Presentation: Understanding, Controlling and Reconciling the Purchasing Accrual Account
Speaker(s): Karen Brownfield, Solution Beacon, LLC

AISIN USA implemented the suite of Oracle manufacturing, financial, and other applications in May, 2004. Problems with some of the converted data, a lack of sufficient training, inadequate procedures and system controls soon caused the balance in the purchasing accrual account to balloon to an unreasonable amount. Steps were taken early on to correct this but only seemed to exacerbate the problem. AISIN USA is an auto parts manufacturer with a high volume of receivings. They have blanket purchase orders with hundreds of lines and thousands of releases. They use 3 way matching and match invoices to receipts (a feature that is fairly new to the Oracle applications). The typical balance at month-end of the uninvoiced receipts is between 6 and 8 million dollars. After a few months accounting personnel noticed that the account balance was growing. It appeared that more money was going in than was coming out. At one point the account balance was over 15 million dollars. The uninvoiced receipts report was mushrooming (2,500 plus pages and counting) and nobody understood why. Things were so bad that the Uninvoiced Receipts Report could not be trusted and what was worse there was no way to substantiate the balance in the Purchasing Accrual account to management and auditors. Not until they took a systematic approach to understand the problem was the account brought back into control. Some of the steps they took to accomplish this included revising procedures in the receiving, purchasing, and payables departments, rethinking some of the system controls and using custom reports and queries to find and isolate the problematic transactions. Corrective actions were taken to purchase orders and invoices with problems. The end result to all this is an account whose balance is reasonable and substantiated. Though the problem is not completely resolved AISIN USA now has confidence in the Uninvoiced Receipts Report and the activity posted to the Purchasing Accrual Account. The balance in the account is reasonably close to the total of the Uninvoiced Receipts Report. They have procedures in place to monitor receiving activity and to ensure that invoices are matched to the correct receipts. This area of functionality is seldom researched. It tends to lie in the edges of the expertise of purchasing and financial experts and doesnât get the attention it deserves. If you are looking for some guidance on controlling and understanding your Purchasing Accrual account, you should attend this presentation.