Solving Issues in Purchasing

Sometimes vendors deliver too little or too great a quantity for an item. A vendor might send a different item than was originally ordered. In these circumstances you can adjust the goods receipt PO accordingly to reflect the actual amount received.

We will examine the options available in SAP Business One for resolving issues that arise at goods receipt.

First, we will see how you can handle too little quantity by creating a goods receipt PO for a partial quantity.

Second, we will see how you can increase quantity on a goods receipt PO when you receive too large a quantity.

Third, we will look at how you can add new items when you receive substitutions.

Later on, when the vendor sends a subsequent shipment, you can reference the purchase order a second time.

You can reference a purchase order as many times as needed, as long as the status is Open.

If you do not expect to receive any additional deliveries for a quantity of items not yet received, then you should close the purchase order so that the open purchase order quantity is reduced. The Status of the purchase order will change to Closed.

A purchase order is automatically closed by the system when all goods are received. If the purchase order has been partially received or not received, you can manually close it. The purchase order is not deleted so you can still display or duplicate the document, but it is no longer available for copying to another document, such as a goods receipt, goods return or A/P invoice.

Another option is to cancel a purchase order. This option is generally used when no items on a purchase order will ever be received.

You can cancel a purchase order that has never been copied. As with the status Closed, a Canceled purchase order is not deleted. You can still display or duplicate the document, but it cannot be copied to another document.

A canceled purchase order does not appear in the purchase analysis report, whereas a closed one will appear.

You can also choose to close a particular row rather than the entire document.

Sometimes vendors delivers too great a quantity for an item.

When you refer to a purchase order document while entering a goods receipt, you can increase the copied quantity to reflect the actual delivered quantity.

A vendor might send a different item than was originally ordered, perhaps to substitute for an out-of-stock item.

In the graphic, two of three items ordered were delivered by the vendor. Those two items were copied from the purchase order to the goods receipt PO. However, the third item was not delivered.

Instead, the vendor sent a substitute item.

When this occurs, you can add the additional item to the Goods Receipt PO.

If the originally ordered item will never be delivered, you should should close the original purchase order so that this undeliverable item does not continue to appear on purchasing reports as an open item.

There are two main documents in SAP Business One that are designed to remove an item from inventory and give a credit in the general ledger.

The first is the Goods Return. The Goods Return is used when the issue is discovered after the goods are received into inventory but before an A/P invoice has been entered.

The second document is the A/P Credit Memo. The credit memo is used once an A/P invoice has been entered.

The Goods Return Request can help simplify the process for your employees. It is designed to handle items returned at any point in the purchasing process. A Goods Return Request can be created based on either a Goods Receipt PO or an A/P invoice.

Employees will not need to research the status of purchase to determine whether an A/P invoice has been entered. The Goods Return Request automatically chooses the correct document for posting the inventory movement and credit.

This optional document also allows you document the reason for the return or credit. If a vendor provides you with a return material authorization (RMA) number, you can record it here.

Imagine that we ordered 20 scanners.

The vendor delivered all 20 and we received them on a Goods Receipt PO.

Then we discover that 2 were damaged in transit.

The receiving clerk can create a Goods Return Request to document the need to return the scanners to the vendor for credit. He can put in the reason we need to return the items. The clerk can contact the vendor and get instructions on how to send the item back to the vendor, perhaps including a return materials authorization (RMA) number to use when mailing back the item to the vendor.

Later when the item is removed from stock to be sent to the vendor, he copies the items to a Goods Return to record the removal of the scanners from inventory and to post the credit expected from the vendor.

Think of the Goods Return as the clearing document for a Goods Receipt PO. When you enter a goods returns, the goods are issued from the warehouse and the quantities are reduced.

If your company runs perpetual inventory, SAP Business One creates the relevant accounting postings to update the stock values as well.

If you return goods to a vendor to exchange and later receive a shipment, you can either enter a goods receipt PO without a reference to a purchase order in the system or duplicate one of the preceding documents. It is possible to open the purchase order when a return is made. This allows you to base the new delivery on the original purchase order.

Note that when a Goods Return is created without being based on a previous document, the value of a moving average item is the current item cost calculated for the item and not the unit price entered in the goods return document.

* If there were a preceding purchase order and the configuration setting allowed reopening the purchase order, a quantity of 2 would be added to the Ordered column and the Available quantity would be increased by 2.

Let's look at an example of a Goods Receipt PO (without a preceding purchase order) for the 20 scanners. Before the Goods Receipt PO we had zero in stock.

Once the Goods Receipt PO for 20 scanners was made we have 20 in stock and 20 available.

When the Goods Return Request is added, 2 scanners are added to Committed and subtracted from the Available stock. The Goods Return Request does not have any effect on accounting.

When the Goods Return Request is copied to a Goods Return, the 2 scanners are removed from stock and a posting is made that reverses the Goods Receipt PO posting.

If there had been a preceding purchase order and the setting was made to allow reopening the purchase order, a quantity of 2 would have been added to the Ordered column and the Available column would have been increased by 2.

Now let us imagine another scenario. We ordered 50 headphones boxes. The vendor delivered the items and the invoice.

After we entered the A/P invoice into SAP Business One but had not yet paid the vendor, we discovered that 5 boxes were defective.

We use the Goods Return Request to begin the return process. Here we enter the reason for the return and any information from the vendor about how to return the product.

Since the invoice had already been created, the system creates an A/P Credit Memo from the Goods Return Request.

We cannot create a Goods Return with reference to the Goods Receipt PO since an A/P invoice already exists.

The A/P Credit Memo has the same effect as a Goods Return.

The credit memo updates the stock quantities and corrects the values in accounting.

Since in this case, we were able to create the credit memo by copying the items from Goods Request Return to the A/P Invoice, the system finds the same accounts that were used to post the invoice and posts a negative value to them.

However, in some cases, it may not be appropriate to copy items to a credit memo from an invoice. For example, if the credit was for a price difference rather than for returning items or if the credit referred to an A/P invoice that we had already paid.

There is also an option to create a credit memo without reducing stock accounts.

Perhaps your vendor is giving you credit for a missing discount on an item or refunding your purchase price.

In those cases, you can select the checkbox "Without Qty Posting". This indicator allows you to create an item-type credit memo that affects only the price.

In the example in the graphic, a 10% discount was missing on the vendor invoice for 100, so an A/P invoice was created for 100 and a payment was made for the full amount.

When the issue is discovered, the vendor sends a credit memo for the discounted amount of 10.

The Without Qty Posting checkbox is used to create a credit memo in SAP Business One that does not reduce stock quantity but records the monetary change in the General Ledger.

Sometimes a vendor is giving you a credit that relates to multiple invoices. Or you may need to create a credit for a closed invoice when you return items after you have paid for them.

In those situations, you create an A/P credit memo without reference.

As always, you can create a credit memo for a full amount or partial amount.

When you create a credit memo without copying from the original invoice, the credit memo reduces the total balance due to the vendor. The values in a journal entry created by an A/P credit memo created without a reference are based on the current value calculated for the returned items. This is why it is best to copy an invoice whenever possible.

Another option besides creating Goods Returns or Credit Memo documents is to cancel the original document.

Business One gives you the ability to cancel marketing documents such as a Goods Receipt PO or A/P invoice.

When you cancel a marketing document, a new 'cancellation' document is created during each cancellation procedure. Both the reversing and reversed documents are closed automatically and fully reconciled.

For example, a goods receipt PO is incorrectly entered. The user cancels the goods receipt PO and a cancellation document is created automatically.

The purchase order is re-opened after cancellation, and can be used as a base document to create a new goods receipt PO.

Here's a summary of options for returns and credits in purchasing.

• For incorrect entry of a Goods Receipt PO, you can cancel the document. The related purchasing order will reopen so you can create a new GRPO. The same is true if you incorrectly enter an invoice, you can cancel and reissue the invoice from the GRPO.
• If you need to return item(s) received on a Goods Receipt PO that is not yet invoiced, it is useful to copy to a Goods Return Request. The system will automatically suggest copying to a Goods Return.
• If you need to return item(s) that have been invoiced but not yet paid, it is useful to copy to a Goods Return Request. The system will automatically suggest copying to an A/P Credit Memo.
• Once an invoice has been paid, you can no longer reference it to create a Goods Return Request or A/P Credit Memo.
• Similarly, you cannot copy from multiple invoices to create a credit memo.