1. Chapter 23 Invoice Verification
Invoice Verification is the part of the Materials Management Module that processes invoices from vendors by creating them in the system and matching them to Procurement Documents.
Chapter Objectives
Discuss the purpose of Invoice Verification.
Discuss the details of each step in the Invoice Verification process.
Discuss the integration points between the Materials Management and Financial Accounting modules in the Invoice Verification process.
As a result of this chapter, you should be able to:
Know which documents to reference to create a Vendor Invoice.
Know the reasons for blocking a Vendor Invoice.
Understand how to release a Vendor Invoice which is blocked for payment.
Understand how taxes and cash discounts are calculated.

2. Invoice Verification Environment
Materials Management
Financial Accounting PO
Open Items
Goods
Receipt
Invoice
Verification
Invoice
Invoice Verification provides the link between Materials Management and the Financial Accounting, Controlling, and Asset Accounting Modules.
Invoice Verification serves the following purposes:
It completes the material procurement process, which starts with the Order Document, continues with the Goods Receipt, and ends with the Invoice Receipt.
It allows credit memos for invoice cancellation or discount to be processed.
Invoice Verification tasks include:
Entering invoices and credit memos that have been received from vendors.
Checking the accuracy of invoices with respect to contents, prices, and arithmetic.
Creating open items in the Vendor Account.
Executing the account postings resulting from an invoice.
Checking invoices that were blocked because the invoice varied too greatly from the Purchase Order.
Types of Invoice Verification:
Posting invoices online
Posting invoices in background
Invoices received via EDI
Evaluated Receipt Settlement

3. Information from an Invoice
Vendor
Document Date
Company Code
Purchase Order
Invoice Items
Amount per Item
Material
Currency
Quantities
Unit of Measure
Invoiced Amount
The mandatory fields for creating a Vendor Invoice are:
Document Date, Invoice Amount, Company Code, and Currency.
Reference to a Purchase Order (PO), Delivery Note, Goods Receipt (GR), or a Vendor must be made.
The following data is copied from the reference source:
Vendor
Terms of Payment (if specified in the Purchase Order)
Invoice Items
The following data is copied from the Purchase Order:
Quantity
Amount
The following information is proposed by the system, depending on the system configuration:
Tax Rate
Tax Amount
Bank Data
Terms of Payment

4. Entering Taxes on the Invoice
Tax Details
Amount
Tax Button
Tax Code
The system checks or calculates the tax based on the Tax Amount entered and the Tax Code.
There are different ways to enter tax:
Enter the Tax Amount and the Tax Code manually
the system checks if the Tax Amount and Tax Code correspond
the system creates a message if there is a difference
Leave the Tax Amount field blank and check the Calculate Tax indicator
the system calculates the tax based on the Tax Code

5. Posting a Vendor Invoice
GR / IR Account
Invoice
For
Purchase
Order
Post
Vendor Account A xx B xx
Invoice Verification
Material Master
Stock value
Client 010
Purchase Order History
Invoice Data
GR/IR
Vendor
200-
Possible
Update
Invoice Document # Vendor A/C $200-
GR/IR A/C $200+
Posting an invoice received from a vendor will:
Create the Invoice Receipt Document.
Update the Material master record when appropriate.
Update Purchase Order History when appropriate.
Post entries to the appropriate G/L Accounts.
Update the Vendor Account (sub-ledger).
The Purchase Order History for an item within a Purchase Order can be viewed from a Purchase Order by selecting an item, and using the menu path Item® Statistics®PO History.

6. Account Postings Goods Receipt Qty. = 50 Pcs. Invoice Qty. = 50 Pcs.
Purchase Order
Qty. = 50 Pcs.
$2 / Pc.
Goods Receipt
Qty. = 50 Pcs.
Invoice
Qty. = 50 Pcs.
$2 / Pc.
When a Goods Receipt is posted, a debit is posted to the stock account and a credit is posted to the GR / IR Clearing Account with the delivery value (net order price x goods receipt quantity).
When the Vendor Invoice is posted, a debit is posted to the GR / IR Clearing Account (and cleared) and a credit is posted to the Vendor Account (sub-ledger). At the same time, a credit is posted to the appropriate G/L Reconciliation Account (Accounts Payable Account) assigned to the Vendor.
Stock A/C
100
GR/IR
100
Vendor A/C
100

7. Invoice Verification GR-based IV not selected
Standard PO
Item Quantity Net. Price
Inv. Receipt
Final Invoice
GR-based IV
Goods Receipt
þ 50 Qty.
Invoice
200 $
100 Qty.
Warning: Quantity invoiced greater than goods receipt quantity
Warning: Document no created (blocked for payment)
If the Goods Receipt-Based Invoice Verification indicator is not set in the Purchase Order, then an invoice referencing the Purchase Order can be posted prior to Goods Receipt.
If the invoice is entered via the Purchase Order number, all of the Purchase Order items are displayed in the selection screen. The system will propose a quantity and amount for each Purchase Order item for which Goods Receipt has been posted.
Although an Invoice Receipt Document may be posted prior to a Goods Receipt Document, the Invoice will be blocked for payment because of the quantity variance resulting from the absence of the Goods Receipt Document.
Invoice Verification
þ Item 10
$ 100 Qty. 50
PO #

8. Invoice Verification GR-based IV selected
Standard PO
Goods Receipt
þ 50 Qty.
Invoice
200 $
100 Qty.
Item Quantity Net. Price
Inv. Receipt
Final Invoice
GR-based IV
Error: Quantity invoiced greater than goods receipt quantity
On the Purchase Order Item Detail screen, the Goods Receipt-Based Invoice Verification indicator must be selected, which can be set as a default in the Vendor master record.
If the Purchase Order Number is referenced, all of its unmatched Goods Receipts will be displayed with their individual Document Numbers on the Selection screen.
If the Purchase Order has not been fully received, the system will not allow an Invoice Receipt Document to be posted for the full order value.
Invoice Verification
þ Item 10
$ 100 Qty. 50
PO #

9. Variances Qty $ Price Date 20 10 20 25 Invoice PO Invoice GR PO
Several variance limits can be set in MM Invoice Verification Customizing. When an invoice is posted, these tolerance limits are checked:
If the invoice is outside the tolerance limits, the system issues an appropriate message (e.g., a warning message).
If a tolerance upper limit is exceeded, the invoice is blocked for payment.
Variances will exist in the following circumstances:
Quantity Variances: delivered quantity minus previously invoiced quantity not equal to invoice quantity.
Price Variances: Purchase Order price not equal to invoiced price (or invoiced amount/invoiced quantity).
Schedule Variance: Planned Delivery Date is later than the Invoice Posting Date.
Invoice
Dec. 25
Dec. 1

10. Quantity Variance Example
Purchase Order
50 $2 / Pc.
Goods Receipt
Qty. = 50 Pcs.
Invoice
Qty. = 100 Pcs.
@ $2.00 each
Stock A/C
GR / IR
100-
In the above example, the invoice quantity is larger than the Goods Receipt quantity (not possible in Goods Receipt-Based Invoice Verification).
If the invoiced quantity is larger than the delivered quantity, the system expects another Goods Receipt.
If the delivered quantity is larger than the invoiced quantity, the system expects another Vendor Invoice.
If no more goods are received or invoiced, a balance will remain in the GR / IR Clearing Account. This balance must be cleared in one of three ways:
Return the extra goods to the vendor.
Cancel the invoice.
Clear the GR / IR Clearing Account directly.
Vendor A/C
200-
100+
200+

11. Tolerance Configuration
Quantity Variance
when GR = zero
Price Variance
Tolerances are configured in Customizing.
Tolerances can be established for different variances:
Quantity Variance
Price Variance
Schedule Date Variance
Miscellaneous other variances
For each Tolerance Key and Company Code, upper and lower absolute tolerances as well as upper and lower percentage tolerances can be set.
Many of the variances actually depend on the total dollar amount of the variance.

12. Invoice is BLOCKED for payment
Blocking Invoices
Purchase Order
50 $2 / pc.
Goods Receipt
Qty. = 50 pcs.
Invoice
50 $5 / pc.
Quantity = = 50
Price
50 x 2 = <>
50 x 5 = 250
Error
If an invoice is blocked for payment, an entry is displayed in the Payment Block in the Vendor Details of the Invoice Document, which prevents Accounting from making the payment.
An invoice is blocked if it contains an item with a Blocking Reason. Blocking Reasons may include:
Quantity Variances
Price Variances
Manual Inspection
Quality inspection.
A separate transaction is used to release blocked invoices. When all blocks have been released, the Payment Block field is cleared and payment can be made.
Invoice is BLOCKED for payment
(Price Variance)

13. Releasing Blocked Invoices
The Invoice Release Transaction requires the user to select the invoices to process and to determine how those invoices will be processed:
Manually
Automatically
It is possible that the deadline for a cash discount will be exceeded in the time period between blocking and releasing an invoice. Therefore, when an invoice is released, the Baseline Date for payment can be changed. This feature might be used in cases where the vendor was at fault and caused the delay.
Although the blocking reason may no longer be valid, every blocked invoice remains blocked until it is released.

14. Payment Program can settle the Invoice
Automatic Release
100 pcs.
50 pcs.
IR>GR
Invoice Blocked
for Payment
Order
Delivered
Invoice
100 Pcs.
50 pcs. X
Payment Program can settle the Invoice
A reason for blocking an invoice can become invalid over time.
For example: Quantity Variance Block and Schedule Date Variance Block will automatically become invalid with time.
Release of invoices can be made using the automatic release function. All invoices that meet selection parameters or contain Blocking Reasons that are no longer valid will be released.
Delivered
Automatic Release

15. Manual Release select release pay Blocks
Document Item Q P D G M O I X
X X
X X X
select
release
If the user does not process the automatic release, a list of invoices that can be released manually can be displayed. The individual Blocking Reasons can be deleted. When the Blocking Reason is deleted, the system releases the invoice for payment.
This transaction cannot be used to reverse a released invoice.
Format
Usage
Allowed Values
pay

16. Subsequent Debit / Credit
Purchase Order
100 $2 / pc. GR
Qty. = 50 pcs.
Invoice #1 50
$2 / pc.
Invoice Verification
Settled OK
Invoice #2 50
$2.05 / pc. GR
Qty. = 50 pcs.
Credit Note
PO# 50
$0.05- / pc.
Invoice Verification
Sub. Deb / Cred
P.O. History
GR #1 50 pcs.
GR #2 50 pcs.
IR #1 50 pcs. $100.00
IR #2 50 pcs. $102.50
SC #1 50 pcs. -$
100 pcs. $200.00
Stock A/C
2.50
Subsequent debit / credit memo(s) are used to process additional invoice(s) or credit memo(s) received from a vendor after a (PO) transaction has been settled (paid).
Since settlement has been made, the quantity cannot be changed by these documents.
The standard system has two definitions:
X Subsequent debit / credit = general
S Subsequent debit / credit = freight carrier
Additional user-defined indicators can be made in MM Customizing.
When a subsequent debit/credit is posted, the invoiced amount is posted to the Vendor account. The offsetting entry is made to the stock or price difference account, depending on the material’s price control.
The above example assumes moving average price control + stock > zero.
Vendor A/C
2.50

17. Credit Memos Purchase Order 50 pcs. @ $2 / pc. Goods Receipt
Qty. = 50 pcs.
Invoice
25 $2 / pc.
25 $2.10 / pc.
Credit memos are issued when goods are returned or a price adjustment is needed.
Price Adjustment
Return all Goods
Credit
25 $0.10 / pc.
Credit
25 $2 / pc. 25 $2.10 / pc.
A vendor will normally issue a Credit Memo when the delivered goods are unusable or have been returned. They are also used for price adjustments.
If the Credit Memo is for part of an invoice quantity, it will have to be processed manually in the system.
If it is for a total invoice quantity, the original Invoice document and the system generate the Credit Memo document.
A Credit Memo can be created without reference to a Purchasing Document, using the same process that is used for invoices.
The system treats Credit Memos the same way as an invoice except that the postings have the opposite sign (+/-).

18. Invoice Verification Chapter Summary
Key Terms
Invoice Verification
GR / IR Clearing Accounttion
Quantity Variance
Price Variance
Schedule Date Variance
Payment Block
Credit Memo
Invoice Verification: A function within the Materials Management Module which processes invoices from vendors by creating them in the system and matching them to Procurement Documents.
GR/IR Clearing Account: A holding account to which a payment obligation is posted before the actual Vendor invoice is received or posted.
Quantity Variances: This variance is caused by the delivered quantity minus previously invoiced quantity not equaling the invoice quantity.
Price Variances: This variance is caused by the Purchase Order price not equaling the invoiced price (i.e., invoiced amount / invoiced quantity).
Schedule Date Variance: Planned Delivery Date is later than the Invoice Posting Date.
Payment Block: Prevents Accounting from paying an invoice when there are variances between the ordered, delivered, and/or invoiced amounts
Credit Memo: A document issued by a vendor that adjusts a customers account when the delivered goods are unusable or have been returned. They are also used for price adjustments