An Un-Invoiced Purchase Order is defined as a stock receipt for which the original PO receiver has not been linked to an Accounts Payable Invoice. It is an important part of the monthly inventory reconciliation calculation because it can help explain differences between physical value and financial value.
Physical Value is the combined value of all items currently in stock. Each item’s value is calculated as the current cost multiplied by the quantity on hand. Inform increases the value of stock at the time of receipt.
Financial Value is the balance in the Inventory General Ledger account. Inform increases the G/L value at the time of A/P Invoice entry and depends on the prescribed system process being followed to link the original PO receiver to the invoice.
In most systems, the physical value exceeds the financial value because of the lag time between stock receipt and invoice posting.
- The Un-Invoiced PO Report (Purchasing >Un-Invoiced PO Report) can be produced for a single branch or all branches. This document lists, in order of vendor, each stock receipt which has not been linked to an A/P invoice.
See also: Un-Invoiced PO report
- You can also run the Inventory Value Report (Inventory>Inventory Value Report>Select All Merchandise>Include Reconciliation Summary returns a summary value for all un-invoiced stock receipts as of the time the report was requested.
Following is an example of a correctly entered vendor invoice for inventory purchase.
- The P/O or Reference # field contains a link to the original stock receipt.
- The Linked Receipts field contains the value of the original stock receipt.
- The value of the stock receipt matches the amount recorded to the Inventory G/L account.
Following is an example of an incorrectly entered vendor invoice for inventory purchase. Linked stock Receiver is missing. This invoice is missing the PO link and is therefore considered un-invoiced.
- The PO or Reference # field is blank.
- The Linked Receipts field is empty.
- The system automatically changed the G/L distribution to Non-Inventory, upon saving the AP invoice.
A stock receiver can be linked to an AP invoice, regardless of Accounting period, and regardless if payment has been made against the AP invoice. Linking the stock receiver removes the stock receiver immediately from the Un-Invoiced PO Report.
- The General ledger Distribution on an AP invoice can only be changed if the invoice resides in the current period, and only if it has not been paid. Make sure to click the Recalculate button.
- A journal entry will be required to reallocate the amount into Inventory from Non-Inventory if the invoice has been paid or the accounting period is closed.
An overstated un-invoiced PO value will cause the Inventory Reconciliation to show an artificially large Adjusted G/L Inventory Value as compared to the actual Physical value.
- An understated value can also occur if vendor returns are handled incorrectly. It will contribute to an artificially negative difference.
- If a vendor invoice is lost in the mail, the accounting department will be able to request a copy to avoid losing discount terms.
- Maintaining an accurate value will help with Cash Flow planning.
If a vendor has already been paid for an item showing on the report, , you may edit the original AP invoice, and link the stock receiver, or follow this process to remove the item from un-invoiced status without affecting your stock value or G/L value:
- Enter a zero dollar Accounts Payable invoice using the current date, accounting period, discount date and due date.
- Use a descriptive and unique invoice number, such as “Clear Paid PO-1.”
- Link the PO stock receiver using the Drop-down Icon. You will know the link is successful when there is a value in the Linked Receipts box. You may link as many applicable PO stock receivers as needed to avoid having to enter multiple Accounts Payable Invoices.
- Save the invoice and verify that the stock receiver is no longer present on the Un-Invoiced PO Report.
- Note that systems running Version 17.35 and lower will attempt to balance to the linked receipt as shown in the example below. Click the “X” next to the line items to zero out the distribution before saving the transaction.
Depending on the way your former system handled un-vouchered material, there are some considerations regarding the valuation of opening inventory.
- If there is material in stock, but not yet invoiced by the vendor at the time of conversion, a determination must be made whether to include its value in the opening journal entry.
- Use caution to avoid counting the value twice. When the A/P invoice is entered for this material, Inform will increase the G/L value.
In a continuing effort to refine end of month accounting processes, DDI has eliminated the need to carry un-invoiced material value on monthly reconciliations between physical and financial values. Users selecting the “one step close for A/R and A/P” will have this capability.
The system will post an entry to the period being closed:
Debit inventory Asset / Credit Un-Invoiced Material
The transaction will automatically reverse in the following period:
Debit Un-Invoiced Material / Credit Inventory Asset
- Create a current liability G/L account called Un-Invoiced Material Liability.
- Populate the G/L Control Table field entitled “Un-Invoiced PO.”
- Set File > Company > Master > Accounting > One Step End of Month Closing for A/R & A/P to Yes.