Definition
Invoice price variance (IPV) is the difference between the price on a supplier's invoice and the price agreed on the purchase order for the same goods.
What is invoice price variance used for?
Stock is usually valued at the order price when it’s received. If the invoice then charges more or less, the difference has to go somewhere: to an IPV account, or back into stock. Keeping it in its own account makes overcharges visible and gives purchasing a reason to query the supplier. The formula is (invoice price − PO price) × invoiced quantity.
An invoice above the PO price
Example- PO price
- EUR 75 × 100 units
- Invoice price
- EUR 77 × 100 units
IPV: (77 − 75) × 100
EUR 200
It’s checked as part of matching invoices to orders and receipts; see three-way match.