Price Tolerance & Invoice Matching in D365

Updated: Feb 24

Below written article provide you great insight on Price tolerance & Invoice matching setup and its features in D365.


Invoice Matching


Vendor invoice matching is a process of matching vendor invoice, purchase order and product receipt information. And when matching documents such as purchase order, product receipt and invoice bring difference among these documents are called matching discrepancies




In D365 Matching discrepancies are compared with the tolerances that are specified. If a matching discrepancy exceeds the tolerances percentage or amount, match variances icons are displayed on the vendor invoice page and on the invoice history and matching details page.



For Example, User enter a purchase order with one line item for 1000 Pencil at price of 1 each. The purchase order is approved and submitted to the vendor. The vendor ship 1000 pencil and product receipt for 1000 pencil at price of 1 each. The inventory cost for the batteries is updated with this price.



An Invoice arrives for 1000 pencil at a price of 1.10 each. Now as per the legal entity policy it allows a 5% net 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 user can save the invoice until the discrepancy is resolved.


Below are following type of Account payable invoice Matching


1. Invoice Total matching


Match the total amount on the invoice to the total amount on the purchase order. This type of invoice matching includes the least number of details, so you can use this option to setup controls that minimize the staff time that is required to review invoice matching information

Invoice Total = Purchase order Total


2. Line and Quantity Matching


This matching method have two options which are as follows: -

Two Way Matching


Match the price information on the invoice to the information on the purchase order


1- Purchase Order. Unit Price = Invoice. Unit price

2- Purchase Order. Net Amount = Invoice. Net Amount


Three Way Matching


Match the price information on the invoice to the information on the purchase order. And also match the quantity information on the invoice to the quantity information on the product receipts that are selected for invoice.


1- Purchase Order. Unit Price = Invoice. Unit price

2- Purchase Order. Net Amount = Invoice. Net Amount

3- Product Receipt. Quantity = Invoice. Quantity


3. Charge Matching


Match the charges information (amounts) on the invoice to the charges information (Amount) on the purchase order


1- Invoice Charges Total = purchase Order Charges Total


Price Tolerance Setup


Path :- Account Payable >Setup>Account Payable Parameter>Invoice Validation



Invoice Validation


Enable invoice matching Validation


o Yes

o No


Select this option to activate invoice matching and vendor invoice policies. This lets you specify other invoice matching parameters in this page, set up net unit price tolerance percentages in the Price tolerances page, these tolerances are used to identify discrepancies between purchase order line prices and invoice line prices. View the Match variance indicator in the Vendor invoice for, view matching discrepancies in the Invoice matching details page, apply vendor invoice policies to invoices that are entered in the Vendor invoice page. This includes invoices that are entered through the vendor self-service portal. If this option is selected, the expected prices, expected totals, and expected charges for an invoice are saved when the invoice is approved for posting with matching discrepancies, or when the invoice is posted


Post Invoice with discrepancies


o Allow with Warning


o Require Approval


Select whether an invoice that contains discrepancies for invoice matching must be approved before it can be posted. The options let you allow posting with a warning or require approval. If you select Allow posting with warning, the visual indicator will display when a discrepancy for invoice matching exceeds the tolerance. If you select Require approval, you won’t be able to post the invoice until the Approve posting with matching discrepancies option is marked in the Matching details page. To use workflows together with invoice matching validation, make sure that the Post invoice with discrepancies field is set to Allow with warning to avoid having to approve an invoice more than once.


Automatically update invoice header status

o Yes

o No


Invoice Total Matching


Match Invoice Total


o Yes

o No


Select this option to match actual invoice totals with expected totals, based on purchase order information. This field is available only if the Enable invoice matching validation option is selected.


Display invoice total match icon

o If greater than tolerance

o If greater than or less than tolerance


Select when to indicate that an invoice totals matching discrepancy exists. Select If greater than tolerance to display a warning icon if the variance exceeds the tolerance by a positive amount. If the variance exceeds the tolerance by a negative amount, so that the actual invoice totals are less than the expected invoice totals, the variance is not considered a matching discrepancy. Select If greater than or less than tolerance to display a warning icon if the variance exceeds the tolerance by a positive or negative amount. For example, if the tolerance is 5 percent and the total invoice amount of the purchase order is 100.00, a price match icon is shown if the total invoice amount on the invoice exceeds 105.00. If you select If greater than or less than tolerance, an icon is also shown if the invoice amount is less than 95.00. This field is available only if the Match invoice totals option is selected.



Invoice total tolerance percentage

o Enter Value (percentage)


Enter the percentage variance that you will accept. This field is available only if the Match invoice totals option is selected.


Price and Quantity matching



Line Matching Policy


o Two-Way matching

o Three-way Matching

o Not Required


Select whether to match price or price and quantity information for line items on invoices. Three-way matching

it will match the price information on the purchase order to the price information on the invoice. Also match the quantity information on the selected product receipts to the quantity information on the invoice.


Two-way matching

It will match the price information on the purchase order to the price information on the invoice. With the Not required option, no price or quantity matching is performed. The selection in this field is the default line matching policy that will be used for the legal entity that you are working with. You can override the line matching policy for vendors, items, or vendor and item combinations in the Matching policy page. You can override the line matching policy for purchase order lines in the Purchase order page.


Allow matching policy override


o Lower or Higher than Company policy

o Higher than company policy


Select the type of change that can be made when you override the legal entity line matching policy in the Matching policy page or the Purchase order page. The options include the higher than company policy which applies a more comprehensive type of matching than is selected in the Line matching policy field. For example, assume that the legal entity line matching policy is set to Two-way matching. You can change the line matching policy to Three-way matching for a vendor, item, vendor and item combination, or purchase order line. An error message is displayed if you try to change the matching policy to Not required for a vendor, item, vendor and item combination, or purchase order line. Another option is the lower or higher than company policy option which applies any type of line matching policy, regardless of the selection in the Line matching policy field. For example, assume that the legal entity line matching policy is set to Two-way matching. You can change the line matching policy to Three-way matching or Not required for a vendor, item, vendor and item combination, or purchase order line. This field is available only if the Enable invoice matching validation option is selected


Display Unit Price match icon


o If greater than or less than tolerance

o If greater than tolerance


Select when to indicate that a unit price matching discrepancy exists. Select the if greater than tolerance to display a warning icon if the variance exceeds the tolerance by a positive amount. If the variance exceeds the tolerance by a negative amount, so that the actual invoice totals are less than the expected invoice totals, the variance is not considered a matching discrepancy. Select the if greater than or less than tolerance option to display a warning icon if the variance exceeds the tolerance by a positive or negative amount. For example, if the tolerance is 5 percent and the purchase order unit price is 10.00, a price match icon is shown if the invoice unit price exceeds 10.50. If you select If greater than or less than tolerance, an icon is also shown if the invoice unit price is less than 9.50. This field is available only if the Enable invoice matching validation option is selected.



Match Price Total

o None

o Percentage

o Amount

o Percentage and amount


Select the type of tolerance to use for matching the total on purchase order lines with the total on invoice lines. Price totals matching can be used with either two-way matching or three-way matching. Select the None option to not match price totals. Select the Percentage option to compare the unmatched price total to a percentage that you enter. Select the amount option to compare the unmatched price total to an amount that you enter, in the accounting currency. Select the percentage and amount option to compare the unmatched price total to a percentage and an amount that you enter. Show the variance as a discrepancy only if the absolute value of the variance is greater than the tolerance percentage, the tolerance amount (sometimes referred to as a not-to-exceed amount), or both. This field is available only if the Enable invoice matching validation option is selected


Purchase price total tolerance percent


o Enter value (Percent)


Enter the percentage of variance that you will accept. The variance is calculated on the invoiced net amounts for a purchase order line and the purchase order line net amount. This field is available only if Percentage or Percentage and amount is selected in the Match price totals field.


Purchase Price total tolerance


o Enter Value


Enter the amount of variance that you will accept. The variance is calculated on the invoiced net amounts for a purchase order line and the purchase order line net amount. This field is available only if Amount or Percentage and amount is selected in the Match price totals field.


Display price total match icon


o If greater than tolerance

o If greater than or less than tolerance


Select when to indicate that a price totals matching discrepancy exists. Select the if greater than tolerance to display a warning icon if the variance exceeds the tolerance by a positive amount. If the variance exceeds the tolerance by a negative amount, so that the actual invoice price totals are less than the expected invoice price totals, the variance is not considered a matching discrepancy. Select the if greater than or less than tolerance option to display a warning icon if the variance exceeds the tolerance by a positive or negative amount. For example, if the tolerance is 5 percent and the purchase order price total is 10.00, a price match icon is shown if the invoice price total exceeds 10.50. If you select If greater than or less than tolerance, an icon is also shown if the invoice price total is less than 9.50. This field is available only if a value other than None is selected in the Match price totals field.


Charges Matching


Match Charges

o Yes

o No


Select this option to compare expected charges based on purchase orders with actual charges on invoices. For example, you want to plan for expected freight costs, so that users enter the expected freight costs as charges on purchase orders. To help control the actual freight costs, you use charges matching. Users can make sure that the variance between the expected charges and the actual charges is within the acceptable tolerances that have been set up for the legal entity. This field is available only if the Enable invoice matching validation option is selected.


Display Charges match icon

o If greater than tolerance

o If greater than or less than tolerance


Select when to indicate that a charges matching discrepancy exists. Select the if greater than tolerance option to display a warning icon if the variance exceeds the tolerance by a positive amount. If the variance exceeds the tolerance by a negative amount, so that the actual invoice totals are less than the expected invoice totals, the variance is not considered a matching discrepancy. Select the if greater than or less than tolerance option to display a warning icon if the variance exceeds the tolerance by a positive or negative amount. For example, the tolerance is 5 percent and the expected charge based on the purchase order is 10.00. A charges match icon is shown if the actual charge exceeds 10.50. If you select If greater than or less than tolerance, an icon is also shown if the charge is less than 9.50. This field is available only if the Match charges option is selected



Charges tolerance percentage

o Enter value (percentage)


Enter the percentage of variance that you will accept. The variance is calculated on the charges for a purchase order compared with the charges for the corresponding invoice. If the charge is calculated per piece, the calculation is based on the invoice quantity. This field is available only if the Match charges option is selected.



Now Below example will help to understand the concept in easy way


Scenario 1 – Invoice total matching


For Example :- Purchase Total Price tolerance is 10% defined in the parameter


Case 1- Passed Case: - At the time PO confirm and Received invoice values same

PO Confirm


At the time of invoicing price remain the same


Po Invoice


So, here match status is passed


Case 2 -Failed Case: - At the time PO confirm and Received invoice values are not same and value exceeded outside the tolerance limit

Here match status not matching because invoice total is exceeded the10% tolerance defined in the parameter



Case 3 - Passed Case: - At the time PO confirm and Received invoice values are not same and value exceeded and withing the tolerance limit


Matching because invoice total did not exceed the 10% tolerance defined in Parameter




Scenario 2 – Line Way matching


Case 1- Two Way matching

Two-way matching invoice validation is to match the invoice document unit price with purchase order unit price and net amount with purchase order line net amount.




Setup


Path :- Account Payable > Setup>Account Payable Parameter >Invoice Validation

(Below Setup is defined for Net Amount)


Setup Values

a. Line Matching policy = Two Way Matching

b. Match price totals = Percentage

c. Purchase Price total (Net Amount) variance set in Percentage – 5%

d. Display Price total match icon = if greater than tolerance

e. Unit Price Variance – 10%



For Unit Price Tolerance

Path :- Account payable>Setup>Invoice matching Setup> Price tolerance




Scenario

At the time of PO Confirm, Unit Price is 200 but at a time of PO Invoice, unit price change from 200 to 220 which is 10 % hike in Unit price and also 10 % hike in Net amount.





Now if Unit Price is change from 200 to 230 which is outside 10% tolerance, and exceeding the net amount 5% tolerance, that is why price total match and price match failed




Case 2 – Three Way Matching

Three-way matching matches unit price & Net amount with purchase order and quantity with product receipt



Setup

Path :- Account Payable > Setup>Account Payable Parameter > Invoice Validation

(Below Setup is defined for Net Amount)


a. Line matching Policy = Three Way Matching

b. Match Price Total = Percentage

c. Purchase price total Tolerance=5%

d. Display Price Total match icon= If greater than tolerance





In three way matching, price matching work same ways as two way matching


PO CONFIRM TO PO RECEIVE

PO RECEIVE TO PO INVOICE


That’s all for this blog.

Hope you like it.




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