Invoice verification in SAP MM 

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  • April 6, 2022
  • SAP
Invoice verification in SAP MM 

Invoice verification in SAP MM 

From a Materials Management (MM) perspective, most of the procurement process ends with invoice verification, which concludes in payments being given to suppliers by the finance and accounting department in an organization.

 An invoice is a most important and legal document that a supplier sends as a record of Materials supplied or external services performed. Invoice verification contains the item price, input taxes, freight charges, discounts, and terms of payment.

Purchasing departments are responsible for the verification of an invoice with reference to purchase order (PO) and goods receipt (GR) and then after successful verification they can post it and finally, the finance and accounting departments can process the payment to the vendor.

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After invoice verification there are two documents generated and these are material management invoice documents and finance accounting invoice document. The Purchase order history as well as valuation price in the material master record is updated if materials are subjected to stock valuation, after invoice is posted. 

The invoices can be posted in different ways such as with manual entry  invoices are received by mail or via a fax or courier and employees manually verify and enter the invoices into the SAP system. In EDI/XML, invoices may be transmitted electronically in the form of intermediate documents (IDocs) via EDI that is  Electronic Data Interchange  or in XML format

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We have different  scenarios in invoice verification and these are  –

  1. Purchase order (PO)-Based Invoice verification 
  2. Goods receipt (GR) based Invoice verification 
  3. Subsequent debit
  4. Subsequent credit 
  5. Credit memo 

Now we will discuss all the above scenarios in detail. 

1. Purchase order (PO)-Based Invoice verification –

In this scenario the system allows invoice posting with reference to a PO, even though materials haven’t yet been delivered. The line items of the PO must be copied into the invoice posting screen at the time of invoice verification in SAP system 

 

2.Goods receipt (GR) based Invoice verification- 

In goods receipt (GR) based Invoice verification, the SAP system allows us to post invoices only after the goods receipt (GR) has been posted in the system and invoices are exactly equal with the received quantity of a purchase order (PO). For multiple deliveries, the SAP system can supply each delivery on a separate line.

 

3.Subsequent debit-

This scenario is used when the correction kind of payment vendor has sent to us an invoice to pay as additional charges after some few months of the payment due to different reasons like abrupt change in material price, freight charges, toll charges etc.

 

4.Subsequent credit –

Whenever we want to charge or receive the correction kind of payment from the vendor then we will create subsequent credit. For example we want to charge the amount from the vendor about poor performance of materials or some devices which were brought from the vendor a few months back and also the payment was done then in this case we can create subsequent credit.  

 

5.Credit memo –

This scenario is used when we want or charge money from the vendor due to different reasons like not delivered on time, material being damaged. For example we have received the materials from the vendor and we identified all the materials or some of the materials are damaged due to some reason then we have decided to return the materials back to the vendor so in this case we will create a credit memo for the materials amount equal to the return materials.  

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Now we will discuss the different account entries of invoice verification, credit memo, subsequent debit and credit.

 

Invoice Verification 

Vendor account – Credit 

GR/IR clearing account – Debit

Input tax account – Debit 

 

Credit memo 

Vendor account – Debit

GR/IR clearing account – Credit 

Input tax account – Credit 

 

Subsequent debit

Vendor account – Credit 

Stock or Inventory account – Debit

Input tax account – Debit

 

Subsequent credit 

Vendor account – Debit

Stock or Inventory account – Credit 

Input tax account – Credit 

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Author:-

Prahlad Pawar

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