Reconciling the PO Liability Account - Accounts Payable and General Ledger Users

Contents

Overview

This topic describes how to reconcile the PO Liability Account. This discussion contains instructions for users of General Ledger and Accounts Payable, and Materials Management. If your site does not use General Ledger, and instead, exports transactions to an external general ledger system, see Reconciling the PO Liability Accounts - External GL Systems

PO liability means that there are POs that have been received but not matched with invoices.

The PO LIability Report pulls all materials transactions and all AP transactions up to the run period of the report by PO Number. Materials transactions have a credit to PO Liability and AP transactions have a debit to PO Liability. If the amounts do not net to zero, the report captures the PO data.

For each month in the fiscal year, you should reconcile the PO Liability Account balance with the PO Liability Report amount. If the two values are not equal, you need to find the source of any discrepancy. The process – reconciling the PO Liability Account – involves comparing data using Supply Chain tools.

Additionally, the PO Liability Maintenance tool is available to assist in PO liability reconciliation. This tool avoids the situation in which a user has to manually create a zero dollar invoice to run a debit against the PO vendor GL account, and a credit against the AP invoice GL account to fix the PO liability issue. With non-file and non-stock items, any receipts can then be reversed. However, this approach is particularly problematic when the item is a stock-item. The item receipt cannot be reversed because that would impact the on-hand quantity.

The sections below describe the process and the tool.

For any period and year, the balance in the PO Liability Account is the dollar amount for purchase orders that are not yet matched with invoices:

PO Liability Account balance = the amount owed for purchase orders — the total amount invoiced.

Transactions for materials (MM) and accounts payable (AP) are generated by the system as part of receiving and invoice matching. When items from a purchase order are delivered to a medical center, warehouse staff use the system to create receipts. A receipt record contains the dollar amount of the delivery. When invoices arrive, the invoices are matched to the receipts and approved for payment.

A receipt generates an MM transaction. The organization's inventory account is debited, and the PO Liability account is credited with the receipt amount. Matching the invoice generates an AP transaction that debits PO Liability and credits AP Liability. For example, transactions for a $100.00 receipt and matching invoice would look like this:

Both MM transactions for receipts and AP transactions for invoices are extracted (written to) the GL Transaction Table. (You can write reports on the table's contents using the GL Transactions MM and AP report object.) The PO Liability Report, available from the Reports menu, pulls data from the GL Transactions Table.

When you request a PO Liability Report, the system looks for transactions in the GL Transactions Table. Any GL transactions without matching AP transactions – that is, any receipt amount that is not relieved by matching invoices – is a candidate for the PO Liability Report. The report shows transaction amounts and the total amount for the period and year that you specify. Figure 1 shows how the system elements work together.

Figure 1 - Supply Chain Transaction Processing Overview

General Ledger automatically imports data from the GL Transactions Table. Each import becomes a journal voucher in General Ledger. General Ledger posts the AP transactions to the AP source journal, and MM transactions to the MM source journal. AP transactions posted by the system have journal voucher numbers in the form "APXXXXX." MM transactions posted by the system have journal voucher numbers in the form "MMXXXX." Debits and credits to the PO Liability Account come from the system's automatic posting of AP and GL transactions. Here is a key point to remember:

When you use General Ledger to display the balance in the PO Liability Account, you are looking at the same data that exists in the GL Transaction Table, and the same data that is the source for the PO Liability Report.

How can a PO Liability Account be out of balance?

Since the data for the PO Liability Account comes from the same source as data for the Report, how can the balance displayed for the account be different from the total on the PO Liability Report?

The account balance and the Report total can be different if:

• A manual journal voucher was posted directly to the PO Liability Account in General Ledger.
  - A manual posting in General Ledger bypasses the automatic transactions that the system writes to the GL Transaction Table. Manual postings, therefore, are not reflected in the Report. If the Report total and the account total are different, a larger value for the account total is a clue to this problem.
  - Look for journal voucher numbers that do not begin with AP or MM (as described below). Only Supply Chain posts transactions with those beginning letters.
• Accounts payable staff are still doing work for the period, with invoices being created and matched.
  - You will see different values for the report and/or the account if the period activity is not frozen. For this reason, although it important to balance the PO Liability Account and the Report, you should not do so until data for the period is stable.
  
• An AP or GL transaction created by Supply Chain did not post to the PO Liability Account for some reason.
  - If the PO Liability Report value is larger than the account balance, an omitted posting could be the cause. (This situation is somewhat unlikely, however.)
• The account was not reconciled in a previous period, and the imbalance amount has been carried forward.
  

Summary of the PO Liability Account Reconciliation Process

Summary Steps

1. Run the Supply Chain PO Liability Report for the current period and record the total.
   
2. Look at the balance of the PO Liability Account in the General Ledger for the organization, period, and year.
3. Compare the amounts from Step 1 and 2; that is, determine if the total for the current period from the Report is the same as the account balance.

   • If a difference exists, and the account total is higher,

   - Verify that the accounts have no ongoing activity. If staff are continuing to match invoices, the totals for the period can shift.
   - Verify that the PO Liability Report includes all transactions for receipts and invoices – look for journal vouchers posted manually to the PO Liability Account.

   • If a difference exists, and the Report total is higher,

   - Verify that the accounts have no ongoing activity.
   - Make sure that all relevant transactions in the GL Transaction Table were posted.
   

4. Verify that you have identified anything that could affect the reconciliation.
5. Follow your hospital's procedures in reckoning the Account, if needed.
   

Detailed Discussion and Tools

Using the PO Liability Maintenance Tool - Available beginning with Release 7.9.0.1

This utility uses the standard ERP import process to bring in amounts for PO liability and tax liability (if relevant) for a specified organization and purchase order. The utility creates an AP transaction with the type "PO Liability and Tax Liability Write Off."

The amount in the transaction is: PO liability amount + tax liability amount.

Attachments to the AP transaction are the GL transactions for PO Liability, Tax Liability, and Write-Off GL accounts.

Inter-org GL accounts will also exist when the organization for the write-off account is different from the organization for the PO.

Security: The role object "POLiabImport" controls the user's ability to work with this new tool. The default setting is None.

To use the new PO liability maintenance tool,

Make sure that the role object "POLiabImport" in your user role has the setting All or Create.

1. Create the upload file using an Excel spreadsheet. The first two rows are headers and upload information. The data columns begin on row 3.

Figure 2 is an example of a spreadsheet for the import.

Figure 2 - Sample Import Formatted as .xlxs

The upload file must be a .csv file.

2. Save the spreadsheet to a local network folder as a .csv file. The file name must be unique.
   - Also, save the file as an .xls or .xlsx file, so that you can read it later if you need to.
   

This step uses the standard ERP upload process.

1. From the Materials Management main Contents, select Imports, Exports and Financials > PO Liability Write Off Import.
   Or, from AP, select Imports / Exports > PO Liability Write Off Import.

A list of imports appears, if any have been created (Figure 3). Otherwise, No Data appears.

Figure 3 - Sample List of PO Liability Write Off Imports

2. Click New. The import panel appears (Figure 4).

Figure 4 - PO Liability Write Off Import Panel

3. Enter the file that you wish to import in the File to Upload field.

• Click Browse to locate the file.
• Click the file name to select it.

4. At this step, you have a choice. You can work through the import process in two stages or in one stage. For new users of this feature, we recommend the two-stage approach.
   - To use the one-stage approach, click Submit. This approach loads and imports its data in one step.
   - To use the two-stage approach, select Load and verify, No import. Then click Submit. This approach first loads the .csv file and validates it. You can correct errors, if needed, and upload the file again. You can then process it to import its data.

Step 3: Review the import (Figure 3)

The following fields provide useful status data:

Import Status - The successful or unsuccessful status of the upload.

Complete: The .csv file uploaded and imported its data successfully.

Errors: The .csv file could not be read or validated.

Ready for Processing: If you have used a two-stage upload, the file is ready for the second (update) step.

Processed - The number of data records processed out of the total uploaded. This number indicates how many of the import file records successfully performed their respective actions on General Ledger account records.

n of X: X is the number of data records uploaded and n is the number of records processed.

For a one-stage upload, this field indicates whether the system could make changes to existing GL account information using the imported file's records, and, if so, how many records processed successfully. 0 of X means that the system was not able to process any of the imported file's records. For a two-stage upload, 0 of X is normal.

• Click Menu > View Import Details. The PO Liability Write-Off Import Details panel appears, and you can review your data.
  
• Click View Messages to display any error messages.

Additional Notes

• Once the "PO Liability and Tax Liability Write Off" transaction is created in GL transactions, the Invoice Match Status on the PO is updated to Matched. The audit panel contains the information that PO liability import has changed the Status.
• The Report Object “PO Liability Report Summary” and “PO Liability Report Detail “ include the "PO Liability and Tax Liability Write Off" transaction type.

Running the PO Liability Report

The PO Liability Report Summary has two versions: one version produces output in Adobe Acrobat format; the other version outputs data to an Excel spreadsheet. You can select either, according to your preference.

To run the PO Liability Report:

1. From the General Ledger (or Accounts Payable) main Contents, select Reports > Standard Report Definitions.
   The list of report definitions appears.
   
2. Locate the PO Liability Report Summary (which produces Adobe Acrobat output),
   or, if you prefer, locate the PO Liability Report (File), which produces an Excel spreadsheet. (Figure 5)
   
   Hint: You can find the report definition using the Search panel or the Position To field.

Figure 5 - List of Report Definitions

3. Click Menu > Print Report.
   The Print Report panel appears (Figure 6).

Figure 6 - Print Report Panel for the PO Liability Report

4. Enter the year and period for the report in the field Rpt Acct YrPrd (YYYYPP).
   - Enter the year using four digits.
   - Enter the period as two digits. Use 0 as the first digit in periods zero through nine (e.g., 00, 02).
   - Run the year and period together with no space or other character between them (see Figure 3).
5. Select the Organization code from the prompt.
6. Click Submit.
   The system sends you a message that your report has run, and is available from My Archived Reports or from Completed Reports.
7. Click Completed Reports to view the report.
   Note: Long reports may take a few minutes to run (and often the PO Liability Report is long).
   One or more reports may appear in a list. The top report in the list is the most recently run.
8. Next to the report on the top of the list, click View Report.
   If you ran the report for Adobe output, Adobe Acrobat opens.
   If you ran the report for Excel output, The system displays the Open dialog panel from Windows.
   - Click Open. A spreadsheet appears containing the report data.
   

Figure 7 is a sample PO Liability Report Summary using Adobe output. The first page and the last page of the report are in the figure. The red arrow points to the location of the amount on the last page of the report to use in the reconciliation.

Figure 7 - Sample First Page (top) and Last Page (bottom) of a PO Liability Report

To view the balance in the PO Liability Account:

1. From the General Ledger main Contents, select Account Management > GL Accounts.
   The account codes for you site's chart of accounts appear in a list.
2. Use the Position To field or the quick filter at the top of the list columns to locate the PO Liability Account.
3. Next to the account, select Menu > View Balances.
   Balances for periods in the current year appear. (You can change the year by entering a different year in the Year field.)
4. Locate the Period of interest.
5. Copy the PO Liability Account Ending Balance.
   You will use this amount to compare with the PO Liability Report Balance.
   Note: If you would rather not copy data by hand, you can print the panel on your local printer.
   - Click the print icon on the Internet Explorer toolbar.

Compare the results of Step 2 and Step 3.

Calculate the difference between the PO Liability Report Balance and the PO Liability Account Ending Balance for the period.

- If the difference is zero, or below a threshold set for your organization, no further reconciliation is needed.
- Otherwise, proceed to Step 4 (see the Steps above) to look for discrepancies.

To look for manually posted journal vouchers:

If your account balance is higher than the report balance, and all invoice matching activity for the period is frozen, manual journal vouchers may have been posted to the PO Liability Account. Use the General Ledger Detail by Account report to get a list of credits and debits to the PO Liability Account for the year and period of interest.

1. From the General Ledger (or Accounts Payable) main Contents, select Reports > Standard Report Definitions.
   The list of report definitions appears.
2. Locate the General Ledger Detail by Account Report on the list.
3. Select Menu > Print Reports.
   The Print panel appears (Figure 8).

Figure 8 - Print Panel for the General Ledger Detail by Account Report

4. Enter the Organization code, the Account Code for the PO Liability Account, the Year and the Period.
5. Click Enter.
6. Click Submit.
   The system sends you a message that your report has run, and is available from My Archived Reports or from Completed Reports.
7. Click Completed Reports to view the report.
8. Next to the report on the top of the list, click View Report.
   Figure 9 shows part of a report run for the PO Liability Account.

Figure 9 - General Ledger Detail by Account Report Output

The report shows journal vouchers posted to the account, the date, the source journal, and the credit or debit amount. This format makes it easy to spot manually posted journal vouchers (Figure 6 doesn't have any), particularly if your site has a source journal used only for manual vouchers. The postings In Figure 6 that the were made only by Supply Chain.

More Suggestions

• You may find it helpful to look at the data on the GL Transaction Table. The Report Object "GL Transactions MM and AP" accesses data on the GL Transaction Table. You can create report definitions with this Report Object.
  

To view fields for the "GL Transactions MM and AP" Report Object, from the GL Contents, select Reports > Browse Report Objects.
- You can use the Position To field to find the Report Object.
- Click View Fields.
If you need instructions for writing a custom report using Report Objects, see Creating Custom Reports.

• If the PO Liability Account was not reconciled in a previous period, you can view the account data and run the Report for the period.
• For any questionable MM transactions without matching AP transactions, review dates on invoices to make sure that the invoices were matched in the appropriate period.
• If a journal voucher has been "unposted", verify that the parallel MM or AP transaction was also unposted.

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