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