Concept Definition
What is Evaluated Receipt Settlement (ERS)?
Evaluated Receipt Settlement (ERS) is an AP process where the buyer automatically generates the payment document (self-billing invoice) upon receipt of goods, based on the purchase order and goods receipt note, without waiting for the supplier's invoice. ERS eliminates invoice matching workload and prevents discrepancies for high-volume, standardized supply relationships in manufacturing and retail.
How does the ERS process work?
ERS replaces the traditional invoice receipt step with automated buyer-side settlement generation:
- Purchase order is issued to the supplier with agreed unit prices and terms
- Supplier delivers goods; buyer records the goods receipt note (GRN)
- ERP automatically generates a self-billing document matching PO price × delivered quantity
- Payment is scheduled based on the buyer-generated document
- No supplier invoice is issued; the self-billing document is the VAT document for both parties
Frequently Asked Questions
- What are the VAT implications of ERS?
- Under ERS, the buyer issues a self-billing invoice that serves as the VAT document. Both supplier and buyer must agree to self-billing in writing. The supplier cannot also issue an invoice for the same transaction. VAT rules for self-billing vary by jurisdiction and must be documented in a formal self-billing agreement.
- Is ERS suitable for all procurement relationships?
- ERS works best for high-volume, standardized goods procurement with stable agreed prices (e.g., manufacturing raw materials, retail replenishment). It is less suitable for variable-scope services, project billing, or suppliers with complex pricing structures requiring invoice-level detail.