Processing of unapproved vendor invoices

In This Topic

Vendor Direct Debits
- Setup
- Process

In standard Microsoft Dynamics 365 for Finance and Operations it is not possible to post unapproved vendor invoices in a (banking) journal. This is designed to ensure only approved invoices are paid, reducing errors and preventing fraud.

Many customers request the ability to pay invoices before they are fully approved to take advantage of early payment discounts offered by vendors. Quick payments can result in significant financial benefits.

To avoid risks, we recommend:

Establishing clear rules for non-approved invoice payments, ensuring they’re used only for valid financial benefits.
Regular monitoring and reporting to track these payments.
Strict approval follow-ups to ensure the invoices are properly approved post-payment.

This solution balances flexibility with financial control, allowing customers to save money while maintaining governance.

There are two features which can be used to process unapproved vendor invoices:

Implement the payment of unapproved vendor invoices feature of Vendor Management.
Setup Vendor direct debit codes in the Bank reconciliation setup. When a bank statement line is recognized as a Direct Debit, it will be marked green, no invoice will be recognized, no settlement takes place, but a new Vendor transaction is created which can be settled against the invoice after it has been approved. For this a new Auto settle function has been added to the Banking solution.

Vendor Direct Debits

Setup

General ledger-->Ledger setup-->Bank reconciliation setup

On the parameter tab two fields have been added which are used to recoginze Vendor Direct Debits:

Field	Description	Remark
Vendor direct debit domain	Tag from import file used during reconciliation to identify whether the payment is a Vendor Direct Debit	E.g. in CAMT53 Look for the tag Domn and enter the value from the CD field

Vendor direct debit family

Tag from import file used during reconciliation to identify whether the payment is a Vendor Direct Debit

E.g. in CAMT53 Look for the tag Fmly and enter the value from the CD field

When a payment has been identified as Vendor Direct Debit based on the domain and family codes, it will be marked green and it will not settle any transactions.

Note

The parameter Skip unapproved transactions in not taken into account when a payment has been identified as a Vendor Direct Debit.

Process

Create the vendor invoice in the invoice register
Import the bank statement and create the banking journal. The two Vendor Direct Debit fields have been added to the bank journal lines on the tab Bank Statement.
Execute the reconciliation --> The payment will be marked green (no settlement)
Post the banking journal --> a new open vendor invoice transaction is created, with the invoice number from the payment.
Approve the vendor invoice
On the vendor two new menu items have been added:
- Settlement overview, showing the transactions that will be considered when running the Auto settle functionality
- Automatic Vendor Settlement. The system will try to settle based on the invoice number