Three-Way Match on Invoice INV-8842
You are reconciling invoice INV-8842 against purchase order PO-4471 before releasing payment. The quantity match is already done: the Received column agrees with the signed goods-received notes, and the supplier has confirmed in writing that the three short-shipped EM-15 units will not follow. The invoice totals £15,021.60 including VAT at 20%, and it adds a £180 carriage charge of its own. PO-4471's terms state that carriage is paid by the supplier on orders above £5,000 and that unit prices are fixed for the contract year.
| Item | PO qty | PO unit price | Received | Invoice qty | Invoice unit price |
|---|---|---|---|---|---|
| AX-12 | 400 | £6.25 | 400 | 400 | £6.25 |
| BQ-07 | 150 | £18.40 | 150 | 165 | £18.40 |
| CJ-33 | 60 | £47.50 | 60 | 60 | £49.50 |
| DL-90 | 1,200 | £0.86 | 1,200 | 1,200 | £0.86 |
| EM-15 | 25 | £112.00 | 22 | 25 | £112.00 |
The supplier offers 2% settlement discount on the undisputed net value if payment clears within 10 days. That window closes tomorrow.
1. List every element of the invoice that should not be paid as billed and quantify each one.
Read the worked answer
Four exceptions, each with its own reason - the reasons differ, and that matters.
- BQ-07 - quantity. Invoiced 165, received 150. The 15 short-shipped units were never delivered, so no liability attaches. Overcharge: 15 × £18.40 = £276.00.
- CJ-33 - unit price. Invoiced at £49.50 against a PO price of £47.50, and the PO fixes prices for the contract year. Overcharge: 60 × £2.00 = £120.00. This is not a quantity or delivery issue; it is an unauthorised price change, which is a control question, not just a correction.
- EM-15 - quantity with written confirmation. Invoiced 25, received 22, and the supplier has confirmed the remaining 3 will not follow. Overcharge: 3 × £112.00 = £336.00. Because the non-delivery is confirmed, this needs no further chasing - it is a clean credit.
- Carriage £180.00. Absent from the PO, and the PO terms place carriage on the supplier for orders above £5,000 - this order is well above the threshold. Reject in full: £180.00.
No query on AX-12 or DL-90: quantity and price agree on both.
Totals: net overclaim 276 + 120 + 336 + 180 = £912.00. VAT at 20% = £182.40. Gross overclaim = £1,094.40. Cross-check against the invoice total: £15,021.60 − £1,094.40 = £13,927.20, which matches the corrected build-up in the next task.
One point of accuracy: the VAT arithmetic on the invoice (20% of £12,518.00 = £2,503.60) is correct. The VAT error is entirely inherited from an overstated taxable base, so demanding 'a VAT correction' would misdescribe the problem.
2. Compute the correct amount payable, showing net, VAT and gross.
Read the worked answer
Rebuild from the PO, not from the invoice - that is the discipline that catches price drift as well as quantity errors.
| Item | Payable qty | Unit price | Net |
|---|---|---|---|
| AX-12 | 400 | £6.25 | £2,500.00 |
| BQ-07 | 150 | £18.40 | £2,760.00 |
| CJ-33 | 60 | £47.50 | £2,850.00 |
| DL-90 | 1,200 | £0.86 | £1,032.00 |
| EM-15 | 22 | £112.00 | £2,464.00 |
| Carriage | - | - | £0.00 |
- Net: £11,606.00 (2,500 + 2,760 + 2,850 + 1,032 + 2,464)
- VAT at 20%: £2,321.20
- Gross: £13,927.20
Check against the invoice: £15,021.60 − £13,927.20 = £1,094.40, agreeing with the itemised overclaim of £912.00 net + £182.40 VAT. Two independent routes to the same number is the assurance that the reconciliation is complete.
Two clean-audit details worth stating: the payable quantity for EM-15 is 22, not 25 minus a promise; and the price for CJ-33 is the contracted £47.50 regardless of what the invoice asserts, because the PO fixes it for the year. If the supplier claims a variation was agreed, the burden is on them to produce a signed PO amendment - none is on file.
3. Should you pay the undisputed amount tomorrow to capture the discount, or withhold the whole invoice until the queries are settled? Quantify the trade-off.
Read the worked answer
Undisputed net = the corrected net, £11,606.00 - none of the four exceptions is a genuine disagreement about the core supply, so the whole corrected amount is undisputed.
Value of paying on time
- 2% of £11,606.00 = £232.12; net becomes £11,373.88.
- VAT recalculates at 20% = £2,274.78; gross £13,648.66 versus £13,927.20 due without the discount.
- Cash saving: £278.54.
Cost of withholding everything
- The disputed sum is £1,094.40 gross. Withholding £13,927.20 to protect £1,094.40 is a 12:1 ratio - poor value for a query that is documentary and, on the EM-15 and BQ-07 lines, already conceded in writing.
- The identifiable loss is the £278.54 discount, plus the administrative cost of the query and the interest/relationship exposure.
Recommendation: pay £13,648.66 tomorrow with a remittance advice itemising the four exceptions, and request a credit note for £1,094.40.
Two checks before releasing - both are attention-to-detail points that change the answer:
- Does the 2% clause apply to a part payment, or only to payment of the invoice in full? If it is drafted as full-invoice-only, the discount is forfeited and 'pay the undisputed portion' loses its financial advantage - though it remains the better control.
- Never pay the invoiced total and rely on a later refund. That converts a controlled rejection into an unsecured receivable, and the credit note becomes harder to obtain once the supplier holds the cash.