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The Receiving Department: A Crucial Link in Procure-to-Pay

photo of niek dekker
Niek Dekker
5 Min
Receiving Department

Any CFO will tell you that their Accounts Payable department does not exist in a vacuum. For Accounts Payable to function effectively and efficiently, it relies on other departments across the organisation having their own internal processes running smoothly too. After all, if other departments are disorganised and don’t maintain proper internal controls, it will be almost impossible for the Accounts Payable team to know with certainty which invoices are legitimate, accurate and need paying. In many organisations, the Receiving Department has a particularly important role to play.

In this blog we will explore the duties and responsibilities of the Receiving Department. We will examine why it is critical that your organisation has an efficient and accurate Receiving Department, so that the Accounts Payable team can function properly too.

What is a Receiving Department?

The Receiving Department, not to be confused with Accounts Receivable, is the department that is responsible for receiving any physical goods that have been purchased by the organisation. Physical goods may include new office equipment, all kinds of manufacturing inputs, shipping containers with retail stock, construction materials, or any other item that an organisation may need to procure. Even small items like envelopes, stationary and cleaning materials can be considered physical goods.

Receiving Departments have a critical role to play in ensuring an organisation actually receives the items it is paying for. If a Receiving Department fails to maintain accurate inspection and reporting processes, there is a high risk that the organisation will end up paying invoices to suppliers that have not fulfilled their requirements as outlined in a Purchase Order.

What are the Responsibilities of the Receiving Department?

As the central receiving point for all the goods an organisation procures, the Receiving Department is responsible for verifying the accuracy of all deliveries. In particular, the Receiving Department should inspect the quantities of goods delivered and determine whether anything is damaged.

In fact, inspection is one of the most important functions of the Receiving Department. If incoming goods are inspected correctly, many additional problems with suppliers can be avoided. By inspecting items as soon as they are delivered, many problems can be addressed expeditiously. This helps the requisitioning department by limiting any delays they may experience due to incorrect or damaged deliveries.

Once goods have been delivered, the Receiving Department needs to liaise with the department that requisitioned the items to determine whether any further inspections are required, as well as how the goods should be handled or warehoused.

Whilst inspecting inventory, most of which will arrive by freight, the Receiving Department should firstly ensure that the delivery matches the Bill of Freight, preferably while the courier or deliverer is still present. The Bill of Freight should always be retained. The Receiving Department should also check for any discrepancies against the Purchase Order.

Once the Receiving Department has conducted its inspections, it should complete a Receiving Report that is made available both to the requisitioning department, as well as the Accounts Payable department.

Why is Supervision Critical in the Receiving Department?

The receiving clerks who work in the Receiving Department may be responsible for handling millions of dollars’ worth of inventory. They have responsibility for inspecting goods and transferring them from the loading dock to a warehouse or the requisitioning department. They also have responsibility for completing Receiving Reports.

Throughout this process, they may be in a position where they have access to inventory with little or no supervision, opening the way for completing incorrect Receiving Reports in order to steal goods.

Supervision of the Receiving Department is therefore critical. Apart from having managers present, the requisitioning department should also check incoming goods to ensure delivered inventory matches the Purchase Order, Bill of Freight and Receiving Report.

Ideally, the requisitioning department should complete its own Inspection Report. This should match the Receiving Report that had been compiled by the Receiving Department when the goods were delivered. This will help mitigate the risk of inventory theft.

The purpose of the Receiving Report and Inspection Report should be supplied to the Accounts Payable team so they have a strong degree of certainty that an invoice should be paid.

What is a Receiving Report?

The Receiving Report is a document to be completed by the Receiving Department following the inspection of all goods delivered.

As mentioned, delivered goods should be inspected to ensure the quantity matches both the Bill of Freight and the Purchase Order. Furthermore, any damages should be identified. All this information needs to be recorded in the Receiving Report, which needs to be made available to both the department that requisitioned the goods, as well as the Accounts Payable team.

These days, Receiving Reports can be completed electronically, enabling the Receiving Department to file the report in the ERP system under the supplier’s account. This helps facilitate efficient communications within your organisation and ensures the Accounts Payable team has access to all the relevant information they require when determining whether an invoice needs to be paid.

What Function Does the Receiving Department Serve in The Procure-To-Pay Lifecycle?

For any organisation to maintain an effective Accounts Payable function, every step of the Procure-to-Pay lifecycle needs to be functioning optimally. Of particular importance is the Receiving Department.

Due to the fact that the Receiving Department has responsibility for receiving purchased goods, they play a critical role in ensuring that suppliers meet their obligations when it comes to fulfilling Purchase Orders. After all, it is the team in the Receiving Department that physically inspects all incoming goods and is able to identify incorrect or damaged items.

If the Receiving Department isn’t inspecting goods, and completing accurate records in the form of the Receiving Report, it makes it very difficult for the Accounts Payable team to know with any certainty whether an invoice is legitimate, accurate and should be paid.

How Can You Improve Receiving Department Processes to Ensure They Align with Accounts Payable Requirements?

To ensure your Receiving Department functions in a way that aligns with the needs of your Accounts Payable team, it is important to streamline all communications.

This is best achieved through implementing electronic record keeping. When all records are filed electronically within your ERP system, checking what items were requisitioned according to the Purchase Order, as well as recording received inventory, becomes seamless. This facilitates 3-Way Matching, so the Accounts Payable team knows that an invoice is legitimate and accurate.

How Can Eftsure Help?

As you can see, there are many important considerations in the Procure-to-Pay lifecycle, not the least of which is ensuring that suppliers are delivering the goods they are contractually obliged to supply according to their Purchase Order.

Each of these considerations requires time and effort on the part of busy Accounts Payable staff. With eftsure integrated into your processes, you can automate many of the controls that are required in the Procure-to-Pay lifecycle.

This allows your team to focus on other important considerations, such as efficient liaising with the Receiving Department, so your entire Accounts Payable function can operate effectively and efficiently.

Contact us today for a no-obligation demonstration and learn how eftsure can help secure your organisation from error and fraud.

The Essential Procure-to-Pay Checklist
Continuous monitoring is essential when it comes to securing your supplier payments. Understand how it fits into the Procure-to-Pay lifecycle with this 8-step checklist.

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