GR/IR Analysis in SAP S/4HANA Finance

Master the art of GR/IR analysis in SAP S/4HANA Finance to streamline procurement processes, resolve discrepancies, and ensure financial accuracy—discover how it works and how to set it up.

Goods receipt/invoice receipt analysis is a crucial part of financial and inventory management in SAP S/4HANA Finance that helps organizations ensure the accuracy of their financial records, particularly related to procurement and inventory.

In this blog post, we explain what the GR/IR account in SAP is good for and how GR/IR automated postings are set up.

Business Process Overview

Here's how GR/IR analysis works:

1. Goods receipt: A GR transaction typically follows placing an order. When an organization receives goods from a vendor or supplier, they create a GR document in the SAP system. This document acknowledges the receipt of the goods into the company's inventory. It records details such as the quantity, value, and location of the received goods. A GR entry example is shown here. 

2. Invoice receipt: When a vendor or supplier sends an invoice for the delivered goods, the organization creates an IR document in SAP. This document records the financial aspect of the transaction, including the amount to be paid to the vendor. An IR entry example is shown in the next figure.

3. Matching GR and IR: In an ideal scenario, the quantity and value in the GR document should match those in the IR document. However, discrepancies can occur for various reasons, such as incorrect quantities, prices, or delivery issues. These discrepancies can lead to financial inaccuracies.
4. GR/IR account: SAP maintains a special account called the GR/IR account to track discrepancies. When you create a GR, the system records the value in the GR/IR account as a credit (liability). When you create an IR, the system records the value as a debit (expense). The goal is to ensure that the GR/IR account balance is zero, signifying that all goods have been received and correctly invoiced. In the next figure, you can see a line item report for a GR/IR account. The lines with WE document types are for GR transactions, and the lines marked with RE document types are for IR transactions. In this case, all WE lines have matching RE lines, which means that the RE transactions can be cleared against the WE transactions. The status of each line will then turn green.

5. GR/IR analysis: GR/IR analysis in SAP involves regularly reconciling the GR/IR account to identify and resolve any discrepancies between GR and IR. This analysis helps ensure the accuracy of financial statements as well as inventory records. If discrepancies are found, they are investigated and resolved, which may involve adjusting financial records or contacting a vendor for clarification. In our example, there is a discrepancy between the GR and IR for purchase transaction 4500000232 (see following figure). The received quantity is 12 pieces, but the billed quantity is 24 pieces.

GR/IR analysis is an integral part of maintaining accurate financial records and controlling costs within an organization's procurement and inventory processes. It helps prevent overpayment, underpayment, and inaccuracies in financial reporting, ultimately contributing to better financial management and compliance with accounting standards.

GR/IR Analysis Accounts

The GR/IR account serves as a reconciliation account in which debit entries represent goods received and credit entries correspond to invoices received. These two types of transactions can offset and reconcile only if they pertain to the same business transaction. However, if goods receipts and invoice receipts are associated with different transactions, both types need to be reclassified into two separate accounts: one for items that have been invoiced but not yet delivered and another for items that have been delivered but not yet invoiced.

To facilitate this automatic reclassification, it is essential to maintain the relevant accounts in the system's configuration settings, as described in the next section. We’ll also discuss the specific settings for BNG and GNB accounts.

GR/IR Configuration Options

Configuration options for GR/IR accounts can be accessed within designated menu area IMG > Financial Accounting > General Ledger Accounting > Business Transactions > Periodic Processing > Reclassify > Define Adjustment Accounts for GR/IR Clearing.

There are two main settings for two different procedures (see figure below):

• BNG: Invoiced but not yet delivered
• GNB: Delivered but not yet invoiced

For both of these processes, distinct account determinations are utilized. The GR/IR account remains unaffected throughout. Instead, any necessary adjustments to the GR/IR accounts are made at the end of the accounting period following the initiation of the GR/IR run.

Accounts for GNB

To accurately classify transactions, two additional accounts are required alongside the GR/IR account (see the next figure):

• The Adjustment Account, which is used to offset and balance the GR/IR account to zero.
• The target account (acct), which represents the debit side of transactions, indicating instances where goods have been received but payment has not yet been made.

Accounts for BNG

To ensure accurate classification for BNG, two additional accounts are required alongside the GR/IR account (see final figure):

• The Adjustment Account, which serves to balance the GR/IR account to zero.
• The target account (acct), which represents the credit side of transactions, indicating cases where payment has been made but goods have not yet been received.

Editor’s note: This post has been adapted from a section of the book Account Determination in SAP S/4HANA: Business Processes and Configuration by Abdullah Galal and Jonas Tritschler.