We had a PO that was received in the morning. On the same day, but in the afternoon, the cost on the item (but not the PO) was changed. We processed the invoice a few days later, and it exactly matched the PO at the old cost.
The receipt (and associated inventory movements that happen immediately) all occurred at the old cost, as we would want and expect.
Although the invoice matched the PO at the old cost, AS treated it at the new cost, and we got an invoice price variance entry (and a balance left over in our accrued AP account).
Does it make sense that the AP entry referenced the updated cost, even though that cost wasn't on the PO or the invoice? Does the fact that the receipt and price update occurred on the same day cause confusion? How do organizations prevent/avoid this scenario, or are all AS end users making clearing entries to variance and accrual accounts?
It sounds like you're using the standard cost model for costing your inventory. Are you operating on line level posting as well?
The reason you got a cost variace entry is because the system calculates the cost of the product based on whatever the cost is on the product at the time the payable is posted (which was after the cost had been updated).
Your options to avoid a variance are to either make sure the payable is posted before the cost is updated, or to clear the variance after the fact via a journal entry.
This is definitely one of the pain-points of the standard cost model, and reconciling your vouchers payable and cost variance entries on a monthly basis is important, especially if you often have a situation where the cost is likely to change in between PO receipt and posting the AP invoice.
There are reports that can be generated that make reconciling those accounts easier with the help of a couple formula fields. If you'd like to to discuss reporting optimizations we can do for your org, you can contact my team at Coastal Cloud here: https://coastalcloud.us/contact/
I *think* variances are only generated if you are on standard cost. But you can check which system you are on for sure by going to the Accounting Settings page and looking at the "Inventory Valuation Method" value under the Product Costing Aesttings group.
It is worth noting that even if you are on average cost, you can end up with variances in vouchers payable that will need to be adjusted out if your Payable has a different item cost than the PO.
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