The SAP system is made up of several components linked together so that different departments within a company can cooperate with one another. The Invoice Verification component is part of the Materials Management (MM) system. It provides the link between the Materials Management component and the Financial Accounting, Controlling, and Asset Accounting components.
Invoice Verification in Materials Management serves the following purposes:
It completes the materials procurement process – which starts with the purchase requisition, continues with purchasing and goods receipt and ends with the invoice receipt .
It allows invoices that do not originate in materials procurement (for example, services, expenses, course costs, etc.) to be processed. It allows credit memos to be processed; either as invoice cancellations or discounts Invoice Verification does not handle the payment or the analysis of invoices. The information required for these processes is passed on to other departments.
Invoice Verification tasks include:
- Entering invoices and credit memos that have been received
- Checking the accuracy of invoices with respect to contents, prices, and arithmetic
- Executing the account postings resulting from an invoice
- Updating certain data in the SAP system, for example, open items and material prices
- Checking invoices that were blocked because they varied too greatly from the purchase order
- The high degree of integration in the SAP system allows these tasks to be carried out smoothly and efficiently.
Invoice Verification in SAP System
The Invoice Verification Procedure
Each invoice contains various items of information. To post an invoice, you must enter this information into the system. If an invoice refers to an existing transaction, certain items of information will already be available in the system. The system proposes this information as default data so that you only need to compare it and, if necessary, correct any possible variances.
Also See: What are all accounts important for Invoice Verification?
If an invoice refers to a purchase order, for example, you only need to enter the number of the purchase order. The system selects the right transaction and proposes data from the purchase order, including the vendor, material, quantity ordered, terms of delivery, terms of payment. You can, of course, overwrite this default data if there are variances. You can display the purchase order history to see, for example, which quantities have been delivered and how much has already been invoiced.
If there are variances between the purchase order or goods receipt and the invoice, the system will issue a warning on the screen. If the variances are within the preset tolerance limits, the system will allow the invoice to be posted but will automatically block it for payment. The invoice must then be released in a separate step. If the variances are not within the tolerances, the system will not allow the invoice to be posted.
When the invoice is entered, the system also finds the relevant account. Automatic postings for sales tax, cash discount clearing, and price variances are also generated and the posting records displayed. If a balance is created, the user is required to make corrections, as an invoice can only be posted if the balance equals zero.
As soon as the invoice is posted, certain data, such as the average price of the material ordered and the purchase order history, is updated in the system.
The invoice posting completes Invoice Verification. The data necessary for the invoice to be paid is now contained in the system. The accounting department can retrieve the data and make the appropriate payments with the aid of the Financial Accounting component.
Types of Invoice Verification
As a rule, an invoice refers to a transaction for which the issuing party requests payment. Invoice Verification differs depending on the type of invoice involved:
Invoices based on purchase orders.
With purchase-order-based Invoice Verification, all the items of a purchase order can be settled together, regardless of whether an item has been received in several partial deliveries. All the deliveries are totaled and posted as one item.
Invoices based on goods receipt.
With goods-receipt-based Invoice Verification, each individual goods receipt is invoiced separately.
Invoices without an order reference
When there is no reference to a purchase order, it is possible to post the transaction directly to a material account, a G/L account, or an asset account.
Also See: Materials Management Terms in SAP
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