24Understanding Rounding Versus Soft Rounding

Rounding and Soft Rounding Comparison

If you process a significant number of invoices and vouchers that have discounts, taxes, or both, rounding differences can add up quickly. Rounding occurs on any part of a transaction that involves a calculation. The system uses rounding on transactions with a single pay item and soft rounding on transactions with multiple pay items.

Rounding

Rounding automatically occurs when the system performs a calculation and the result does not exactly equal the lowest currency unit, such as the penny for the U.S. dollar. In this situation:

  • If the least significant digit is 5 or greater, the system rounds up.

  • If the least significant digit is less than 5, the system rounds down.

For example, if the result of a calculation is 0.55672 and the currency is Canadian dollars (CAD), which has two decimal places, the system uses the third number to the right of the decimal to determine the rounding. In this example, it rounds the amount up to 0.56. Conversely, if the amount is 0.55472, the system uses 4 and round the amount down to 0.55. The system ignores all numbers after the third decimal for a two-decimal currency.

Soft Rounding

When the total of two or more amounts must equal a specific amount, the system uses soft rounding to force the total. For example, if you split a voucher for 100 CAD into three payments, the system calculates the first pay item at 33, the second at 34, and the third at 33 so that the total of the three pay items equals 100. If the system did not use soft rounding, you would have to enter an amount that could be divided equally among pay items or submit pay items that did not equal the total amount due, which would not be acceptable.

To minimize the negative effects of rounding, the system uses soft rounding on transactions with multiple pay items. The system stores the amount that it adds or subtracts to a calculated amount (as a result of rounding) in a cache (memory), and then adds or subtracts that amount from the next pay item:

  • If the system rounds up the amount for a pay item, it subtracts that amount from the next pay item before rounding that pay item.

  • If the system rounds down the amount for a pay item, it adds that amount to the next pay item before rounding that pay item.

If the system did not perform soft rounding, you might overpay or underpay a supplier as well as overcharge or undercharge a customer. While soft rounding does not control overpayments or underpayments and overcharges or undercharges between transactions, it does minimize the impact of rounding within a single transaction. The system does not carry soft rounding amounts from one transaction to another.