Term

What is Price variance and tolerance?

A tolerance is the agreed margin within which a difference between invoice and purchase order is accepted automatically, expressed as an amount, a percentage, or both.

Also known as: tolerance threshold, price variance, matching tolerance

Tolerances exist because reality does not land on the cent. Unit prices are rounded, currencies move, fuel surcharges change weekly, and when delivery is by weight the quantity is never exactly what was ordered. Without a margin every invoice would be an exception.

The craft is in two numbers side by side. A percentage alone is too loose on large amounts: two percent of 80,000 euro is 1,600 euro passing unseen. An amount alone is too strict on small invoices: five euro on a twenty euro invoice blocks everything. The common answer is that a difference has to fall inside both limits before it is accepted automatically.

In Exact Online

Exact Online has no configurable matching tolerance when a purchase invoice is entered, because it does not perform the three-way check per line itself. Tolerances are therefore set in the connected invoice processing. In Glimps they are set per amount and per percentage, and a difference outside tolerance can go automatically as a question to a named buyer or budget holder instead of landing on a pile.

Where to draw the line

There is no universally correct value, but there is a good way to find one. Look back at six months of price differences, sort them by size, and find where the distribution flattens. Below that knee is noise and rounding, above it are real errors. Start there and adjust after a quarter.

  • A tolerance per supplier works better than a single value for everyone.
  • Treat freight and surcharges separately, otherwise they eat the whole margin.
  • A tolerance should only be generous upward. A supplier that structurally undercharges is a signal too.

What happens outside tolerance

This is where it is won or lost. An invoice that blocks outside tolerance and lands on a list waits days on average. An invoice where the question goes straight to the buyer, with the order line, the receipt and the invoice line side by side, is often resolved the same day. The difference is not the check but the routing.

Where it usually goes wrong

  • 1Setting the tolerance so wide nothing ever blocks. Then you have abolished the control without writing it down.
  • 2Setting it so tight everything blocks. The team then learns to click blocks away without looking.
  • 3Raising tolerances by hand per invoice to push a payment through. If you do that more than once a month, the setting is wrong.
  • 4Forgetting that a tolerance at line level is not the same as at invoice level. Ten lines each just inside the margin add up.
FAQ

Frequently asked questions

Common questions about Price variance and tolerance.

Questions about your situation?

Open the demo

In practice you often see something in the order of a few percent with a cap of a few tens of euros, where the difference has to fall inside both limits. What fits depends on your margins and your suppliers: bulk goods on daily prices need a different line than office supplies.

For most suppliers one default is enough. Set a separate tolerance on the handful of suppliers where it structurally goes wrong or where the amounts are large. That returns more than a fine-grained setting for everyone.

Usually whoever placed the order, with a second signature above a certain amount. What matters is that the approval is recorded on the invoice, with who and when, so the auditor can find it later without searching mailboxes.