Finance & Accounting, Operations & Management

Jargon: Evaluated Receipt Settlement (ERS)

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Evaluated Receipt Settlement (ERS) is an EDI (Electronic Data Interchange) procedure, part of Supply Chain Management.  It was pioneered by GM to address the issues associated with payments against invoices (bills) for goods received. ERS is valid in India.

Issues addressed are

  • preventing variance between goods ordered, received & paid for
  • elimination of non-value-added work (like reconciliation, etc)
  • possible savings in order processing costs and avoiding duplicate payments

ERS is a business process between trading partners that agree to conduct commerce without invoices. A typical transaction occurs as follows:

  • The supplier keeps the purchaser current with price/sales catalogue that the latter uses in the purchasing cycle.
  • The purchaser issues a purchase order (PO) electronically (EDI), via fax, or paper, that carries a unique number. At times, a goods order placed might be pursuant to the specific terms and conditions of a contract, in which case the contract number is referenced.
  • The supplier delivers the advance shipping notice (ASN) to the purchaser, permitting loading/receiving docks to be properly scheduled and accurate material receipts to be generated. ASNs despatched electronically use either ANSI X12 Transaction or Data Set 856 (Ship Notice/Manifest) standards. The latter, however, does not contain pricing or tax information.
  • The supplier ships the goods with a goods receipt (typically an itemized bill of lading {BoL} or packing slip) which references the purchase order or contract number.
  • The purchaser performs a 3-way match between the goods receipt, ASN, and purchase order, or contract as applicable. Some companies (like Agilent Technologies) generate a self-billing invoice (SBI) that is sent out to suppliers for the goods received.
  • On verification, he authorizes supplier payment (electronic transfer or cheque), thus making the invoice redundant.

It gained popularity since it had addressed legal and accounting implications well.  ERS is allowed in Australia, Austria, Belgium, Canada, Denmark, Finland, Germany, Hong Kong, India, Ireland, Malaysia, Netherlands, New Zealand, Singapore, Sweden, Switzerland, United Kingdom and United States. China, France, Korea, Taiwan & Thailand are a few known countries where ERS is not legally allowed. For a few other countries, there are specific invoice requirements that must be met for ERS to be legal.

Electronic Invoice Presentment and Payment – EIPP or eInvoicing, is another way of enabling the supplier.