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Vendor Shipping and Invoicing Issues
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Vendor Shipping and Invoicing Issues
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As anyone with experience in the FF&E procurement business can tell you, the ability of shipping surprises to wreck the schedule of any complex project is something to be respected. In addition, the possible variations that can occur when shipped items are invoiced can lead to an equal amount of confusion on that end of the process. FF&EZ offers some relief from the potential complexities of the ordering, shipping and invoicing cycle through its approach of using a separate "split" record to deal with shipping and invoicing. For most orders and their items, though, you will not see any difference between an item and an item split. It also allows you to "pre-split" items based on larger phases in a project. Best Practice: Prevention One of the most important goals to have in dealing with shipping and invoicing is one that will help you avoid complicated problems: Keep the "shipped" (and it follows, "received") quantities in sync with what has actually occurred, not what was supposed to occur. Primarily, this means to enter partial shipments on the Expediting List as soon as you can confirm them, which will set up the items and splits to match what should be on a future invoice. Although this might sound simple enough, anyone who has slogged through a multi-page invoice in which several items don't seem to have any relation to what you thought was shipped will understand that what a vendor says they shipped isn't always what the invoice says. Several things can go wrong:
All of these situations can be handled by FF&EZ, either on the Expediting List or while using the Enter/Reconcile Vendor Final Invoices processing command. However, there are two extra steps you can take to minimize problems:
Before talking about the more unexpected types of changes you may need to handle with item splits, we would point out that, for larger projects, there are two other approaches you can use to set up planned partial shipments of FF&E. The key to using them (and whether you want to) is whether the timing of the shipments is extended enough that the separate orders (or order items) for the same products won't cause confusion. That is, given that you will expect to see normal split shipments that may change the expected timing and quantities of any item, you would not want to pre-split an item if separate order or item shipments may actually "bleed" into one another, because it may be harder to make the actual quantities match up with what the vendor invoices, especially if we are talking about more than one order for the same item. That said, there are two ways to pre-split items:
Both of these approaches make it easier to track the orders for well-defined project phases, but both are also vulnerable to "on the fly" decisions that may rob the "Peter" phase to pay the "Paul" phase. A vendor may not recognize the phase differences in invoicing and it will be up to you to figure out what quantities on their invoice apply to which purchase order or item (note, though, that FF&EZ's Enter/Reconcile Vendor Final Invoices function can reconcile a vendor invoice to more than one order). Although shipping differences due to case sizes and overruns could be categorized as "basic changes," we cover those further below. Here we want to concentrate on the less expected changes to what was to be shipped. Here is the (simplified) structure with which every order begins, in which each order record points to at least one item and each item points to a split:
In the diagram above, the "Item" contains the description of the item, the cost and price and the original order quantity, while the split does not have any relevant information yet (note that it is numbered as "0" to signify that nothing has been split yet). At this point, the item and its split are treated by FF&EZ as a single record. Now, suppose that you have the manufacturer ship 20 of the dining chairs (Items 1 and 3) to the site. The manufacturer notifies you that these items have been shipped and you enter the quantity shipped on the Expediting List screen. When you enter the smaller quantity, FF&EZ will automatically create a shipping split for the remainder (unless you indicate that the quantity is a final variance before saving the update). At that point, the data will look like this:
Next, suppose that, unknown to you, the shipper's truck filled up and only 10 of Item 3 were shipped, with the remainder scheduled for the next day. Depending upon how the vendor runs invoices and their timing, you might receive an invoice a few days later with any of these possibilities:
20 of Item 3
10 of Item 3
10 of Item 3 : (many other line items) : 10 of Item 3 However, if you have not been informed of what actually happened at the vendor, the invoice may not match your expectations. On the other hand, perhaps they did inform you but the second variation occurred and the last 10 of Item 3 will be invoiced later. Your challenge is to get FF&EZ's splits to make sense with the vendor invoice without needlessly adding extra splits (or panicking). The first thing to do is to determine whether the second or third possibility above is the case as you begin to enter the vendor's invoice into the Processing module. If it's the second, simply enter the quantity of 10 that was actually shipped and FF&EZ will guide you through creating a split for the remainder (that should appear on a later invoice). If it's the third option, you have a choice of simply entering "20" (because that was the total quantity found on that invoice for Item 3) or entering "10" to create a split and then including the new split on the invoice, too. The reason to do the latter is simply to make it match the invoice more exactly and prevent future questions about that vendor invoice (that is, it's not required, but might be a good idea if strict auditing is expected). The first possibility above is the only one that poses a real problem, especially if you are in the habit of marking the "Received" quantity at the same time you are told what was shipped (if you don't check receiving, then you won't notice a problem and can just happily proceed onward...la la la la la la...). Properly verifying what was received gives you the chance to correct the "Shipped" amount (or ask for a corrected invoice if it comes to that). Note that if you have marked a "Received" quantity in error, you can use the Update Item function in expediting to correct it and you can do the same for the "Shipped" quantity as long as you have not yourself invoiced your client for that quantity. We'll cover mistakes in your own invoices further below. Note: when making corrections to "received" and "shipped" entries, always start at the last entry (e.g., the "received" quantity) and work backwards. Case Quantities & Quantity Variances One source of changes to what you expected to be shipped can happen when a case quantity is involved. There are two possible situations:
In the first scenario, as long as the item has not been reconciled to a vendor final invoice or has appeared on a balance request or your own client invoice, you can simply revise the item's original quantity to reflect the actual quantity that will ship. However, if you do this on a resale project and wish to avoid charging the client an overage, you may need to adjust the sell price of the total quantity. Alternatively, you can instead enter the revised quantity on the Expediting screen as a variance and unmark "Change client amount?" if you don't want to charge the variance to them. Situation #2 is simply a normal partial shipment, because you know in advance that the case quantity will be shipped and can enter that amount in Expediting, which will create the appropriate shipping split for the remaining items. However, with the third scenario, the shipping split you create won't match what the vendor actually shipped and invoiced. For example, suppose you requested a shipment of 40 items out of a total of 124, but the case quantity is 25 and the vendor ships 50. When you get the invoice, it will be for 50 items. When you use Enter Vendor Final Invoice for that order, you may find that you have two splits of 40 and 84 already set up:
If you look at the details, you can see that the vendor has invoiced $125.00 for 50 items @ $2.50, but the shipping split that was based on the requested 40 is for $100.00. When you select the first split (split "0") and enter the quantity of 50 in the "Inv Qty" column, FF&EZ will flag this and display a screen that will allow you to deal with it. Since a case quantity issue often involves more than the expected quantity, you can indicate this on the choices:
What the third choice does is treat the quantity of 50 as "40 plus a variance of 10 items." This preserves the original split quantity that you requested, but allows you to match the vendor's invoiced quantity. What about the remaining 84 items on the order? One of two things will happen: 1) The vendor will ship and invoice 75 items (the remainder of 124 - 50 is 74, but that requires 3 cases) or 2) the vendor will ship and invoice you for 100 items (the next case equivalent for 84). If the first scenario occurs, you have two choices:
As you can see, this also creates a variance of -9 as explained above. But what if the vendor ships and invoices 100 (four cases) instead? We recommend that you return the extra case and request a new (or adjusted) invoice, holding off the entry of the second invoice until you have a correct one. Alternatively, you would enter the quantity of 100, creating an overshipment variance of 16 (but a total overshipment of 26 between the two splits). In a case like this, your knowledge of what might happen when you dealt with the 50 shipped against the first split can act as a prompt to confirm that you can set the second split to 75 manually. Then when the vendor invoice arrives, you will have an obvious discrepancy if it is for four cases instead of three. Discontinued or Canceled Items Sooner or later, you will have a vendor call you to tell you that an item that was ordered and even acknowledged has been discontinued or out of stock and you can't get it (or want to find a substitute for the remainder). Also, an item's original quantity may have been overestimated and a vendor may agree to cancel an unshipped quantity. "No Charge" Items Correcting Your Invoice or Check Request Errors Depending upon when and how you invoice your clients, you may want to exercise care to be sure that the shipping quantities indicated are correct prior to running the invoice process, so as to avoid discrepancies that may require corrections. In addition to the available standard scopes or query, FF&EZ's invoicing function allows you to use the item/split status so that you can invoice order item/splits based on:
In particular, if you are billing based on a purchasing fee and bill your fee when an order has been issued, your fee may be slightly higher or lower than expected if the vendor invoices a different quantity. The "cleanest" way to correct an invoice is to void it and issue a new one. When you void an invoice, all the splits that were included on it will be set back to "uninvoiced" status and are eligible to be invoiced again. Note, though, that the original scope that you used for the invoice may now include more items, since their status may have changed so as to meet your scope conditions. |
