Charge Per Unit Outside Tolerance (Rejected)

Scenario:

The charge per unit is outside tolerance and has not been approved.

Action:

The system adjusts the charge per unit to match the purchase order or approved levels, generating any necessary debit or credit notes.

Example:

• Purchase Order (PO):

  • Charge Per Unit: $6.00

  • Quantity: 800 units

  • Total Charge Amount: $4,800.00

• Invoice Received:

  • Charge Per Unit: $7.00 (outside tolerance of 16.67%, rejected)

  • Quantity: 800 units

  • Total Charge Amount: $5,600.00

• Tolerance Levels:

  • Charge Per Unit Tolerance: ±5%

Since the charge per unit ($7.00) exceeds the acceptable tolerance range of 5% and has not been approved, the system will:

1. Reject the Invoiced Charge Per Unit: The system does not accept the invoiced charge per unit of $7.00 due to the variance exceeding the tolerance limit.

2. Adjust the Charge Per Unit: The system adjusts the charge per unit to match the purchase order or the approved charge per unit:

   • Adjusted Charge Per Unit = $6.00 (from PO)

3. Recalculate the Total Charge Amount: The system recalculates the total charge amount based on the adjusted charge per unit:

   • Corrected Total Charge Amount = Quantity × Adjusted Charge Per Unit

   • Corrected Total Charge Amount = 800 units × $6.00 = $4,800.00

4. Generate a Debit Note: Since the original invoice total was higher than the corrected total, the system generates a debit note for the overcharged amount:

   • Debit Note Amount = Original Invoice Total - Corrected Total Charge Amount

   • Debit Note Amount = $5,600.00 - $4,800.00 = $800.00

5. Process the Invoice: The system processes the invoice with the corrected total charge amount of $4,800.00 and issues a debit note for $800.00 to account for the overcharged amount.

This approach ensures that financial transactions are consistent with the purchase order terms, rejecting unapproved variances and maintaining accurate billing practices.