Price variance
The difference between the unit price a supplier billed and the contracted price in effect on the invoice date.
A price variance is the gap between what a supplier billed for a line and what your agreement said that line should cost on the day it was invoiced. It is measured per line, per unit, and then extended by quantity to give the dollar impact.
The date qualifier is what separates a real variance from a false one. Comparing an invoice to today's price list will flag every line that was legitimately billed under an earlier agreement. Always match against the price in force on the invoice date.
Variances run in both directions. Overcharges are recoverable money. Undercharges are a negotiating fact worth knowing before your next renewal, and they should never be netted silently against overcharges.
Related terms
- Unmatched reason — The classified explanation for why an invoice line could not be matched to a contracted price.
- Tolerance threshold — The minimum variance, in percent or dollars, that is worth a human's attention.
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