Accounting Information Systems: The Processes and Controls, 2nd Edition

EVALUATED RECEIPT SETTLEMENT (STUDY OBJECTIVE 7)

In the mid-1990s, some companies, including those in the automotive industry, began implementing invoice-less matching systems for purchasing and paying vendors. For instance, General Electric Co. began using an invoiceless system for direct material purchases and wished to move other purchases to an invoiceless system. Changing document matching to an invoiceless system is more a process change than it is an application of new technology. However, the capability to achieve an invoiceless matching system is dependent on having extensive IT systems with online, purchase-related files. The simple explanation of an invoiceless match is that a comparison takes place by matching the purchase order with the goods received. If the PO matches the goods, payment is made to the vendor. This eliminates the need for the vendor to send an invoice, since payment is approved as soon goods are received (when they match a purchase order). Thus, it is an invoiceless system and is called evaluated receipt settlement (ERS). The ERS name signifies that the receipt of goods is carefully evaluated and, if it matches the purchase order, settlement of the obligation occurs through this system.

When the purchasing department initiates a purchasing process, a purchase order is entered in the online database of open orders. When goods arrive at the receiving dock, employees in the receiving department will check the online database for the purchase order that ...