Evaluated Receipts Settlement
Evaluated Receipts Settlement
Executive Overview
Evaluated Receipts Settlement (ERS) was one of the many innovative business practices initiated by the Japanese in the 1970’s to gain a competitive advantage. After introducing this process to Ford Motor Company in 1986 and helping over 200 companies implement this Best Practice, the founders of Soltec have become recognized as the authority on ERS education and implementation. Soltec has experience in implementing ERS across many industries including Automotive, Chemical, Semiconductors, HVAC, Grocery Products, Retail, and others.
ERS is not a software solution and typically requires minimal software configurations to current business systems. In addition, ERS does not require Electronic Data Interchange (EDI) capability for implementation. Instead, ERS is a process which drives fundamental change to the procurement cycle with a major emphasis on data quality improvements to purchasing, and receiving, as well as improving supplier relations.
Simply put, ERS eliminates the supplier’s need to prepare and furnish an invoice which the customer must then process. The underlying principle of this radical transformation is the use of the supplier shipping document (packing slip) or an electronic Advanced Shipping Notice (ASN) to establish the quantity of goods and the time of their receipt. This quantity is then multiplied by the previously agreed upon purchase contract price with the payment terms in effect at the time of shipment, giving the amount due and the necessary date of payment.
IMPACTS
- ERS moves accountability for errors and supplier problems from Accounts Payable to Purchasing and Receiving. If suppliers have payment inquires, they no longer contact A/P but rather the responsible buyer for the Purchase Order for price questions, or the Receiving area for quantity or non-receipt questions
- Accurate and complete Purchase Order information maintained by the purchasing organization
- Accurate and complete packing slip information prepared by suppliers
- Accurate and timely packing slip processing by materials receiving organization
BENEFITS
Finance & Accounting
- When fully implemented, ERS will eliminate all traditional Accounts Payable functions within a company except for disbursement (check writing/EFT). Other benefits within the finance function include:
- Reduced clerical personnel
- Enhanced Internal Control and SOX compliance
- Reduced data entry costs
- Reduced reconciliation of price and quantity records
- Fewer clerical errors
- Elimination of lost or duplicate invoices
- Improved cash flow and Days Payable Outstanding
- Elimination of monthly accruals
Purchasing & Receiving
- ERS delivers additional benefits in improved data quality for purchasing, receiving, and inventory records. Among the key benefits for Purchasing and other functions are:
- Improved supplier relations and performance evaluation
- Elimination of miscellaneous charges
- Elimination of costly prepaid and add freight terms
- Reduction in freight costs
- Establishment of single firm pricing and payment terms
- Quantitative records control financial records
- Improved discrepancy and return processing
- Reduction of inventory adjustments
- Soltec’s position as the national leader in the ERS process and a proven implementation methodology ensure a successful transformation for your organization. Soltec uses detailed process models, activities and tasks developed into end-to-end process flows that allow a company to implement ERS within 3-4 months.
RELATED BEST PRACTICES
- Soltec provides ERS education to both business professionals and executives in both web enabled and on-site formats. Please contact Soltec to setup an educational session or to understand how ERS can improve your organization’s financial performance.
- Production Demand Replenishment: Improves Working Capital & Inventory Turns
- Payment Terms: Increase Working Capital, Reduce Administrative Costs
- Purchasing Card: Reduce procurement to payment process costs by up to 80%
- Travel & Expense: Reduce Administrative Costs
- Electronic Funds Transfer: Eliminate Check Processing, Improve Cash Management
- Working Capital Improvements: Comprehensive Solutions to Increase Cash Flow
