What are the key components for moving the approved purchase orders to a closed status?
There are various factors which must be considered that relate to the systematic closing of the Purchase Order Shipments, Lines and Headers.
Factor 1 - Matching2 Way Matching - Approve/Invoice
3 Way Matching - Approve/Invoice/Receipt
4 Way Matching - Approve/Invoice/Inspect/Receipt
The level of matching (2, 3,or 4) defaults in the following order:
Level 1 - Item if not found then
Level 2 - Line Type - if not found then
Level 3 - Supplier - Receiving Tab Options Area - if not found then
Level 4 - Purchasing Options
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If Receipt Required is Yes and Inspection Required is No
– this is 3 way matching – meaning Approve/Receive/Invoice
If Receipt Required is No and Inspection Required is No
– this is 2 way matching – meaning Approve/Invoice
If Receipt Required is Yes and Inspection Required is Yes
– this is 4 way matching – meaning Approve / Inspect / Receive / Invoice
Take notice that Receipt Close Tolerance is also on the Item as well as Invoice Close Tolerance.
This is also the primary default for these values as well.
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In the supplier screen – the match approval level can also be set. This is the second defaulting level in the hierarchy.
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In the Line Type – there are two columns – Receipt Required and Receipt Close.
Receipt Required as Yes – serves as a 3 way match – No – would serve as a 2 way match.
You can name the line type anything – in this example 2 way match was given to help clarify.
Also, you see the receipt close tolerance – in this case is set at 100%. This will be explained in the tolerances section.
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In the Purchasing Options – there are settings for Match Approval Level – Receipt Close – and Invoice Close tolerance. This is the last location that is checked for values – when entering a Purchase Order.
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Factor 2 - Receive and Invoice Close TolerancesThe Receive and Invoice Close tolerances are entered based on percentages.
The defaulting order of these tolerances is as follows:
Receipt Close Tolerance – Defaulting Hierarchy
Level 1 – Item in the Item Master – if not found then
Level 2 – Line Type – if not found then
Level 3 – Purchasing Options
Invoice Close Tolerance - Defaulting Hierarchy
Level 1 - Item in the Item Master - if not found then
Level 2 - Purchasing Options
The screen prints in Factor 1 also show the locations for entering the tolerance percentages.
Here is a quick link to the Purchase Order Defaulting Rules -
Note 1067175.1.
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The receipt close tolerance determines how much quantity must be received before a Purchase Order Shipment will move to the status of Closed For Receiving.
The invoice close tolerance determines how much quantity must be billed prior to moving to a status of Closed for Invoicing.
Once a purchase order/blanket release shipment has met both tolerance conditions for closing – as related to invoicing and receipt – the shipment will automatically close. The Closure Status for the shipment will show – Closed with a reason of Status Rolled Up.
After all shipments have closed for a particular line – the closure status of the Line will become Closed as well. Finally, when all lines have closed on the purchase order – the header level of the Purchase Order will become closed.
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Here is an example of how the receipt close tolerance works.
Suppose that a purchase order line has a quantity of 100.
The receipt close tolerance is 10%. This is seen on the Purchase Order Shipment – More TAB
10% of 100 is 10. Deduct this from the shipment total as 100 – 10 = 90.
This means that in order for this Purchase Order Shipment to move to a status of Closed for Receiving, at least a quantity of 90 or greater - out of the total 100 would need to be received/delivered.
Now, for 2 way matching – the desire is to only have to approve and then create an invoice. For this to work – it is necessary to have the receipt close tolerance come in as 100%. By putting in 100% - the system is being told that no receipt would need to be done – as 100% of the quantity is all quantity ordered.
By using 100% receipt close tolerance with 2 way match – the system will move the purchase order shipment immediately to Closed for Receiving. See below:
Here is a purchase order – that is having 2 way match – with 100% receipt close tolerance.
Notice the status tab – below – the shipment is already Closed for Receiving. This now sets up the system so that when the invoicing is conducted – and reaches within the invoice close tolerance – the purchase order shipment will be closed. In this case – the invoice close tolerance is 0% which means that this purchase order shipment would require the full amount to be invoiced. If the full amount is not billed – the shipment will remain in the Closed for Receiving status – and not close (roll up) automatically.
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Factor 3 - Receipt Close PointThe receipt close point is a key component when using 3 and 4 way matching. This determines when the closure process should be engaged for the Receive/Inspection portion of the Purchase Order Receipt.
The receipt close point is set in the Purchasing Options.
When a Purchase Order Receipt is conducted - it consists of two transactions -
Receive and
Deliver.
The Receipt Close Point tells the system when to determine/consider the shipment for Closure.
Receive is completed - Receiving/Receipts
Deliver is completed - Receiving/Receiving Transactions
Receipt Routing is set in the Purchase Order Shipment - Receiving Controls. There are three different types of Receipt Routing:
- Standard Receipt - The Receive and Deliver will be done separately
- Direct Delivery - The Receive and Deliver transaction are done at the time of Receive
- Inspection Required - The Receive - Inspect - and Deliver are done separately
Here is an example:
- Purchase Order - Line 1 - quantity 100 - and shipment is having Receiving Routing - Standard Receipt
- The Receive Close Tolerance is set to 0% - meaning that the quantity will need to be fully Receipted
- The Purchasing Options - Receive Close Point is set to Deliver
The user enters Receiving/Receipts - and conducts the first portion of the Receipt.
- The user does not conduct the Delivery of the receipt
- The shipment will still be open - it will not goto Closed For Receiving - as the receipt close point is Deliver and the Deliver transaction has not yet been accomplished.
Now, in the above scenario - had the Receipt Routing on the Purchase Order Shipment - Receiving Controls - been Direct Delivery - then at the time the user conducted the Receive portion of the Receipt - the Deliver would also have been done - which satisfies the Receipt Close Point of Deliver. This would move the shipment to Closed For Receiving.
Note: If receipt close point is set to 'Accepted' try changing to 'Receive' or 'Deliver' for automatic close.
As the receiving and invoice tolerances are met on each shipment, the shipments will close - and as all shipments reach a closed status - the line will then close.
As all lines eventually close on the purchase order - the header will then close as well. It is possible to use the purchase order summary to again Open a Closed Purchase Order.
