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Reconcile NetSuite Purchase Order and Post Vendor Bill Variances

By Citrin Cooperman Digital Services Practice .

NetSuite purchase orders deliver functionality that simplifies the purchasing and receiving process for greater accuracy. NetSuite purchase order items can be received into a warehouse directly or through an inspection warehouse, but it is critical for businesses to know how to manage differences attributable to quantity, pricing, and exchange rate differences. NetSuite users can utilize Post Vendor Bill Variances to reconcile item receipts and vendor bill variances.

In a perfect world, a purchase order is issued for an item with a certain quantity and cost, the item is received with the same quantity and cost, and the vendor bills reflect the same details. This is the ideal situation because everything matches the exact quantity and dollar value. There are no reconciliation headaches. However, this is not always the case in real-world situations.

Generally, a NetSuite purchase order is issued for a specific quantity and price, but you may receive the item for a lesser or greater quantity and at a different price than what was initially ordered. The invoice from your supplier may be for a quantity and price different than the items already received. Here is a typical scenario:



Activity Quantity Unit cost Extended cost
Purchase order issued 10 4 40
Received orders 8 6 48
Vendor bill 10 8 80




The accounting impact on the variance that results from the purchasing activity needs to be determined.

Impact of a NetSuite purchase order on general ledger accounting

Issuing purchase orders results in no general ledger accounting impact, but received orders and vendor bills do have a general ledger impact, which is illustrated below:



Received orders Debit (Dr)  Credit (Cr)
Inventory 48  
Accrued purchases   48



Vendor bill Dr Cr
Accrued purchases 80  
Accounts payable   80




Businesses need to identify what happened to the $32 variance in the accrued purchases account due to the price variance. In this case, they use Post Bill Vendor Variance in NetSuite to reconcile the difference.

NetSuite’s Post Vendor Bill Variance methods

Post Vendor Bill Variances reclass the variance in the accrued purchases account into variance accounts assigned on the item record. To Post Vendor Bill Variance, NetSuite has two methods:

  1. Based on Vendor Bill Lines using Match to Bill Receipts checkbox
  2. Based on Purchase Order lines with no Match to Bill Receipts checkbox

Focusing on Posting Based on Vendor Bill Lines with Match to Bill Receipt checkbox, apply ‘Post Variance Based on Vendor Bill Lines with Match Receipts checkbox checked’ by setting three variance accounts on the item record, which includes:

  1. Price Variance Account
  2. Quantity Variance Account
  3. Exchange Rate Variance Account

When entering NetSuite purchase orders, (Transactions=>Purchases=>Enter Purchases Orders) check MATCH BILL TO RECEIPT on the purchase order lines.

Finally, once Purchase Orders, Receive Orders, and Bill Purchase Orders processes have been completed, Post Vendor Bill Variances (Transactions=>Payables=>Post Vendor Bill Variances) generates journal entries to clear out the Accrued Purchases Account.

Received orders Dr Cr
Price variance account 32  
Accrued purchases   32


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