ERP Vendor Management 2 — Questions and Answers
Question 1: What is 'three-way matching' in ERP vendor management?
- Matching three vendor invoices to one purchase order
- Comparing the purchase order, goods receipt, and vendor invoice before payment (Correct answer)
- Assigning three approvers to each vendor transaction
- Reconciling three vendor accounts at period end
Correct answer: Comparing the purchase order, goods receipt, and vendor invoice before payment
Three-way matching compares the purchase order, goods receipt, and vendor invoice to verify accuracy and prevent fraudulent or erroneous payments.
Question 2: Which ERP capability allows organizations to negotiate and store pricing agreements with vendors in advance?
- Goods Receipt Processing
- Outline Agreements / Contracts (Correct answer)
- Vendor Down Payments
- Material Valuation
Correct answer: Outline Agreements / Contracts
Outline Agreements, such as contracts and scheduling agreements, store pre-negotiated pricing and terms that auto-populate purchase orders.
Question 3: In vendor management, what does 'dual sourcing' refer to?
- Using two ERP systems to manage vendor data
- Purchasing the same material from two separate vendors to reduce dependency risk (Correct answer)
- Having two employees approve all vendor invoices
- Splitting vendor payments into two installments
Correct answer: Purchasing the same material from two separate vendors to reduce dependency risk
Dual sourcing is a supply chain strategy where a company uses two vendors for the same material or service to reduce single-source dependency risk.
Question 4: How does an ERP system typically handle vendor payment terms such as '2/10 Net 30'?
- It blocks payment until 30 days have passed regardless of discounts
- It stores terms in the vendor master and automatically calculates discount deadlines on invoices (Correct answer)
- It requires manual calculation by the accounts payable team
- It applies the discount to all invoices regardless of payment date
Correct answer: It stores terms in the vendor master and automatically calculates discount deadlines on invoices
ERP systems store payment terms in the vendor master and automatically compute discount due dates and net payment deadlines on each invoice.
Question 5: What is the purpose of a 'vendor evaluation system' in ERP platforms like SAP?
- To calculate the net book value of vendor assets
- To score vendors on criteria like price, delivery, and quality for objective comparison (Correct answer)
- To create financial statements for vendor-related transactions
- To automatically block vendors with overdue invoices
Correct answer: To score vendors on criteria like price, delivery, and quality for objective comparison
The vendor evaluation system provides weighted scores across criteria such as price, on-time delivery, and quality to objectively rank and compare vendors.
Question 6: In ERP, what triggers the creation of a vendor liability when goods are received?
- Issuance of a purchase order
- Posting of the goods receipt against a purchase order (Correct answer)
- Approval of the vendor invoice
- Release of the payment run
Correct answer: Posting of the goods receipt against a purchase order
When a goods receipt is posted against a purchase order, the ERP system automatically creates a goods receipt/invoice receipt (GR/IR) clearing account entry, establishing a vendor liability.
Question 7: Which best practice ensures vendor master data quality in an ERP system?
- Allowing all users to create and edit vendor records freely
- Implementing centralized vendor master data governance with defined approval workflows (Correct answer)
- Duplicating vendor records for each purchasing department
- Storing vendor data only in spreadsheets outside the ERP
Correct answer: Implementing centralized vendor master data governance with defined approval workflows
Centralized governance with approval workflows prevents duplicate records, ensures data accuracy, and maintains compliance in vendor master data management.
ERP Vendor Management 2
What is 'three-way matching' in ERP vendor management?