Approval Limits in Two Currencies
Meridian Devices buys components from about 40 vendors and runs its purchasing on standard and blanket purchase orders. Approval rules: purchase orders above $5,000 need the department manager, above $50,000 need the VP of Operations, and above $250,000 need the CFO; limits live on employee records and are enforced by a SuiteFlow workflow on the purchase order. The Toronto subsidiary buys in CAD, and its employee approval limits were copied from the US template. Last week a 62,000 CAD order (roughly 45,000 USD) triggered CFO approval, while a 240,000 USD order from the US subsidiary skipped the CFO entirely. Receiving also reports that bills for partial receipts keep posting a difference to the purchase price variance account even when the PO price and the bill price match. Finance is separately worried that a blanket order with 12 releases is inflating committed cost.
1. Both approval symptoms appeared in the same week. How do you diagnose the routing problem and what policy decision is needed?
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Both symptoms point at one design flaw: the workflow compares the PO amount in transaction currency against limits that were designed in USD. A 62,000 CAD order is about 45,000 USD and should sit in the manager tier, but evaluating 62,000 directly against a 50,000 threshold escalates it. A 240,000 USD order skipping the CFO suggests either a mis-keyed limit or the workflow reading an approver whose limit was never set. Diagnose by entering test POs at 4,999, 5,001, 49,999, 50,001 and 249,999 in each currency and watching the routing, then inspect the workflow condition to see which amount field it evaluates. The policy decision has to be explicit: either convert thresholds to the transaction currency at the PO rate, or maintain subsidiary-specific limits, and document which. Then correct the Toronto employee records - copied US limits are wrong for that subsidiary - and retest before the next spend cycle.
2. PO price and bill price match, yet partial receipts still post to purchase price variance. What is happening?
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If price and quantity match and a variance still posts, it is almost certainly an exchange-rate or matching artifact. Two checks. First, foreign currency: a PO in CAD received in one period and billed in another carries a different exchange rate on each transaction, and if the configuration routes the difference to the price variance account rather than a dedicated exchange-rate variance account, every partial receipt looks like a pricing error. Second, matching: if Match Bill to Receipt is enabled and the bill matches a receipt whose unit cost includes landed cost or freight that the PO price excludes, the difference posts to variance. Verify the variance account configured in accounting preferences and on the item, then review one bill's GL impact line by line to see which account the difference actually hit. Fixing the mapping is configuration; fixing the process means matching to the PO for price and to the receipt for quantity.
3. How would you determine whether the blanket order is genuinely double-counting committed cost?
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This is usually a transaction-type problem. A blanket purchase order is a purchasing instrument that authorises future releases and should not consume committed cost the way a standard PO does. If 12 releases exist and the blanket itself also appears as an open commitment, inspect the PO type on all 13 records: if the releases are separate standard POs they commit correctly, and the blanket line carrying the full authorised quantity and value is the double count. Build a saved search grouped by PO type showing quantity open and amount open to see where the duplication sits. Then agree a definition of committed cost with finance - typically open standard PO quantity not yet received or billed, plus in-transit transfers, excluding blanket authorisations - and build the report as a saved search rather than relying on a standard report whose calculation you cannot inspect.