Purchase Orders and Invoicing Business Process

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1 Document Type: Author: Schools SAP Version Date Completing a Purchase Requisition Form Orders for goods and services must be submitted to the Finance Office on a Purchase Requisition Form. (PRF) An example PRF can be found on the Intranet under: Schools > SAP Support for Schools > Accounts Payable > Purchasing - Sample purchase order requisition forms (for schools internal use) The form must include the vendor contact information, details of the goods/services to be ordered, an accurate price, and the cost centre to be charged and preferably the general ledger code (if known). In order to meet FMSIS, a PRF should only be entered as a Purchase Order (PO) on SAP if it has been signed by the employee(s) empowered to authorise orders for the cost centre(s) being charged. A list of employees empowered to authorise orders on behalf of the Governing Body should be held by the school. (See 16.6 in Financial Manual of Guidance). By signing the PO the authorised signatory is acknowledging that there are sufficient funds in the cost centre to cover the cost of the goods/ services to be ordered and that the school s best value procedures approved by the Governing Body have been adhered to. Creating a Purchase Order on SAP When the order has been entered on SAP a unique document number is generated and this should be written on the PRF. The PO will automatically appear in the SAP authorisers Inbox for approval. Authorising a Purchase Order on SAP The PRF should be placed in a folder in SAP document number order. This folder should be given to the SAP authoriser to refer to when authorising the orders on SAP. When the PO is authorised the order is printed automatically on the approver s default printer. This should be given to the Finance office so that they can post/fax the order to the vendor. Filing the Purchase Order If the PO has been faxed you can attach the paper copy to the PRF and file it in SAP document number order in a Purchase Order file. Please note that the PO number is sequential by county, not per school. If the PO is posted it is not necessary to print an additional copy to put in the file, as the SAP document number can be viewed on the PRF. Goods Receipt and Filing Delivery Notes When the goods arrive in the school they should be checked against the purchase order and delivery note to ensure that they have all been received. The delivery note should be signed by the requisitioner to confirm receipt and given to the Finance Office. (Where the requisitioner is the Head the delivery note should be signed by a different member of staff to ensure compliance with FMSIS separation of duties). SAPBPPSCH_Purchase Orders & Invoicing Page 1 of 7

2 The Finance Office should attach the Delivery Note to the PRF/PO in the Purchase Order file. Checking Invoices Against Deliveries When the invoice arrives it should list the purchase order number. The invoice should be checked against the delivery note to ensure that all the items listed on the invoice have been received. Where a part invoice has been received and the items have been delivered, the invoice can be processed on SAP. The remaining items should be listed on a subsequent invoice. Where a delivery note is not held in the Purchase Order file, (this would be the case where a service has been provided) the invoice number and date received, should be noted on the PRF and the invoice should be sent to the person who requested the goods/services. They must sign the invoice to confirm that the order has been fulfilled and return it to the Finance Office for processing. Processing Invoices Linked to PO s on SAP Invoices must be processed on SAP using transaction MIRO. When the PO number is entered on the invoice screen the system will retrieve all the items entered on the original PO together with their price and quantity. If the price on the invoice differs to the price on the PO, then you must adjust the prices on the invoice screen so that they match the paper invoice. Where a price increase exceeds the tolerance level per line of 5% or 100, the payment will be blocked and the person who entered the PO on SAP will receive a workflow message asking them to adjust the PO. The price increases will then have to be approved by the SAP authoriser before the invoice will unblock and payment can be made to the vendor. Price increases are likely to occur if: the items ordered were selected from an out of date catalogue The price should be adjusted and an up to date catalogue should be requested to prevent problems with future orders the vendor has overcharged The price should be queried with the vendor and if the vendor is in agreement they will send a credit note. The invoice should be entered with the updated prices and if it exceeds the tolerance level the system will block the payment. The credit note should be entered via MIRO and this will remove the payment block. Where there is an ongoing dispute with the vendor, the invoice should still be entered on SAP but Accounts Payable must be contacted to place the item In Dispute which will block the payment. When the issue has been resolved contact Accounts Payable to remove the dispute flag and the payment block will be removed. delivery costs were not included on the PO SAPBPPSCH_Purchase Orders & Invoicing Page 2 of 7

3 Delivery costs, in excess of 25, should be added as a separate line item at the bottom of a PO. Delivery costs below 25 can be entered in the Unplanned Delivery field on the invoice (provided that each item has the same VAT rate, otherwise a new PO line will need to be added). The delivery costs will then be added pro-rata to each of the items orders. Please see Dealing With Unplanned Delivery Costs (MIRO) (.pdf format, 509Kb) on how to deal with unplanned delivery cost. Price reductions are likely to occur if: Not all the items ordered have been received If a partial delivery of a certain item has been received and you are expecting the remainder at a later date, the Quantity field on the invoice should be adjusted. If the vendor has confirmed that they are unable to supply the remainder then the Final Invoice field should also be ticked to remove the outstanding commitment from the cost centre. Where no quantity has been received the line for this item can be deselected ready for invoicing when it is received later. A standard VAT rate has been applied to the item and it should be either lower or exempt VAT rates are not entered on the PO so the tax code entered at header level on the invoice screen will automatically default to all items. If the invoice contains a mixture of VAT codes the Tax Code field at header level should be left blank and the appropriate code should be entered against each item. A discount has been given on the order If the discount only applies to 1 or 2 items then adjust the price on the invoice and tick the Final Invoice field to remove the outstanding commitment from the Cost Centre. Where a discount has been applied to the whole order and it contains many items you can exit out of the invoice screen and apply a header level discount on the purchase order. The PO will not go for re-approval, so the invoice can then be entered and the prices should now agree. Processing Non Order Invoices on SAP It is possible to enter a non order invoice on SAP for items/services that are invoiced dependant on usage, such as utility bills, mobile phone bills. These invoices should be processed in SAP by the Finance Officer, using transaction FB60. Once entered SAP will allocate a document number that should be written on the paper invoice. The invoice will be passed to the Head for signature and authorising on SAP. Once authorised the invoice will be paid subject to the payment terms entered on the invoice. Filing Invoices If the purchase order has been fullfiled Once the invoice has been entered and saved on SAP, two document numbers are generated. Enter the numbers on the invoice and attach the PRF/PO and delivery note to the invoice and file it in an Invoices file in vendor name and date order. SAPBPPSCH_Purchase Orders & Invoicing Page 3 of 7

4 If the purchase order has outstanding items If there are outstanding items on the PO to be delivered or you have requested a credit note, then file the invoice with the PRF/PO and delivery note back in the Purchase Order file in PO number order. PO s should only be moved to the invoice file once all the items have been received or the vendor has confirmed that they are unable to supply the remainder. If the remaining items are not to be delivered the PO on SAP should be updated to remove the outstanding items by either deleting the items or ticking the Final Invoice field on the Invoice tab for the relevant items. This will remove the commitment against the cost centre. Non-order invoices Paper invoices should be filed in vendor name and date order in the invoice file once they have been authorised on SAP by the Head. SAPBPPSCH_Purchase Orders & Invoicing Page 4 of 7

5 Purchase Order Flow Diagram Purchase Orders Requestor Purchasing requirement identified Requisition pro-forma completed Admin / Finance Create PO in SAP Amend PO after consulting requestor Receive notification of rejection NO Approvers Approval task (via SAP workflow) Approval YES PO printed automatically Vendor PO received Good, services, or works delivered Invoic Accounts Payable (SSC) SAPBPPSCH_Purchase Orders & Invoicing Page 5 of 7

6 Segregation of Duties Purchasing and processing invoices in schools Examples to show how segregation of duties can be applied for schools in purchasing. SAP Purchase Order Cost Centre Manager (CCM) requisition 1. Requisition form signed by CCM (Budget Holder/Teacher) to confirm a. Best value procedures followed b. Preferred vendor is used c. Goods/services are required d. Sufficient funds in budget 2. Admin/finance enter on SAP requisition form to head 3. Head compares and approves PO in SAP requisition form back to admin 4. Delivery confirmed ok by signing delivery note or e mail by CCM. This is provided to admin to attach to requisition form. (Could be confirmed by admin) 5. Invoice signed by admin to confirm matches goods ordered and delivery note. Then entered on SAP for matching and payment. Invoice attached to PO and receipt so that all paperwork is signed and filed together ready for audit. SAP Purchase Order Head requisition 1. Requisition form signed by head to confirm :- a. Best value procedures followed b. Preferred vendor is used c. Goods/services are required d. Sufficient funds in budget e. Within their spending limit as per the school Policy & Procedures Document (if outside limit to be signed by authorised person) 2. Admin/finance enter on SAP requisition form to head 3. Head compares and approves PO in SAP requisition form back to admin 4. Delivery confirmed ok by signing delivery note, if available, by Admin. This is attached to requisition form. (not to be confirmed by head) 5. Invoice signed by admin to confirm matches goods ordered and delivery note. Then entered on SAP for matching and payment. Invoice attached to PO & receipt so that all paperwork together and all signed ready for audit Non order invoice 1. No requisition form. If one provided then SAP PO should be raised. 2. Delivery confirmed by admin or requisitioner by signing delivery note. Not applicable in some cases such as services or utility bills. 3. Invoice received. If delivery note available attach to invoice. Admin enter SAPBPPSCH_Purchase Orders & Invoicing Page 6 of 7

7 Segregation of Duties invoice on SAP, and pass paperwork to head 4. Head authorises in SAP and signs invoice to confirm a. Best value procedures followed b. Preferred vendor is used c. Goods/services are required d. Sufficient funds in budget 5. Invoice to admin for filing ready for audit Schools need to be aware of the purchasing limits approved by their Governing Body and will need to ensure that these limits are adhered to at all times. For large sums where either Finance Governors or Full Governors authorisation is required, it should be sought before transactions are recorded on SAP and approved. In such circumstances there should be written approval held by way of minutes of meetings for audit purposes. SAPBPPSCH_Purchase Orders & Invoicing Page 7 of 7