Invoice exception
A supplier invoice that fails a check, such as a price or quantity mismatch, and is held until someone resolves it.
In short
- Common causes: price or quantity differs from the order, no purchase order, duplicate, wrong tax or changed bank details.
- Exceptions are where AP time goes. Most invoices that match need no attention.
- Tracking exception reasons shows which suppliers and processes cause them.
An invoice exception occurs when a supplier invoice cannot be approved automatically because something does not line up. The invoice is put on hold with a reason, and someone in accounts payable, purchasing or the business has to resolve it before it can be paid.
Common types
- Price variance: the unit price on the invoice is higher than on the purchase order.
- Quantity variance: more units billed than were ordered or received.
- No purchase order: the invoice does not reference one, or references one that does not exist.
- Possible duplicate: same supplier, amount and date as an invoice already processed.
- Tax issue: missing tax registration number, wrong rate or tax on an exempt item.
- Supplier data: bank details that differ from the vendor master file, a classic fraud signal.
Resolving them
Most exceptions are resolved in one of three ways: the invoice is accepted within a tolerance, the purchase order or receipt is corrected, or the supplier issues a credit note or a corrected invoice. The resolution should be recorded so the audit trail shows why the invoice was paid.
Exception reasons are useful data. If one supplier causes most price variances, its prices in the system are wrong or it is overbilling. If most exceptions are missing purchase orders, the purchasing process is being skipped.
Worked example
Three holds in a morning
Of 120 invoices received on Monday, 104 match and post. Of the 16 held, nine are price variances from one packaging supplier whose 4% increase was never updated on the purchase orders, four are missing purchase orders, two are possible duplicates and one shows new bank details, which AP confirms by calling the supplier's known phone number before releasing it.