Vendor Invoice Management is the process of recording and matching an invoice to a purchase order and receipt information. Business Central has its unique way of handling vendor invoices without requiring lengthy data entry or complex invoice matching. I explain how to process vendor invoices in Business Central in this post.
Before we start, let's clarify an important concept: Vendor invoices in Business Central are called Purchase Invoices, and I will use this terminology in this post.
Purchase Document Types in Business Central
There are many purchase document types in Business Central; some are draft documents and can be used to initiate inventory or warehouse activities like Purchase orders and Purchase Return Orders. Others can be used to prepare consolidated invoices. The list below includes all the different types of purchase documents in Business Central:
Purchase Quote
Blanket Purchase Order
Purchase Order
Posted Purchase Receipt
Purchase Return Order
Purchase Return Receipt
Purchase Invoice
Posted Purchase Invoice
Purchase Credit Memo
Posted Purchase Credit Memo
The Posted Purchase Invoice is the equivalent of the vendor invoice, which we will cover in this blog post.
Difference Between a Purchase Invoice and a Posted Purchase Invoice
One of the first questions I get when introducing Business Central to a new client is this: What is the difference between a Purchase Invoice and a Posted Purchase Invoice? The short answer is the two documents are completely different; they only share a similar name. Let's look at the details:
Purchase invoice:
It is a draft document
It does not post to the general ledger
Similar to a Purchase Order but with fewer features to manage inventory transactions
Users must post the Purchase Invoice to create entries in the general ledger
It can be deleted if not posted
Posted Purchase Invoice:
It is a registered document
It creates entries in the general ledger
Users cannot create a posted purchase invoice; Business Central creates this document when users post another document, like a Purchase Invoice or a Purchase Order.
It cannot be deleted or edited; users can only reverse it with a purchase credit memo.
Invoice Matching: Why It's Not Available in Business Central?
Invoice matching is not available in Business Central and for a good reason. There is no need to create a new purchase invoice and match it to a purchase order or receipt in Business Central. Users can enter the purchase invoice details in the purchase order, and Business Central will automatically create the Posted Purchase invoice, match it and link it to the Purchase Order.
How to Post a Purchase Document in Business Central
There are two ways to post a purchase document in Business Central and create a Posted Purchase Invoice. Both methods can be used together, even for the same vendor. The choice between the two methods depends on internal processes and policies.
1. Post the Purchase Document
The simplest way to create a posted purchase invoice is to post a purchase document, a Purchase Order, or a Purchase Invoice. There are minor differences between a Purchase Order and a Purchase Invoice; the two document types are essentially the same for invoicing purposes.
Regardless of the document type, users can post purchase orders or invoices in the same way; by using the Post action in the document menu.
After clicking the Post action, a prompt will appear asking to confirm the posting type. Depending on the setup, the options are the following:
- Receive
This action will only receive the document lines. Note that you cannot receive items using the Post function if the purchase document lines include items requiring warehouse activity. I describe the receiving process of inventory items in this other post: Receive Items - The full guide.
- Invoice
The Invoice action will create the Posted Purchase Invoice from the purchase document. This action only works if the document lines are:
Type G/L (General Ledger), Service Item or Item Charge.
Type Item where the field Quantity to Invoice is equal to Quantity Received.
For example, a purchase order line for an inventory item with a quantity of 10, where the quantity received is 5, can be posted if the quantity to invoice is 5. In essence, part-received purchase document lines can be part-invoiced. This action is available on both purchase orders and invoices.
- Receive and Invoice
The third posting option is to run both the receive and the invoice action together. More accurately, Business Central will try to receive the lines first and then post the invoice. The same logic described before applies to this method, which means you cannot receive lines that require warehouse handling.
However, if users receive the purchase document lines through warehouse activity, the Receive and Invoice will work, as Business Central will never re-receive document lines.
2. Create a Draft Invoice and Use Get Receipt Lines
The second method to post a purchase document requires a two-step process.
While this method introduces an additional step that small enterprises might not need, invoicing using this two-step process comes with many benefits, for example:
Segregation of duties: Line managers can create permissions and roles in Business Central to separate the purchase, the receipt and the invoice tasks and assign responsibilities to specific users or teams.
Invoice Consolidation: Pulling multiple receipts into a consolidated invoice is easier using the two-step process.
Record additional charges while maintaining the purchase audit trail: Users can record freight charges or customs clearance costs to the invoice without reopening the purchase order.
This method begins with a posted purchase receipt. Business Central creates this document when a purchase document line is received, either using the receive functionality or through a warehouse activity.
The process starts with a blank purchase invoice, which is a draft document. Users can create a new invoice using the shortcut on the role centre or the action from the vendor card.
I prefer this option because, in a real business scenario, a user receiving the invoice will first check the vendor and whether existing documents apply to the invoice received. After an initial check, the user can pull the receipt lines that apply to the invoice into the draft document using the functionality Get Receipt Lines.
After clicking the link, Business Central will show a list of all the purchase receipt lines that apply to the selected vendor. The list is filtered on the field Qty Invoiced, meaning users will only see receipts to be invoiced on this page.
The next step is to select the line or lines to pull down into the invoice. Here users can select lines from multiple receipts, therefore multiple orders to create a consolidated invoice, or select only certain lines from a single receipt. This step does not require reopening the purchase order, which is ideal for companies requiring strict segregation of duties.
The last step is optional and allows users to add lines on the purchase invoice, like freight charges or to request approval before posting the invoice. If required, the user can even update the invoice line prices. Even in this case, Business Central allows the posting of the invoice without changes to the purchase order while ensuring the correct inventory costing because the actual cost is registered on the posting of the invoice.
Closing Thoughts
There are two ways to invoice purchases in Business Central, and both can be used concurrently. In both cases, Business Central allows the automatic matching of invoice lines to purchase receipts. Before you decide which method works for your organization, consider other departments' needs, like segregation of duties, permissions and the need to handle additional charges.
Regards
Alfredo Iorio
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