Case 10b: Quantity Outside Tolerance (Negative Rejected), Unit Price Outside Tolerance (Rejected)

Scenario:

Both the quantity and unit price are outside tolerance, and neither has been approved.

Action:

The system rejects the invoice data, adjusts the values to match the purchase order, and generates necessary debit or credit notes.

Example:

• Purchase Order (PO):

  • Quantity: 150 units

  • Unit Price: $30.00 per unit

  • Total Amount: $4,500.00

• Invoice Received:

  • Quantity: 140 units (outside tolerance of -6.67%, rejected)

  • Unit Price: $33.00 per unit (outside tolerance of 10%, rejected)

  • Total Amount: $4,620.00

• Tolerance Levels:

  • Quantity Tolerance: ±5%

  • Unit Price Tolerance: ±2%

Since both the quantity (140 units) and unit price ($33.00) are outside the acceptable tolerance limits and neither has been approved, the system will:

1. Reject the Invoice Data: The system does not accept the invoiced quantity or unit price due to their deviation from the tolerance limits.

2. Adjust the Quantity: The system adjusts the quantity to match the original purchase order quantity.

   • Adjusted Quantity = 150 units (from PO)

3. Adjust the Unit Price: The system adjusts the unit price to match the original purchase order unit price.

   • Adjusted Unit Price = $30.00 per unit (from PO)

4. Recalculate the Total Amount: The system recalculates the total amount using the adjusted quantity and unit price:

   • Corrected Total Amount = Adjusted Quantity × Adjusted Unit Price

   • Corrected Total Amount = 150 units × $30.00 per unit = $4,500.00

5. 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 Amount

   • Debit Note Amount = $4,620.00 - $4,500.00 = $120.00

6. Process the Invoice: The system processes the invoice with the corrected total amount of $4,500.00 and issues a debit note for $120.00 to offset the overcharged amount.

This approach ensures that the financial transaction is corrected to match the purchase order terms, maintaining accurate and fair billing practices.