Evaluated receipt settlement definition
/What is Evaluated Receipt Settlement?
Evaluated receipt settlement is an arrangement in which payments to suppliers are based on the quantities received, rather than a supplier invoice. The payment to the supplier is based on the number of units received and the price per unit stated in the authorizing purchase order. This approach is significantly more efficient than the traditional accounts payable process, but requires a high degree of coordination between the supplier and the purchasing entity.
Related AccountingTools Courses
Accounting Information Systems
Advantages of Evaluated Receipt Settlement
Evaluated receipt settlement has numerous advantages. First, it eliminates much of the non-value added activity associated with the payables function. Second, there are no variances between the billed amount on the supplier invoice and the amount received, since there is no supplier invoice. Third, payments are usually electronic, so no checks are issued. Fourth, the process can be largely automated. And finally, given the level of automation, suppliers can rely upon more consistent payments.