"I received an invoice in the mail from a vendor, there is a Purchase Order created on the PO but there is not shipment received, because the invoice has a dro-ship address I went to the Purchasing dept to verify if the items were received , they didn't know and instead of calling the vendor for proof of delivery they requested the packing slip from the person who requested the order. Whoever placed the order doesn't understand what purchasing wants...so in the meantime I'm still not able to pay the invoice. Who is responsible to track this shipment..is Purchasing or Payables? Also what would be a better way to manage this situation in the future? Does the receiving department need to be involved?"
The answer to your question depends on several factors including your management's philosophy on where accountability should reside, your internal control environment, vendor tracking capabilities, and available resources including the staff needed to properly track drop shipments. Here are some thoughts.
- Determining who should track a drop shipment should be a decision for your management team. A logical department would be Purchasing since they ordered the product and would want to know that it arrived in good condition and get notified of any short shipment. There are several ways to accomplish shipment verification, some of which you have noted:
- One is to have the vendor verify delivery by providing you with proof of receipt. If your terms are FOB Destination then this is important to the vendor because while the product is in-transit its still the responsibility of the vendor and title does not pass to you until its received by the drop ship destination.
- A second method of delivery verification is to have the drop ship location send a receiving report or the packing slip signed by them to the Purchasing Dept. The Purchasing Dept would match the receipt to the PO and forward it to AP.
- A third way is to have the drop shipment location send to AP a receiving report or packing slip documenting their signature and the corresponding PO#. AP would then get a copy of the PO from Purchasing and match the invoice, PO and receiving report for processing. This option does require the cooperation of three groups routing shipment/invoice data to AP (the vendor= invoice; Purchasing= PO; drop ship location= receiving report).
We encourage you to seek the advice of your outside accountants who can give you their perspective on what they consider effective from an internal control point of view since they know your business operations. We also encourage you to post your question to the Messaging/Forum section of the site to get feedback from your peers as to how they are handling the documentation for drop shipments, and how they got management support, and overcame any objections from other departments.