This article deals with rounding differences in a software. Below is an explanation of how rounding differences can occur and why it is difficult to find a uniform solution.
Different calculation methods for the tax
The main reason for rounding differences are the different methods for the addition of VAT in the line items. There are two methods that are are recognized by law.
Variant 1: Column-wise (vertical) calculation
To calculate by column, first determine the net sum per tax rate for the entire invoice. Then multiply the net sum with the tax rate. The VAT total is shown separately on the invoice for each tax rate.
Example: A customer invoice is issued with 3 item lines that cost 0.99 EUR net. The tax rate is 19%.
Calculate net sum of items: 0.99 EUR x 3 = 2.97 EUR
Multiply with tax rate: 2.97 EUR x 1.19 = 3.5343 EUR
Result with rounding: 3.53 EUR
Calculation: (0.99 EUR x 3) x 1.19 = 2.97 EUR x 1.19 = 3.5343 EUR = 3.53 EUR
Variant 2: Row-by-row (horizontal) calculation
In this case the value added tax is calculated for each individual item, using the appropriate tax rate. The total is calculated as the sum of the amounts in the individual item lines. The VAT is also shown separately on the invoice separately for each tax rate.
Example: A customer invoice is issued with 3 item lines that cost 0.99 EUR net. The tax rate is 19%.
Multiply tax rate with each individual item: 0.99 EUR x 1.19 = 1.1781 EUR
Rounding leads to 1.18 EUR per item
Calculate sum of items with tax: 1.18 EUR x 3 = 3.54 EUR
Calculation: (0.99 EUR x 1.19 EUR) x 3 = 1.18 EUR x 3 = 3.54 EUR
Difference in the calculation in the examples
Depending on the calculation method, this results in a rounding difference of 0.01 EUR. This shows that amounts with decimal places may lead to rounding differences.
Transfer of orders from the store
Even with well-known online stores there are rounding errors. When working in conjunction with an ERP system, it is conceivable that the store itself has already created rounding errors. In this case, it is possible that the customer has already paid the Store’s receipt total. Xentral would take the rounded numbers and process them accordingly to avoid further rounding differences.
Very small prices
Some industries quote prices below one cent. Therefore, when working with prices that are too small, rounding differences may also occur. Therefore Xentral shows a lot of decimal places. Nevertheless, even in Xentral rounding errors can occur due to multiplication with quantities.
Procedure for rounding differences
If rounding differences occur during payment import, they should be eliminated. This is especially important in the case of a high volume of orders. To do this, check in the store system to see at which point in time these differences occur.
Removing rounding differences
In some cases, it is unavoidable that differences are transferred to the tax software. Therefore, these are to be posted in the software to an appropriate account. It is important that the rounding amounts are in the cent range, otherwise the origin for larger differences needs to be found.