How Invoices Are Validated

Before you can pay or create accounting entries for any invoice, you must validate the invoice. You can use the Validate invoice action or you can submit the Validate Payables Invoices process.

The validation process performs actions, such as calculating tax, checking that matching variances fall within specified tolerance limits, and placing holds for exception conditions.

Settings That Affect Invoice Validation

The following table describes the settings that affect the invoice validation process:

Setting	Description
Calculation point	If set to Invoice on the Manage Tax Reporting and Withholding Tax Options page, the validation process calculates withholding.
Tax invoice creation point	If set to Invoice on the Manage Tax Reporting and Withholding Tax Options page, the validation process creates withholding invoices.
Invoice tolerances	If a supplier has quantity and amount tolerance templates, the validation process checks for matching variances. If a supplier doesn't have tolerance templates, the validation process uses the tolerance templates on the Manage Invoice Options page.
Option parameter	When you validate invoices as part of a batch, you can use the Option parameter to identify which invoices to process. All: Submits validation for all invoices that don't have a status of Validated. The validation process reviews all invoice distributions that weren't yet reviewed and also reviews invoices with unreleased holds. New: Processes only invoice distributions that were entered or imported since the last validation. The validation process selects only invoice distributions that weren't yet reviewed. The validation process doesn't review invoice distributions already on hold.
Budgetary control	If enabled for the ledger, invoice business unit, invoicing business function, and type of transaction, the validation process reserves funds.

How Invoices Are Validated

Whether you validate an invoice by selecting the Validate invoice action, or by running the Validate Payables Invoices process, the validation process:

• Generates invoice distributions based on:

  • Line information such as default distributions, distribution sets, and overlay distributions

  • Freight or miscellaneous charge allocations

• Calculates tax

• Creates tax lines and distributions

• Calculates withholding

• Creates withholding invoices

• Checks for variances between ordered, received, consumed, and invoiced quantities or amounts

• Applies or releases holds

• Validates project information

• Checks conversion rate information

• Checks period status

• Reserves funds for invoices requiring budgetary control and places holds for insufficient funds and other budgetary control validation errors

The following examples illustrate how you can resolve holds placed on an invoice by the Validate Payables Invoices process. You can release some invoice holds manually without submitting the validation process. For other invoice holds, you must correct the exception by updating the invoice or purchase order, then resubmitting the validation process to release the hold. You can also review and adjust tolerance limits, if needed.

Example 1: Billed Quantity Exceeds Received Quantity

An invoice has a matching hold because the billed quantity exceeds the received quantity. For example, the billed quantity is 6 and the received quantity is 5. The receiving department receives the remaining goods and records the receipt. The quantity on the invoice line now matches the receipt quantity. You resubmit the validation process to release the hold.

Example 2: Invoice Price Exceeds Purchase Order Schedule Price

An invoice has a matching hold because the invoice price exceeds the purchase order schedule price. For example, the invoice unit price is 10.00 USD and the purchase order schedule price is 9.00 USD. A supplier sends a credit to correct the amount due on the previous invoice. You perform a price correction and resubmit the validation process to release the hold.