Dynamics GP Three-Way Match Process or, How I Learned to Love My Purchase Accrual Account

A significant number of clients that I've worked with in the past (and present) have a tough time wrapping their brains around the Purchase Accrual account and how it is interrelated with receiving and invoicing of purchased goods.  This lack of clarity results in unreconciled accounts, duplicate postings to inventory and expense accounts, and an accountant's worst nightmare if allowed to go unchecked for very long.

This column is an attempt to help clarify the Purchase Accrual concept and point out the necessity of keeping it reconciled with the Received not Invoiced report and/or SmartList.

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About Frank Hamelly

Frank Hamelly, Sr. Dynamics Consultant with I.B.I.S., Inc., in Charlotte, NC,  is a business and technology professional with over 25 years experience implementing and supporting various ERP systems and business process re-engineering initiatives across all organizational areas and across various industries, for small, mid-sized, and Fortune 500 companies.  He has held numerous positions in Accounting, Finance, Customer Service and Information Systems.  His application experience includes SAP R/3, Baan, Fourth Shift, Peachtree, MAS 90/200, Quickbooks and Microsoft Dynamics ERP.  His industry experience includes manufacturing, , distribution, telecom, aerospace, life sciences, utilities and media.  Frank studied Business Administration with an Accounting concentration at the University of Pittsburgh.  He is a Microsoft Certified Professional (MCP), Microsoft Certified IT Professional (MCITP), a Microsoft Certified Trainer (MCT), and has been named a Microsoft Most Valuable Professional (MVP) each year since 2008.  He writes articles for Dynamics-related web sites and is a regular speaker at Microsoft Dynamics Convergence, GPUG Summit, MSDynamicsWorld's De

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Purchase Accrual Account

Good article - nice and simple - thankx

However, if you use the Edit Purchase Order functionaltiy to close the PO, the system will clear the Purchase Accrual account by debiting that account and the other side of the entry will be a credit to the Stock on Hand account. That means that you have stock in your warehouse but you are now crediting the Stock on Hand account in the General Ledger - you therefor cause an imbalance between your Stock module and the General Ledger.

My suggestion is that you mark the Edit PO Status transaction to post TO the GL and not through and then you intercept the journal that the system has created and you change the credit side of the entry as you do not want the value to touch the Stock on Hand account.

If you don't do something like that then you might be solving 1 problem by clearing out your Purchase Accrual account but you now cause a new problem by putting the Stock Control out to the Ledger - that's even more of a nigthmare.

Regards
Marmeduke

Purchase Accrual Account

Great point Marmeduke!! I approach this from an accountant's point of view so that detail seemed intuitive to me. Thanks for highlighting this and thanks for the compliment.

Frank

Good Article

Great article that sheds light on this topic.

I know you limited topic to purchase accrual account and reconciling the account - and you discussed quite well. I would suggest expanding the topic to include purchase price varaince and cost adjustments as featured in V90sp4 and later versions.

A couple of my clients are struggling with Dynamics automatically revaluing inventory (I know i actually like the feature and realize MBS had to do something to respond to their install base) under certain conditions - example, if item is sold or adjusted before PO invoice/match at different cost, etc.

Thanks,
Bron Tamulis, CPIM
Tectura

Thanks for the compliment Bron

and the suggestion - I'll get to work on expanding the topic as you suggested - great idea.

Best regards,

Frank

Helpful Article!! But what about 2-way match..

Frank, thanks for the article. It was insightful. I am curious if there is a solution for 2-way matches within GP 9. We have alot of vendors that are providing services, but they have agreed that their fees will not exceed X. Is there anyway to create a PO and receive against it as the service invoices come in? That way if they tried to bill us more than the PO, the system would prevent payment. Our solution to this In the past is that we would treat it as a normal 3-way match PO and just have the AP clerks "receive" the item when they received the approval on the invoice. BUT this is a major Segregation of Duties issue.

Any ideas or work-arounds you've seen that address this challenge?

THANKS!

2-way match

I've had clients create PO's for utilities and similar products by creating "inventory" items that are item types of "Service" or "Misc Charge" and assigning the appropriate GL accounts to them. Those items can be entered on a PO with the $ equal to the maximum amount allowed. Then the receipt is entered through Transactions > Purchasing > Receiving Transactions Entry with a Type 'Shipment/Invoice'. They can see at that point what the maximum amount allowed is and determine if they're over that amount. You can also generate reports for the charges that go over the PO amount. It won't "prevent" the payment of the bill but it does provide visibility.

Unfortunately we don't live

Unfortunately we don't live in an ideal world so I guess that's what makes us appreciate informative websites like this one. I recently found an invoice template free, this website looks like the perfect place to start learning about it.

Great post, thanks for the

Great post, thanks for the article. If you're interested, you can find a template here. It's saved me a bunch of time filling out invoices and can assist CFO's and accountants trying to balance their books.

Nightmare implementation

Andrevdw
Thanks Frank. The article is clear and logistical. If only our service provider provided us with this " simple" explanation of the three way processing.

If we were only given the tip of "never, never, post a general journal to AR,AP, Inventory or Assets.............sub ledgers will not balance. My company are JE trigger happy. They love JE.

We are 17 months down our journey of implementing AX 2009. It has been a nightmare.

Purchasing Distribution Hierarchy

Is there a thread that discusses distribution account source validation? Specifically, where does the ACCRUED PURCHASES distribution come from in a shipment transaction when using Projects? Can it be sourced from anywhere other than the Posting Accounts grid? (We are using GP 2010)

Thanks in advance