Invoice held because 95 units were received against a 100-unit invoice
Northwind Manufacturing has a blanket purchase agreement with a supplier for 100 rugged barcode scanners at $12.50 each, with a 5% over-receipt tolerance and 3-way matching. The buyer issues a release for the full 100 units. The supplier ships 95 units and invoices for 100, stating that five units are in transit and will follow. Receiving records 95 units into inspection, with zero delivered, because the item category requires inspection before delivery. Accounts Payable sees the invoice on hold with a quantity match exception. The supplier insists that the five in-transit units should be paid because the PO allows over-receipt. The project needs 100 units by month-end, and the buyer wants to avoid a second PO. The category manager asks whether the over-receipt tolerance or invoice tolerance should be changed so invoices can be paid before all units are delivered.
1. Explain why the invoice is on hold and whether the 5% over-receipt tolerance authorizes payment for the five undelivered units.
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The over-receipt tolerance controls how much quantity receiving may accept above the ordered quantity; it does not create a payable quantity before goods are received or delivered under the applicable match rule. Here, only 95 units were recorded as received, and the invoice bills 100. With 3-way matching, the invoice quantity must be supported by the receipt and PO. The five in-transit units are not a receipt, so the quantity match fails. The fact that the PO allows 5% over-receipt would permit receiving up to 105 units if they physically arrived, but it does not let the supplier invoice 100 when only 95 have been recorded.
The inspection routing adds a second control. Because the category requires inspection before delivery, the received quantity may not yet be available for invoice matching at the delivery level. That makes the gap even clearer: AP should not release payment for units that are neither received nor delivered. Changing invoice tolerance to force payment would bypass the receiving control rather than resolve the exception.
2. What are the acceptable resolutions, and which one would you recommend? Consider the month-end need and the supplier relationship.
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First verify the physical facts. If all 100 units actually arrived and the receiver keyed only 95, correct the receipt for the remaining five and complete inspection/delivery according to the routing. Then the invoice can match normally. If only 95 arrived, the supplier should issue a credit memo or corrected invoice for 95 units, and AP should pay that amount. The five backordered units can ship later and be invoiced after receipt, without creating a second PO; the existing release can remain open for the remaining quantity.
A prepayment is possible if the business truly needs to pay before receipt, but it should be a deliberate prepayment with approval and application to the later invoice, not a tolerance override. I would not change the match level to 2-way for this category, because that removes the receipt control for all future purchases. Recommended path: pay 95 against the corrected invoice, expedite the five units, receive and inspect them, then pay the final invoice. Document the supplier conversation and keep the PO open.
3. What configuration changes, if any, would prevent this exception from recurring without weakening control?
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Keep 3-way matching for inspection-controlled categories. Use the over-receipt tolerance only for genuine receiving overages, and set it at the PO or category level with a documented limit. If the issue is frequent partial shipments, configure the supplier agreement or PO to allow multiple receipts and partial invoices, and train receivers to record the actual quantity promptly so AP is not working from an inaccurate receipt.
For inspection items, review whether invoice matching should require delivery or only receipt; if policy requires inspection before payment, do not relax it. Add an AP exception report for quantity-billed-greater-than-received and route it to procurement rather than letting AP override case by case. Finally, do not use invoice quantity tolerance as a substitute for receiving. Tolerance settings should be tested with partial receipt, over-receipt, and inspection scenarios before changing production.