Price Tolerance

Price tolerance defines the percentage by which the invoice net unit price can exceed the purchase order net unit price, and still be considered within the allowable tolerance for invoice matching discrepancies.

Invoice matching is the process of matching vendor invoice, purchase order, and product receipt information. Differences among these documents are called matching discrepancies. Matching discrepancies are compared with the tolerances that are specified. If a matching discrepancy exceeds the tolerance percentage or amount, match variance icons are displayed in the Vendor invoice form and in the Invoice matching details form.

For example, you enter a purchase order with one line item for 500 pencils at a price of 1.00 each. The purchase order is approved and submitted to the vendor. The vendor ships 500 pencils, and you enter a product receipt for 500 pencils at a price of 1.00 each. The inventory cost for the pencils is updated with this price.

An invoice arrives for 500 pencils at a price of 1.10 each. Your legal entity policy allows a 5 percent net unit price tolerance for this category of item. A price of 1.05 would be acceptable, but 1.10 is not. When you enter the invoice information, a price matching discrepancy is identified and you can save the invoice until the discrepancy is resolved.

A vendor price tolerance group defines the group of vendors for which such a “price tolerance” is applicable. In other words, it is a vendor group to which a specified price tolerance is applicable. In the vendor form, this field describes the “identifier” for the vendor group.

Happy learning.!