Three-Way Match Tolerances, Holds, and a Verbal Price Approval
Procurement issued PO 45122 to Meridian Plastics for 10,000 units at $4.00 each, total $40,000. The warehouse received 9,600 units and recorded the receipt. The supplier invoice arrives for 10,000 units at $4.08 each, plus tax of $3,264, total $44,064. Payables matching tolerances are quantity 2%, price 3%, and total amount 1%. The invoice is matched to the PO and receipt. The buyer insists the price increase was approved verbally and asks AP to release any holds immediately. The supplier offers a 1% discount if paid within 10 days. AP must decide whether to pay, adjust, or dispute. The invoice date is March 5 and the payment term is Net 30. The receipt is still open and no return has been recorded.
1. Calculate whether quantity, price, and total amount holds apply. Show the math and the likely hold sequence.
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Quantity: billed 10,000 versus received 9,600, a shortfall of 400. The quantity tolerance is 2% of 10,000, or 200 units. Because 400 exceeds 200, a quantity-related match hold applies.
Price: invoice price $4.08 versus PO price $4.00 is an increase of $0.08, or 2%. The price tolerance is 3%, so the price is within tolerance and should not create a price hold by itself.
Total amount: the PO plus correct tax at 8% would be $40,000 + $3,200 = $43,200. The invoice total is $44,064, an excess of $864, or 2% of $43,200. The total amount tolerance is 1%, so an amount or tax-related hold is likely unless tax tolerance is configured separately.
Validation would place the matching holds; AP should not release them manually until the quantity and amount issues are resolved. The price variance may still be recorded as an invoice price variance, but it is not the hold driver.
2. The buyer demands immediate release. What should AP do, and what evidence is needed?
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AP should not release a quantity hold on a verbal approval. The receipt supports only 9,600 units, so paying for 10,000 creates an overpayment risk of 400 units plus tax. The correct paths are:
- Ask receiving to record the remaining 400 units if they were physically received; then revalidate and see whether the quantity hold clears.
- If the goods were not received, adjust the invoice to 9,600 units or request a credit memo for the difference.
- For the price increase, obtain a PO change order or a documented price approval that updates the PO price to $4.08. A verbal approval is not an auditable match basis.
- For the tax and total amount difference, have tax verify the correct rate and amount; if the invoice is wrong, request a corrected invoice.
AP can release a hold only after the underlying condition is corrected or an authorized, documented exception is approved. The buyer's urgency does not transfer the audit risk away from AP.
3. If the remaining 400 units are received tomorrow, which holds clear and what should AP verify before paying?
Read the worked answer
Receiving the 400 units would bring total received quantity to 10,000, so the quantity shortfall disappears and the quantity hold should clear on revalidation. The price variance remains within the 3% tolerance, so it should not block payment. The total amount issue may remain: $44,064 is still 2% above the $43,200 PO-plus-tax baseline, beyond the 1% total amount tolerance. If that tolerance is configured to compare invoice total to PO total, an amount hold may persist even after receipt.
Before paying, AP should revalidate, confirm the hold list, verify tax, and confirm whether the PO was changed to $4.08. If the PO is updated, recalculate the expected total and tolerance. AP should also evaluate the 1% discount: it is worth taking only on the correct, approved amount and only if the payment date can meet the discount window. Paying early to capture a discount on a disputed amount can complicate recovery.