How can I offset against a PO?
Grasping the intricacies of invoice matching, particularly when dealing with different amounts in purchase requests, GRNI (Goods Received Not Invoiced), and actual invoices, can be challenging. This article illustrates this process using a practical example, where a purchase request for £2,000 (+20% VAT) is involved, but the GRNI and invoice amounts differ.
Before diving into the specifics of our scenario, it's essential to understand what GRNI is. GRNI stands for Goods Received Not Invoiced. It is an accounting term used when a company has received goods or services but has not yet received the invoice for these goods or services.
In financial records, GRNI is important because it represents a liability – an acknowledgement that while the company has benefitted from these goods or services, it still owes payment for them. Accurately tracking GRNI is crucial for maintaining the integrity of a company's financial statements, ensuring that liabilities are correctly recorded and the company's financial obligations are transparent.
- Purchase request: You've raised a purchase request for goods or services worth £2,000, with an additional 20% VAT, totalling £2,400.
- GRNI recorded: Subsequently, a GRNI is recorded for £1,000 (excluding VAT), indicating goods received but not yet invoiced.
- Invoice received and matched: Later, you receive and match an invoice for £1,000 (excluding VAT).
The offset process
Identifying the discrepancy: Initially, there's a discrepancy. The purchase request is for a total of £2,400 (including VAT), but the GRNI and the matched invoice total £1,000 each (excluding VAT).
Calculating VAT and total amounts: VAT for the GRNI and invoice amount (£1,000) needs to be considered, which is 20% of £1,000, equating to £200. Therefore, the total for each (GRNI and invoice) including VAT is £1,200.
Determining the offset: The original purchase request was for £2,400, but so far, only £1,200 (including VAT) has been accounted for in both GRNI and the invoice. The offset here would be the remaining amount that is yet to be accounted for.The offset can be the remaining amount that is yet to be accounted for. In this case, an offset of £1,200 can be recorded to align the total purchase request amount and then to make a match with
Recording the offset: This offset amount should be recorded in your financial system. It adjusts the total liability or payable amount in your accounts, ensuring that your financial records accurately reflect the total of the original purchase request.
Finalizing the accounts: With the offset recorded, your accounts will now show a commitment of £2,400 (including VAT), aligning with the original purchase request. This ensures the financial integrity and accuracy of your procurement and accounting records.
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