Variances
The following types of variance can be generated during the matching process:
Rate variance
This variance arises when the invoice price is different from the PO price. The variance amount is calculated as follows:
(Invoice Unit Cost – PO Unit Cost) * Invoice Quantity
Usage variance
A usage variance arises when the invoice quantity is different from the PO receipt quantity. This amount is calculated as follows:
(Invoice Quantity – PO Receipt Quantity) * PO Unit Cost
Exchange rate gain or loss
This variance is calculated when payments are generated involving multiple currencies. This variance is normally posted to the system Unrealized Exchange Gain or Loss account. See
Foreign Currency PO Receipts.
The system automatically calculates variance amounts when you enter amounts in the matching grid. When the matching is saved, the system generates variance postings. The GL Var Account setting in Receiver Matching controls whether or not variances are posted to variance accounts (the default) when average costing is used. If you clear the Use GL Var Account field when using average costing and if there is a variance, the system posts the variance to an inventory account and creates a cost update transaction to update the item cost. However, if the GL Var Account field is selected, the variance is posted to the AP rate variance account as normal.
The Matching Variance Report (28.2.7) lists the variance details that result from the matching process.
Adverse variances occur when the amount on the supplier invoice is greater than that of the original purchase order, and you have effectively been overcharged. You may want to withhold payment of this additional amount, and the system automatically places this variance amount on hold. This is displayed in the TC Hold Amount field on the supplier invoice. Whether the whole invoice amount goes on hold or just the variance is dependent on a setting in Supplier Invoice Control (28.24).