Case 7: Quantity Within Tolerance, Unit Price Outside Tolerance (Positive Rejected)

Scenario:

The quantity is within tolerance, but the unit price exceeds the acceptable range (positive tolerance) and is not approved.

Action:

The system rejects the invoice unit price, adjusts it to match the purchase order, and may generate a debit note to account for the overcharged amount.

Example:

Purchase Order (PO):
- Quantity: 200 units
- Unit Price: $15.00 per unit
- Total Amount: $3,000.00
Invoice Received:
- Quantity: 198 units (within tolerance of 1%)
- Unit Price: $17.00 per unit (outside positive tolerance of 13.33%)
- Total Amount: $3,366.00
Tolerance Levels:
- Quantity Tolerance: ±2%
- Unit Price Tolerance: ±1%

Since the quantity (198 units) is within the acceptable tolerance range but the unit price ($17.00) exceeds the acceptable tolerance and is not approved, the system will:

Reject the Invoice Unit Price: The system does not accept the invoiced unit price of $17.00.
Adjust the Unit Price: The system adjusts the unit price to match the original purchase order unit price.
- Adjusted Unit Price = $15.00 (from PO)
Calculate the Corrected Total Amount: Using the adjusted unit price, the system recalculates the total amount.
- Corrected Total Amount = Quantity × Adjusted Unit Price
- Corrected Total Amount = 198 units × $15.00 per unit = $2,970.00
Generate a Debit Note: The system generates a debit note to account for the difference due to the overcharge.
- Debit Note Amount = Original Invoice Total - Corrected Total Amount
- Debit Note Amount = $3,366.00 - $2,970.00 = $396.00
- This debit note represents the amount overcharged by the supplier.
Process the Invoice: The system processes the invoice with the corrected total amount of $2,970.00 and issues a debit note for $396.00 to offset the overcharge.

This approach ensures that any overcharging is corrected, aligning the transaction with the purchase order terms and protecting the financial interests of the business.

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Example:

Purchase Order (PO):

Quantity: 200 units
Unit Price: $15.00 per unit
Total Amount: $3,000.00

Invoice Received:

Quantity: 198 units (within tolerance of 1%)
Unit Price: $17.00 per unit (outside positive tolerance of 13.33%)
Total Amount: $3,366.00

Tolerance Levels:

Quantity Tolerance: ±2%
Unit Price Tolerance: ±1%

Since the quantity (198 units) is within the acceptable tolerance range but the unit price ($17.00) exceeds the acceptable tolerance and is not approved, the system will:

Reject the Invoice Unit Price: The system does not accept the invoiced unit price of $17.00.

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

Adjusted Unit Price = $15.00 (from PO)

Calculate the Corrected Total Amount: Using the adjusted unit price, the system recalculates the total amount.

Corrected Total Amount = Quantity × Adjusted Unit Price
Corrected Total Amount = 198 units × $15.00 per unit = $2,970.00

Generate a Debit Note: The system generates a debit note to account for the difference due to the overcharge.

Debit Note Amount = Original Invoice Total - Corrected Total Amount
Debit Note Amount = $3,366.00 - $2,970.00 = $396.00
This debit note represents the amount overcharged by the supplier.

Process the Invoice: The system processes the invoice with the corrected total amount of $2,970.00 and issues a debit note for $396.00 to offset the overcharge.

This approach ensures that any overcharging is corrected, aligning the transaction with the purchase order terms and protecting the financial interests of the business.