We have been on SAP for 1.5 years and continue to struggle with clearing of GR/IR. I would like to hear from other companies to understand how they tackle this.


The answer to your question depends on industry practices, your management’s feelings around reasonable tolerance limits, why the discrepancies occur, and reporting capability in SAP (about which we are not specifically familiar).

In regards to reconciling the discrepancies in the GR/IR account, it would depend on what tolerance level of discrepancy your management team feels is reasonable given the fact that receiving materials such as liquids or powders can have weight/quantity discrepancies. Some industries such as the chemicals will have tolerance limits that if the receipt shows 10lbs of widget material and the invoice indicates 10.1lbs, if there is a 10% tolerance limit then the discrepancy would be considered acceptable and the GR/IR difference would be charged off to expense at the time of payment (differences can be especially true with evaporation of some liquids in transit). This is often negotiated with the vendor as part of the supplier contract. Your percent tolerance limits should be determined by your management team and, if you have outside auditors, also include them as part of the discussion. What is a material percentage for one company is not the same for another company.

If the amount falls outside the tolerance limits: an aging report that shows the vendor and the discrepancy can be used to create a debit memo if the vendor "over charged" you for material that you actually didn't receive and that fell outside the tolerance limits (TAPN has a debit memo form in the A/P Tools section: http://www.theaccountspayablenetwork.com/html/pafiledb3/pafiledb.php?action=file&id=101&category=5 ) You would take it out of the GR/IR account and put it into either a receivable account or as an offset in A/P to take on as a deduction on a future invoice.

Managing the age of your GR/IR balances should be similar to how you manage your collections from customers. In our opinion you would want to limit the age of amounts to the lowest possible number of days (and at least within the number of days payment terms with your customers). Who should manage the GR/IR depends on whom your management team feels is best equipped to get answers and understand why there are discrepancies. Certainly the purchasing department should be involved with larger amounts if there is not a good reason for the difference. If you are having a lot of discrepancies that are larger than what you would expect, then it may be a problem that needs more research and accountability within the organization-- Is it the same vendors regularly? Is it the with the same purchasing group (if you have different groups)? Are the dollar amounts or percent of invoice cost generally the same?

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