Invoice Tolerance Limits an Insight Part 1

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SAP ERP - Logistics Materials Management(SAP MM): Invoice Tolerance Keys - Aninsight - Part 1

Posted by Raja Ramasamy Apr 18, 2014In this blog I am going to share the invoice tolerance limits learning and understanding which would help tounderstand invoice blocking techniques and provide a base to apply in real time situations depending on theclient's need.

This document will help consultant who is going to implement Open Text Vendor Invoice Management (VIM)Introduction:In the Procure to Pay(P2P) life cycle procurement part ends when Account Payable(AP) processor/Invoice clerk posts the vendor invoice in SAP using MIRO transaction which is also called Logistics InvoiceVerification(LIV). It is tedious job for invoice clerk manually to verify each and every invoice line item isconforming to agreed price or quantity in PO. SAP provides systemic way of verifying this kind of discrepanciesand block the invoice for payment using the 2 digit key called "Tolerance key".Lower & upper tolerance limits for all possible discrepancies can be maintained in tolerance key. I would try toexplain all the invoice tolerance keys in this blog with possible examples.There are 2 kinds of invoice matching in SAP which are controlled by tolerance keys.

3 way match:

Invoice line item is checked against corresponding purchase order and good receipt documents item for price &quantity matching

2 way match:

Invoice is checked against only to PO price/qty if there is no goods receipt planned

SAP ERP - Logistics Materials Management (SAP MM): Invoice Tolerance Keys - An insight - Part 1


Let us understand the how the automatic block is working via tolerance keys. In SAP we have many tolerancekeys, I am going to discuss only below keys in this part AN,AP,BD,BR,BW,DQ,DW.Tolerance Limits:

1. SAP tolerance limits work only for MIRO transaction Invoice posted in FB60 is not subject to tolerance keys limit check Tax amount is not included during tolerance check It is stored in table T169G

Invoice blocking ways:In SAP vendor invoice can be blocked for payment by anyone of the following way.

1. Automatic block:

Only if there is a discrepancy due to price or quantity or date variance in an invoice.

If the item amount is exceeded from the limit maintained in the tolerance key. 2.Manual block:Invoice processor could manually block an invoice either at item level or header level 3.Blocking through payment term:Invoice can be blocked always with a particular payment term even if there is no variance 4.Stochastic blocking:Random blocking of invoices without any variance 5.Blocking at vendor master level:Invoice can be blocked always for a particular vendor if specific blocking key is maintained at vendor masterlevelBlocking indicators: Blocking indicators are available both at header and item level of invoice document. System set thisindicator in the document wherever and whenever it is appropriate.Header level:Table: RBKP_BLOCKED Field: MRM_ZLSPRPossible values:

A Automatically blocked due to existence of blockingreasons

S Stochastically blocked



M Manual payment block set in header - no blockingreasons

W Automatically blocked due to entry via Web Invoice

Item level:Table: RSEG Value = XFields:

SPGRP Blocking reason price

SPGRM Blocking reason quantity

SPGRT Blocking reason date

SPGRG Blocking reason OPQ

SPGRV Blocking reason ProjectSPGRQ Manual blocking reason

SPGRS Blocking reason amount

SPGRC Blocking reason: Quality

1.AN Amount for an item without order referenceDefinition:System checks every line item in an invoice with no order reference against the absolute upperlimit defined.Without order reference means direct posting to G/L or Material.

System behavior:If only the invoice line item is greater than absolute upper limit the invoice would be blocked.Let us understand with below example.



It updates RBKP table without a header Block R. But updates table RBKP_BLOCKED withpayment block A.No entries in RSEG table as it is directly posted to G/L or Material

Tolerance Key RBKP RBKP_BLOCKED RSEG Auto release

AN No blockingindicatorupdate(ZLSPR)

A- Auto block No update(item amountblock)

Not possible

2.AP Amount for an item with order referenceDefinition:System checks every line item in an invoice with order reference against the absolute upperlimit defined.Pre-requisite:

Item amount check must be activated at company code level OMRH Item amount check must allowed for item category and GR indicator - OMRI

System behavior:Let us understand with below example



No blocking indicator at header table RBKP but RBKP_BLOCKED table has blocking indicator A.Blocking indicator RSEG- SPGRS (Blocking reason item amount) is set at item level.Item amount block must be released manually. There is no automatic release possible even if we perform anyone of the following activities

Post subsequent credit Adjust AP tolerance limit


AP No blockingindicatorupdate(ZLSPR)

A-Auto block RSEG- SPGRS = X(item amountblock)

Not possible

3.BD Form small differences automaticallyDefinition:The system checks the balance of the invoice against the absolute upper limit defined. If theupper limit is not exceeded, the system automatically creates a posting line called Expense/Income from Small Differences, making the balance zero and allowing the system to post thedocument

System behavior:Let us understand with below exampleSmall difference within tolerance limit:As per the PO reference the invoice amount is 1000 USD.



But vendor actual invoice copy has amount of 1002 USD.

AP invoice processor enters the invoice amount as per the vendors invoice copy which is 2 USDhigher than PO price.

Since small difference is within the tolerance limit, invoice would be posted without block. Small differenceamount would be debited to small difference G/L account maintained for the transaction event key DIF inOBYC. Same rule is applied in the lower side as wellSmall difference above the tolerance limit:PO price: 1000 USDVendor invoice amount: 1003 USD

If the small difference above the tolerance limit then system would not allow to post the invoicewith hard error Balance is not zero. Still AP invoice processor could able to post invoice viamenu bar option Edit -> Accept and Post provided if he/she has authorization object M_RECH_AKZallowed.

If we post with above option then system would behave as below. Invoice will be posted without block Small difference G/L account (DIF) get posted RBKP MAKZN (net amount accepted manually) field will get updated with small diff.

amount : 3.00



Tolerance Key Tolerance RBKP RBKP_BLOCKEDRSEG Auto release

BD Within range No blockingindicatorupdate(ZLSPR)

No update No blockingreason update

NA

BD Above No blockingindicatorupdate(ZLSPR)MAKZN fieldupdated withdiff. amount

No update No blockingreason update

NA

4.BR: Percentage OPUn variance (IR before GR)Definition:The system calculates the percentage variance using below formula and compares the variance with the upperand lower percentage tolerance limits.

Pre-requisite to simulate this scenario:1. No GR based IV



2. Variable order unit is activated at material level3. Maintain tolerance key DW with Do not check active

Tolerance:

Material master:

CRT is maintained as order unitEA is maintained as order price unit in info record 1 EA = 100 USDPO Details:PO has been created with CRT as Order unit and EA as Order price unitPo quantity: 2 CRT = 24 EA

Invoice details:Invoice is simulated before GR as belowScenario 1:Order unit quantity 2 CRT



Order price unit quantity 22 EA and amount 2200 USDObservation: There is no warning message on the variance.Let us use the above formula to find the variance percentage.

Difference is 100 91.6 = 8.9 % which is within the BR tolerance limit 10% maintainedScenario 2:Order unit quantity 2 CRTOrder price unit quantity 21 EA and amount 2100 USD

Observation: There is a warning message as below.

Let us use the above formula to find the variance percentage.

Difference is 100 87.5 = 12.5 % which is more than the BR tolerance lower limit 10%. Hence weare seeing the above warning message which will block the invoice for payment.


BR No blockingindicatorupdate(ZLSPR)

A- Auto block RSEG- SPGRS = X(item amountblock)

Not possible

5.BW: Percentage OPUn variance (GR before IR)Definition:The system calculates the percentage variance using below formula and compares the variancewith the upper and lower percentage tolerance limits.



Let us understand with same master dataPO Details:PO quantity in order unit 2 CRTPo quantity in order price unit 24 EA

GR Details:GR quantity in order unit 2 CRTGR quantity in order price unit 22 EA

IR Details:Scenario 1:IR quantity in order unit 2 CRTIR quantity in order price unit 20 EAObservation: There is no warning message on the variance.

Variance % = (20/2) / (22/2) *100 = 90.9%Difference is 100 90.9 = 9.1 % which is within the BR tolerance limit 10% maintainedScenario 2:IR quantity in order unit 2 CRTIR quantity in order price unit 19 EAObservation: There is a warning message as below

Variance % = (19/2) / (22/2) *100 = 86.4%Difference is 100 86.4 = 13.6 % which is more than the BR tolerance limit 10% and invoiceposted with payment block.




BR No blockingindicatorupdate(ZLSPR)

A- Auto block RSEG- SPGRS = X(item amountblock)

Not possible

6.DQ: Exceed amount: quantity varianceThis tolerance key has both absolute and percentage limits.Definition:If a goods receipt has been defined for an order item and a goods receipt has already been posted, the systemmultiplies the net order price by (quantity invoiced - (total quantity delivered - total quantity invoiced)).

If no goods receipt has been defined, the system multiplies the net order price by (quantity invoiced - (quantityordered - total quantity invoiced)).

System behavior:Absolute limits:Let us see the system behavior if only absolute values are maintained and percentage limits aremarked as Do not check.

Upper limit: 100.00 Lower limit: 100.00

Test data :- (GR has been defined)PO quantity = 100 EAPO price = 100 USDGR quantity = 50 EA a) System behavior when invoice quantity is 51Variance = PO price x (quantity invoiced - (total quantity delivered - total quantity invoiced)) = 100 * (51 (50-0)) = 100 * (1) = 100Variance 100 is equal to upper limit 100 and there will not be any warning message.

b) System behavior when invoice quantity is 52 Variance = PO price x (quantity invoiced - (total quantity delivered - total quantity invoiced)) = 100 * (52 (50-0)) = 100 * (2) = 200Variance 200 is more than upper limit 100 and there will be a warning message as below.



When we post invoice with above variance it will get blocked for payment.

It updates tables as belowTolerance Key RBKP RBKP_BLOCKED RSEG Auto release

DQ No blockingindicator update(ZLSPR)

A- Auto block RSEG- SPGRM = X(Quantity block )

Yes

Automatic release possible if the blocking reason RSEG- SPGRM is deleted when we post GRN for thebalance quantity or credit memo for the excess invoiced quantity.Same rules apply on the lower side as wellTest data :- (GR has not been defined)PO quantity = 100 EAPO price = 100 USDGR not possible a)System behavior when invoice quantity is 51 Variance = PO price x (quantity invoiced - (total quantity ordered - total quantity invoiced)) = 100 * (51 (50-0)) = 100 * (1) = 100 Variance 100 is equal to upper limit 100 and there will not be any warning message.

b)System behavior when invoice quantity is 52 Variance = PO price x (quantity invoiced - (total quantity ordered - total quantity invoiced)) = 100 * (52 (50-0)) = 100 * (2) = 200 Variance 200 is more than upper limit 100 and there will be a warning message as below. Invoice will beblocked for payment and same tables will be updated as above.

Percentage limits:



We can also configure percentage limits for the quantity variance check. In this case, the systemcalculates the percentage variance from the expected quantity, irrespective of the order price,and compares the outcome with the percentage limits configured.

Let us see the system behavior with same example if only percentage limits are maintained andabsolute values are marked as Do not check.

Upper % limit: 10.00 Lower % limit: 10.00

Test data :- (GR has been defined)PO quantity = 100 EAPO price = 100 USDGR quantity = 50 EA a)System behavior when invoice quantity is 55 Variance = (quantity invoiced - total quantity delivered)/ (quantity expected)*100 % = (55-50)/50 * 100 % = (5/50)*100 % = 10 % Variance 10% is equal to upper limit 10 % and there will not be any warning message.

b)System behavior when invoice quantity is 56 Variance = (quantity invoiced - total quantity delivered)/ (quantity expected)*100 % = (56-50)/50 * 100 % = (6/50)*100 % = 12 % Variance 12% is more than upper limit 10% and there will be a warning message as below. Invoice will beblocked for payment and same tables will be updated as above.

Both Variances active:If both absolute & percentage variance are active the system would block which ever tolerance is firstbreached.Quantity check for Delivery cost:The system also carries out a quantity variance check for planned delivery costs when we post only planneddelivery cost.Tolerance key not maintained:If the tolerance key DQ is not maintained for a company code when we perform the same transactionsdiscussed earlier, system considers this as zero tolerance and block the invoice for the payment for anydeviation.



7.DW: Quantity variance when GR quantity = zeroDefinition:If a goods receipt is defined for an order item but none has as yet been posted, the system multiplies the netorder price by (quantity invoiced + total quantity invoiced so far).The system then compares the outcome with the absolute upper tolerance limit defined.System behavior:This tolerance key works only for PO based invoice verification because GR based invoice verification will notallow IR without GR.DW absolute upper limit as 100:PO quantity = 100 EAPO price = 10 USDNo GRN posted a)If the IR quantity is 10 then system calculates variance as below Variance = Net order price * (quantity invoiced + total quantity invoiced so far) = 10 *(10+0) = 100 This value is equal to DW limit hence there is no warning message and system will not block the invoice.

b)If the IR quantity is 11 then system calculates variance as below and block the invoice. Variance = 10 *(11+0) = 110

This value is more than DW tolerance absolute upper limit hence invoice got blocked.It updates tables as belowTolerance Key RBKP RBKP_BLOCKED RSEG Auto release

DW No blockingindicator update(ZLSPR)

A- Auto block RSEG- SPGRM = X(Quantity block )

Yes

Automatic release possible if the blocking reason RSEG- SPGRM is deleted when we post GRN for thebalance quantity or credit memo for the excess invoiced quantityDW absolute upper limit as Do not check:PO quantity = 100 EAPO price = 10 USDNo GRN postedIf the IR quantity is 112 then also system would not block even though this is beyond the DQtolerance since it has been maintained as Do not check and there is no GR has been done.

One should be very careful to use this option as this would by-pass quantity variance DQ block ifthere is no GR posted where GR has been planned

DW tolerance key is not maintained:



If this key is not maintained for a company code it would always blocks the invoice for PO based invoiceverification when there is no GR has been posted.

Reference:* SAP IMG documentation9609 Views Tags: invoice_verification, tolerance_limit, spgrp, rbkp_blocked, invoice_block, three_way_match,3way_match, tolerancekey

Pratik JadhavMar 28, 2015 3:04 AMNice Explanation ... helpful and easy to understand...thanks for this article

Kishan HJan 5, 2015 9:53 AMGood one. Whre is part 2?

Dalapathy Sankar in response to Raja Ramasamy on page 17Jan 2, 2015 8:28 PMNice Blog. Could you please guide me for the below scenario. PO Qty = 100 with unlimited over delivery checkbox, GR = 140 Qty. GR checked but No GR based IV, MIRO should post for 140 Qty by blocking invoice withTolerance key DQ as 1% (warning message). Currently system is not checking DQ tolerance as its two waymatch (PO based invoice) and ignores the tolerance % as its unlimited delivery check box in PO

Dalapathy SankarJan 2, 2015 8:25 PMNice Blog. Could you please guide me for the below scenario.

PO Qty = 100 with unlimited over delivery check box, GR = 140 Qty. GR checked but No GR based IV, MIROshould post for 140 Qty by blocking invoice with Tolerance key DQ as 1% (warning message). Currentlysystem is not checking DQ tolerance as its two way match (PO based invoice) and ignores the tolerance % asits unlimited delivery check box in PO

Alaeddine BDHDec 31, 2014 6:03 PMhello @Raja Ramasamy,

what about tolerance customizing? how can I set low MAX and MIN level case of company code?

thanks.

Raja Ramasamy in response to Pravin Bakrania on page 16Sep 15, 2014 12:07 PMHi Pravin,Thanks for the feedback , i will publish shortly...



B V YadavSep 12, 2014 1:10 PMHi Raja Ramasamy,

Good effort i think you spent more time to prepare this document. Good document and thank for share valueinformation.

Regards,

B V

Danny RousselSep 12, 2014 10:39 AMvery usefull blog, thanks!

I was wandering if we can block an invoice if the received quantity > ordererd quantity.

So we want to do the goods receipt, but the related invoice should get blocked.

Any idea please?

Danny

Pravin BakraniaAug 8, 2014 4:17 PMHello Raja Ramasamy - This is very useful document and would appreciate if you can also post "Part -2" of this"Tolerance Keys - An Insight" - I am more interested in examples of "KW" "ST" "PP".

Thanks once again !

Sanil BhandariJun 20, 2014 12:16 PMVery useful document

Regards

Sanil Bhandari

Raja Ramasamy in response to Mehmet Ozgur Unal on page 16Apr 21, 2014 9:13 AMThanks........

Mehmet Ozgur Unal in response to Raja Ramasamy on page 17Apr 20, 2014 12:36 AMHi ,



Good effort , i wrote a similiar subject in document M8 messages for incoming invoices with tolerances

Regards.

M.Ozgur Unal

Raja RamasamyApr 18, 2014 7:32 PMHi AllAppreciate your comments and valuable feedback....

Invoice Tolerance Limits an Insight Part 1

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