Odoo Purchase: How to Manage Vendor Payments with Three-Way Matching

1. Introduction

Managing vendor payments effectively is crucial for any business to maintain positive supplier relationships and ensure cash flow stability. One of the best ways to streamline this process and avoid common payment errors is by using the three-way matching method. This approach involves comparing three key documents—the purchase order, the vendor bill, and the receipt of goods—before releasing payments.

Odoo, a comprehensive business management platform, offers powerful tools for managing vendor payments through its bill control policy feature and three-way matching configuration. By setting up the right policies, businesses can automate parts of their payment process, ensure compliance, and prevent overpayments.

In this guide, we will walk through the entire process of configuring bill control policies, enabling three-way matching in Odoo, and demonstrate with examples how to handle different payment scenarios based on whether you pay vendors before or after receiving products.

2. What is a Bill Control Policy in Odoo?

A bill control policy in Odoo defines when a business should generate a bill for purchased goods or services. It helps ensure that your vendor payments align with your company’s procurement and cash flow strategies. This setting can either be defined at a company-wide level or customized for individual products based on specific requirements.

Types of Bill Control Policies in Odoo:

1. Ordered Quantities:
   • This option allows businesses to create vendor bills as soon as the purchase order is confirmed, even before receiving the products. It’s suitable for companies that have established trust with suppliers or need to issue payments upfront.
   • Use Case: Ideal for services or digital products that do not involve physical delivery.
2. Received Quantities:
   • With this option, businesses can only generate bills after they have received at least a portion of the ordered products. This setting ensures that payments are made only for goods that have been received and verified.
   • Use Case: Recommended for physical goods to prevent overpayments for unreceived or damaged items.

By using the appropriate bill control policy, companies can better manage their financial commitments and ensure that they are paying only for what they have received.

3. Understanding Three-Way Matching in Vendor Payments

Three-way matching is a standard accounting practice used to control vendor payments by comparing three critical documents: the purchase order, the vendor bill, and the goods receipt. The goal is to ensure that you only pay for what was ordered, received, and billed.

How Three-Way Matching Works in Odoo:

In Odoo, the three-way matching feature automates this process by linking these three documents together:

• Purchase Order: Specifies the quantity, price, and expected delivery of the ordered goods.
• Vendor Bill: Indicates the supplier’s invoice based on the purchase order.
• Receipt: Confirms that the correct quantity of goods has been received.

When the three-way matching feature is enabled in Odoo, the system cross-checks these documents before allowing you to approve the vendor bill for payment. This workflow reduces the risk of overpayment, discrepancies, or fraudulent billing.

Benefits of Three-Way Matching:

1. Accuracy in Payments: Ensures that you are paying the correct amount for the products or services received.
2. Avoid Overpayments: Prevents paying for goods that were ordered but not received or damaged items that need to be returned.
3. Compliance: Supports internal controls by adhering to organizational policies and regulatory requirements.

Overall, three-way matching adds an extra layer of security and accuracy to your vendor payment process, making it a must-have feature for businesses managing large volumes of supplier transactions.

4. Setting Up a Bill Control Policy in Odoo

To use three-way matching in Odoo effectively, you need to configure your bill control policy settings. This involves navigating through the Purchase app settings and choosing the right policy that aligns with your business requirements.

Step-by-Step Setup Guide:

1. Navigate to the Purchase App:
   • Start by logging into your Odoo dashboard and selecting the Purchase app.
2. Access Configuration and Settings:
   • Click on the Configuration tab and then select Settings.
3. Choose the Bill Control Policy:
   • Scroll down to the Invoicing section.
   • Here, you will see the Bill Control feature, where you can select between Ordered Quantities or Received Quantities.
4. Save the Changes:
   • Once you have made your selection, click on the Save button at the top left to apply your settings.

Enabling the Three-Way Matching Feature:

• To enable three-way matching, ensure that the Three-Way Matching option is activated within the Purchase app’s settings. This will link purchase orders, vendor bills, and receipts, allowing you to validate and control vendor payments accurately.

Once these settings are configured, Odoo will automatically apply your selected bill control policy to all purchase orders created within the system.

5. Example Scenario 1: Using "Received Quantities" Policy

Let’s illustrate how the Received Quantities policy works using an example scenario in Odoo.

Scenario Overview:

Your company, Stealthy Wood, has placed a purchase order for 50 office chairs from a vendor. You want to ensure that you only create a vendor bill and pay for the chairs once they are delivered.

Step-by-Step Workflow:

1. Create a Purchase Order:
   • Go to the Purchase app and select Create.
   • Fill out the purchase order details, including vendor name, product (office chairs), and quantity (50 units).
   • Confirm the purchase order.
2. Receive the Products:
   • Once the chairs arrive, go back to the purchase order and click on the Receive Products button.
   • Validate the receipt to confirm the delivery of the goods.
3. Generate the Vendor Bill:
   • After validating the receipt, return to the purchase order.
   • You’ll notice that the Create Bill button is now enabled. This option appears only because the products have been received, as per the Received Quantities policy.
   • Click on Create Bill and review the bill details to ensure they match the received quantities.
4. Verify Billing Status and Pay:
   • Navigate to the Other Information tab on the vendor bill.
   • Check that the Billing Status is set to “Waiting for Bills”.
   • Once confirmed, finalize the bill and process the payment.

By following this workflow, you ensure that the vendor is paid accurately and only for products received, reducing the risk of overpayments or errors.

6. Example Scenario 2: Using "Ordered Quantities" Policy

Now, let’s look at how the Ordered Quantities policy works in Odoo. This setting allows you to create a vendor bill as soon as the purchase order is confirmed, even before you receive the products. This workflow is suitable for businesses that have established trust with their vendors or need to issue payments in advance due to special agreements.

Scenario Overview:

Your company, Stealthy Wood, needs to order 100 apple pies from a vendor called Healthy Foods. With the Ordered Quantities policy enabled, you want to generate the vendor bill immediately after confirming the purchase order.

Step-by-Step Workflow:

1. Create a Purchase Order:
   • Go to the Purchase app and click Create.
   • Fill in the vendor details (Healthy Foods), product name (apple pies), and quantity (100 units).
   • Confirm the purchase order.
2. Generate a Vendor Bill Immediately:
   • Once the purchase order is confirmed, Odoo allows you to create a vendor bill without waiting for the products to be received.
   • Click on the Create Bill button at the top right.
   • Review the details to ensure they match the ordered quantities and prices specified in the purchase order.
3. Receive the Products:
   • After the vendor ships the apple pies, go back to the purchase order and click on Receive Products.
   • Validate the receipt to confirm that the order has been delivered as expected.
4. Verify and Complete the Payment:
   • Check that the Billing Status in the Other Information tab of the purchase order is updated to “Fully Billed”.
   • Once verified, proceed with the payment to complete the transaction.

Outcome:

Using the Ordered Quantities policy enables faster bill generation and payments, which can be useful for businesses that rely on prompt payment to secure supplier relationships or take advantage of early payment discounts.

7. Customizing Bill Control Policies for Individual Products

While configuring a company-wide bill control policy is effective for general operations, some products may require specific payment policies that differ from the default settings. Odoo allows you to override the company’s bill control policy for individual products, enabling greater flexibility in managing your vendor payments.

When to Use Custom Product-Specific Bill Control Policies:

• Scenario 1: You have a product that is only paid for upon delivery, while the rest of your inventory is billed upfront.
• Scenario 2: You want to apply special payment terms for a high-value product or a product that requires strict quality checks upon delivery.

Step-by-Step Guide to Customize a Bill Control Policy for a Product:

1. Navigate to the Products App:
   • Go to the Products app from your Odoo dashboard.
2. Select the Specific Product:
   • Click on Products and choose the item you want to customize.
   • For this example, let’s select a product called Granny Smith Apple Pie.
3. Adjust the Bill Control Policy:
   • In the product form, switch to the Purchase tab.
   • Scroll down to the Vendor Bills and Control Policy section.
   • Change the Bill Control Policy to either Ordered Quantities or Received Quantities, depending on your requirements.
4. Save and Apply:
   • Click Save at the top left to confirm the changes.
   • This setting will override the company-wide policy for this specific product.

Impact on the Workflow:

By customizing the bill control policy at the product level, you can accommodate unique payment terms for specific items, helping you maintain control and flexibility over your vendor payment processes.

8. Troubleshooting Common Issues in Vendor Payment Workflow

Despite setting up your vendor payment policies correctly, you might encounter some common issues that can disrupt the payment process. Let’s review a few potential problems and how to resolve them.

Issue 1: Unable to Create a Vendor Bill

• Possible Cause: The system doesn’t allow bill creation because the bill control policy is set to Received Quantities but no receipt has been validated yet.
• Solution: Check the receipt status for the purchase order and ensure that the products have been marked as received. Once done, return to the purchase order, and you should be able to generate the vendor bill.

Issue 2: Discrepancies Between the Purchase Order and Vendor Bill

• Possible Cause: The quantities or prices in the vendor bill don’t match the purchase order due to incorrect data entry or additional fees.
• Solution: Use the Three-Way Matching feature to identify where the discrepancies are. Manually update the vendor bill or purchase order to ensure they match.

Issue 3: Billing Status Shows as "Nothing to Bill"

• Possible Cause: This usually happens when the ordered quantity has not been received, and the bill control policy is set to Received Quantities.
• Solution: Validate the product receipt first. Once the receipt is confirmed, return to the purchase order and check the billing status again. It should now update to “Waiting for Bills”.

By understanding these common issues and their resolutions, you can ensure a smooth vendor payment process and minimize delays or payment errors.

9. Best Practices for Vendor Payment Management in Odoo

To get the most out of Odoo’s vendor payment management features, consider adopting the following best practices:

1. Choose the Right Bill Control Policy:
   • Align your bill control settings with your company’s financial strategy. For example, use Ordered Quantities for high-trust vendors and Received Quantities for new or low-volume suppliers.
2. Leverage Three-Way Matching:
   • Always use the three-way matching feature to cross-check purchase orders, vendor bills, and receipts. This will help catch errors early and prevent overpayments.
3. Regularly Review Vendor Bills:
   • Set up a periodic review of your vendor bills to ensure that the billing matches the actual receipts and agreed-upon prices.
4. Implement Custom Product Policies for Complex Orders:
   • Use product-specific bill control policies for high-value items or products with unique payment terms.
5. Monitor Payment Terms for Discounts:
   • Keep track of payment terms and deadlines to take advantage of early payment discounts, which can significantly reduce your overall procurement costs.

By following these best practices, you can optimize your vendor payment workflow and maintain strong relationships with your suppliers.

10. Conclusion and Next Steps

In this guide, we explored how to set up and manage vendor payments using Odoo’s bill control policies and three-way matching feature. By configuring the appropriate bill control settings, enabling three-way matching, and customizing policies for individual products, businesses can streamline their payment processes, avoid overpayments, and ensure financial accuracy.

Whether you’re using the Ordered Quantities or Received Quantities policy, Odoo’s flexible options make it easy to tailor your payment workflows to your business needs. If you’re new to Odoo, we recommend starting with the Received Quantities policy to get comfortable with the process and minimize payment risks.

To further enhance your understanding, check out our other tutorials on Odoo’s Purchase app for advanced tips and strategies on procurement management. With these tools in place, you’ll be well on your way to optimizing your vendor payment processes.