The quantity is within tolerance, but the unit price is below the acceptable range (negative tolerance) and is not approved.
The system rejects the unit price, adjusts it to match the purchase order, and generates a credit note for the difference. Additional header charges may be applied as necessary.
Purchase Order (PO):
Quantity: 100 units
Unit Price: $10.00 per unit
Total Amount: $1,000.00
Invoice Received:
Quantity: 100 units (within tolerance of 0%)
Unit Price: $9.00 per unit (outside negative tolerance of -10%)
Total Amount: $900.00
Tolerance Levels:
Quantity Tolerance: ±2%
Unit Price Tolerance: ±1%
Since the quantity (100 units) is within the acceptable tolerance range but the unit price ($9.00) is below the acceptable tolerance and is not approved, the system will:
Reject the Unit Price: The system does not accept the invoiced unit price of $9.00.
Adjust the Unit Price: The system adjusts the unit price to match the original purchase order unit price.
Adjusted Unit Price = $10.00 (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 = 100 units × $10.00 per unit = $1,000.00
Generate a Credit Note: The system generates a credit note for the difference between the incorrect total amount on the invoice and the corrected total amount.
Credit Note Amount = Original Invoice Total - Corrected Total Amount
Credit Note Amount = $900.00 - $1,000.00 = -$100.00
The credit note will effectively reverse the undercharge.
Process the Invoice: The system processes the invoice with the adjusted total amount of $1,000.00 and applies the credit note for $100.00 to account for the undercharged unit price.
This approach ensures that the pricing aligns with the purchase order terms, even when an incorrect, lower price is invoiced.