounts out, you make a journal entry to make the g/l balance to the report, further complicating the matter.
My second suggestion is to print and update the PPV report every time you post an invoice. No more waiting until the total receipt has been posted.
My third suggestion to improve the process is to enlarge the information that appears at the very bottom of the screen when you click on either the received or invoice fields in the receipt of goods or receipt of invoice entry program. The information displayed pertains to the amount previously received and or invoiced. This information is very important but many people don't even notice that it is there. In receipt of invoice, you can actually pay for more than you received and it doesn't give you much of a warning.
Another place your balance can go astray is in the return of goods processing. If you reference an existing PO # during return entry, the item will be pulled from the inventory account and debited to the purchases clearing account. A line will display on the purchases clearing report. If the vendor replaces the item AND it is posted as a ROG (a big IF), inventory is debited and the clearing account is credited (hopefully for the same amount are the original posting).
Finally, why isn't the purchases clearing concept activated for the receipt of miscellaneous items. Many times a buyer will issue a PO for a miscellaneous item. The item will arrive in the receiving department and be sent to the respective requester, but no accrual will be made at that point. Only when the invoice is received is the liability actually established. This was always an issue when manufacturing was waiting on a part to arrive (work order was open, po referenced the wo job and step). Misc. part was sent to the floor. Machine completed. WO was completed and closed the next day. A week later, the invoice for the part arrived but could not be posted because the work order was unavailable. We created a report to that had to be run before completing the wo which would indicate any open po's. Our reseller didn't tell us this, we learned the hard way when the open work orders didn't balance to the g/l.
Inventory transaction marked as a ""receipt"" also post to the purchases clearing account even though no PO is involved. Not a good idea to use this ""feature"".
Wayne, sorry for the long story but there are many areas that could be causing your out of balance condition. All I can say is to be vigilant.