valuated receipt settlement is an alternative approach to the traditional ac­counts payable process. Under evaluated receipt settlement, a company pays its suppliers based on receipt data rather than the supplier invoice. By doing so, the supplier invoice is eliminated from the three-way matching process, while the receiving staff is allowed to match receipts against online purchase orders. The result is no matching process at all, with the computer system automatically making payments based on the quantities received and the per-unit prices specified in the initiating purchase order. This is a much more efficient process than three-way matching, since all manual process­ing steps can be completely eliminated from the accounts payable process.

The evaluated receipts settlement approach is used primarily for pur­chases related to the cost of goods sold, since it requires training of suppliers to submit a specific set of information on packing slips that occasional sup­pliers may be less willing to do. Consequently, the normal three-way matching process is still likely to be retained for incidental, maintenance and repair, and capital purchases, so the control issues here should be con­sidered additions to the standard computerized accounts payable system, not a replacement of them.

The key procurement card controls are enumerated in Exhibit 1, where controls are summarized next to the small black diamonds. The process flow begins with the issuance of a purchase order to a supplier, who uses it as authorization to make a delivery to the company, along with a packing slip containing the purchase order number, packing slip number, quantity delivered, and unit of measure. Once the delivery is received, the company’s computer system verifies that the reported packing slip number is not a duplicate, that the referenced purchase order number exists and cov­ers the delivered quantity, and that the reported unit of measure matches the one used in the purchase order. This is intended to be a highly automated process, so manual intervention in any of these control points is discouraged. Instead, the MRP system automatically issues the purchase order, supplier packing slip information is bar coded for simplified scanning into the re­ceiving system, and all subsequent controls are handled automatically by the computer system. The only exception is a possibility of manual inter­vention if there is a conflict between the units of measure used by the two business partners.

The controls noted in the flowchart are described in the next bullet points, in sequence from the top of the flowchart to the bottom.

• Mandatory purchase order authorization. The purchase order lies at the core of the evaluated receipts settlement process, since it initiates each transaction and represents the only purchase authorization in the entire process. Issuing purchase orders is best left to the purchasing software for routine materials purchases, with manually generated purchase or­ders needed only for acquisitions falling outside of the MRP system.
• Automatic rejection of duplicate packing slip numbers. If the receiving staff has already recorded a packing slip number and then receives an­other delivery with the same packing slip number, this is a strong indi­cator that the supplier has mistakenly issued a duplicate delivery, which should be rejected. However, the rejected delivery could be for a needed

Exhibit 1 System of Controls for Evaluated Receipts Settlement

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