How are the absolute and percentage tolerances evaluated to trigger invoice exceptions?

Tolerance operations define how the absolute and percentage tolerances are evaluated to trigger exceptions. Please follow the attached sample Excel File which is preconfigured to mimic the tolerance behavior. The Sheet has selection options for the different tolerance operators and fields in which the desired Absolute and Percentage tolerance can be entered. The resultant shows the value up to which the Tolerance will not be triggered for various combinations

The absolute tolerance setting is evaluated first; the absolute tolerance values can be based on either the invoice amount or quantity only (invoice-based absolute tolerance) or based on the difference between the invoice and the purchase order (PO) or contract amount or quantity (difference-based absolute tolerance).

Absolute Tolerance Threshold is Exceeded

This means the absolute tolerance threshold is not met. If the tolerance operation is And, the percentage tolerance does not have to be evaluated, and an exception is triggered by having exceeded the absolute tolerance value alone. If the tolerance operation is Or, the percentage tolerance is evaluated to determine if the values on the invoice are within the percentage tolerance calculation (no exception) or if the values on the invoice exceed the percentage tolerances (exception is triggered).

Absolute Tolerance Threshold is Met

This means that the values on the invoice (for invoice-based absolute tolerance configuration) or the difference between the values on the invoice and PO, or contract (for difference-based absolute tolerance configuration) are below the threshold settings. If the tolerance operation is Or, no further calculations are necessary, and the invoice line or invoice is accepted. If the tolerance operation is And, the percentage tolerance is evaluated. If the percentage tolerance is met, no invoice exception is triggered. If the percentage tolerance is not met, an invoice exception is triggered.

If the absolute tolerance value is 0 (zero), the tolerance operation is always evaluated, and the percentage tolerance setting determines exception handling.

If the percentage tolerance is 1 or -1, invoice amount or quantities are evaluated using the absolute tolerance values alone.

Absolute Variance Tolerances with Contract Limits

When defining a contract request, contract managers can set a percent tolerance value on the contract's maximum limit. That tolerance is checked during exception calculation to decide if an invoice triggers an exception or not.

Suppose a contract of USD 10,000.00 has a percentage tolerance of 2%. If the invoice line amount is for USD 10,150.00, the invoice is accepted because the amount is within the allowable tolerance limit.

If the contract line-item variance exception is configured for an absolute variance tolerance of 100, and the contract tolerance limit is not a hard limit, then, only invoice line-item amount values greater than 10,300 trigger an exception. In effect, the allowable tolerance values of the contract and the invoice exception are combined to determine the maximum allowable amount that does not trigger an exception.

If the contract limit is defined as a hard limit, the variance tolerance defined for the exception is disregarded. In this example, any invoice amount over USD 10,200.00 leads to an automatic rejection of the invoice.

For more information about invoice exceptions, see the Ariba Invoicing Data Import and Administration Guide.

The following examples provide some additional clarification about how absolute and percentage tolerances are evaluated to trigger exceptions.

Suppose you define an absolute tolerance value of 50 on the PO Line Amount Variance exception, and you apply the tolerance to the difference between the invoice and the PO. The percentage tolerance value is 1.03 (3%).

Example 1:

The PO line-item amount is 1,000.00 and the invoice line-item amount is 1,045.00. The tolerance operation is Or.

Result: The absolute tolerance (the difference between the PO line amount and invoice amount, 45, is less than the tolerance threshold of 50) is met, and the tolerance operation is evaluated. The invoice line is accepted because the tolerance operation is Or.

Example 2:

Same as example 1, but the tolerance operation is set to And.

Result: The absolute tolerance (the difference between the PO line amount and invoice amount, 45, is less than the tolerance threshold of 50) is met, and the tolerance operation is evaluated. The percentage tolerance is evaluated because the tolerance operation is And. The percentage tolerance threshold (3% of PO line amount of 1,000.00 = 30) is not met. An invoice exception is triggered.

Example 3:

Same as example 1, but the invoice line amount is 1,055.00.

Result: In this case, regardless of the tolerance operation, an invoice exception is triggered because both the absolute (50) and percentage (3% of PO line amount of 1,000.00 = 30) tolerance thresholds are exceeded.

Example 4:

PO line amount is 5,000.00, invoice line amount is 5,065.00. Tolerance operation is Or.

Result: The absolute tolerance difference threshold (50) is exceeded, and the tolerance operation is evaluated. The percentage tolerance (3% of 5,000.00 = 150.00) is met (for example, the difference between the line-item invoice amount and PO line-item amount is within the threshold set by the percentage tolerance setting). The invoice line is accepted.

Example 5:

Same as example 4, but tolerance operation is And.

Result: The absolute tolerance difference threshold (50) is exceeded, and the tolerance operation is evaluated. Since the tolerance operation is And, and the absolute tolerance is not met, an invoice exception is triggered.

Under Tax/Under Price and Negative Tolerances:
Please refer to the support note How do I configure Under Tax Variance Exception for examples on how to configure tolerances for under tax and under Price exceptions

How are the absolute and percentage tolerances evaluated to trigger invoice exceptions?.xlsx

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Invoicing
Invoicing > Invoice Reconciliation > Invoice Reconciliation Exceptions