Cash Management Setup

Cash Management Set Up Steps
and Usage Aspects
Oracle Cash Management Release 11i Users Guide,

Chapter 2 and pages 2-2 to 2-27.
From Accounts Receivables Perspective

Amit Kumar Singh
Oracle Corporation
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Abstract
Improve your knowledge of Reconciliation Process
in Cash Management by learning how to set up Cash
Management and how to use it. This paper provides
an overview of the Manual and Auto Reconciliation
process, and basic functionalities involved in the
process for instance Reversals & Corrections.
This paper is written from the perspective of
Accounts Receivable Module although it will contain
some useful information for CE Reconciliations with
Oracle general ledger and Oracle Payables also.
All screenshots included in this paper is from AR
side.
I. Overview Of Cash Management.

Cash Management includes:
a)
Clearing manually or automatically

your uncleared transactions lying in
Accounts Receivables, Accounts
payables, Oracle Payroll & General
Ledger modules.
b) It helps the user to reconcile manually
or automatically the payments and
receipts and then review and correct the
unreconciled transactions.
c) Enter Bank Statements manually or
automatically by importing from Open
Interface tables.
d) Prepare Cash forecast.
e) Cash management also handles Multi
Currency Bank Statements and its
reconcilation.
Scope
I. Overview Of Cash Management.
II. Clearing Vs Reconciliation
III. What are the Set up Required for Manual
and Auto Reconcilations
IV. What extra sets required for Reversals and
Corrections
V. Foreign Currency Banks Reconciliations
VI. What are the Set ups for Reconciliation with
Oracle General Ledger and Oracle Payables
II. Clearing Of A Receipt Vs

Reconciliation of a Receipt
Clearing is an accounting event whereas
reconciliation is not an accounting event.
Clearing Transfers the amount from Remittance
account to Cash Account. Whereas
Reconciliation is just tallying of lines appearing
in the bank statement with the Receipts in AR.
However if you reconcile directly the transaction
then the transaction gets cleared first itself and
then in such a case reconciliation becomes an
accounting event also.
Please note that this paper does not replace your Cash
Management Users Guide. This paper is intended to
give you a quick overview of the application, and
some step-by-step setup instructions.
References
For detailed information on all the Cash Management
features, please read the following references.

& Usage Aspects
III. What are the Set up Required for

Manual and Auto Reconciliations?
a) Set up Requirements in Accounts
Receivables for the purpose of
Manual and Auto Reconciliation
i.
ii.
iii.
iv.
Create one Account Code

Combination (CCID) for your bank
Account in Oracle General Ledger
Create a Bank account and specify
the above CCID in the Cash
Account
Create a Receipt Class and Use the
above bank and Bank Account
Create Manual Receipts Using the
above Receipt class
Description Figure 1 Shows Receipt class and types

of Clearance Methods.
Receivables Set up- Receipts-Receipt Class
Note: Status of a Receipt is important field from Cash

management perspective. Receipt Status depends on
three important fields in Receipt Class.
i.
ii.
Remittance Method: if this is No

Remittance then the receipt status will
be remitted and this will require
Clearing in CE. If the Remittance
method is Standard or Factoring or Std
& Factoring then the Receipt status will
be Confirmed and this will require first
Remittance which will then bring status
of receipt to Remitted and then you can
clear the same.
b) Clearing of Receipts and Payments in

CE
There are two methods to clear the receipts and/or

payments:
Matching: If the matching is Directly

then the Status will be cleared. Directly
is available only if you have no
remittance. With Remittance method
other than No Remittance this Directly
is not available. If the Method is By
Automatic Clearing then the Receipt
can be both Auto Cleared or Manually
cleared. IF the Method is By matching
then Automatic clearing is not available
only manual option can be used.
Automatic Clearing: Submit the Automatic Clearing

program to automatically clear remitted receipts and
clear or risk eliminate factored receipts in
Receivables. Clearing remitted receipts debits your
cash account and credits your remittance or factoring
account.
Go to AR Requests Submit Automatic Clearing
of Receipts Program
Note: This Method will clear only those receipts,
which have Automatic clearing as Matching Method.

& Usage Aspects
the dates to any date but not prior to the date of

previous clearing /reconciliation.
c) Manual and Automatic

Reconciliations in Cash
Management
I.
Manual Reconciliation
In Manual Reconciliation System works solely

on the judgment of user
i.
Enter Bank Statement

Note: Bank Statement has two parts Header and Lines.
Header details about Bank , Bank Account,
Totals-control & Actual , Number of lines
unreconciled and its amount . Complete the
statement once no further changes are
required.
Description Figure 2 running of Automatic Clearing

Program in AR.
Navigation: View-Requests
ii.
Enter Statement Line

Statement line can be either Receipt, Misc
Receipt, Payment, Misc Payment, NSF ,
Rejected, Stopped.
Note : You must define bank Transaction
codes for the bank . Although this is not a
mandatory set up but is required for Auto
Reconciliation to identify the source of the
statement line , correction method ,
matching method.
ii.
Manually Reconcile with the available

transactions or you can create manually
a AR Receipt/ Misc Receipt / Payment
from CE and then Reconcile.
iv.
Create a Receipt/ Misc Receipt/Payment
directly from CE
Description Figure 3 Shows the Output of Program

ran in Figure 2 .
Navigation : View-Requests
Note : When you create Misc Receipt system prompts

for Creation of Misc Receipt with Reconciled status
which is not in the case of Cash Receipt.
Manual Clearing: This is done by going to CE - >

Bank Reconciliation - > Manual Clearing > you can
also undo the cleared status of a cleared payment,
receipt, or open interface transaction.
Note : You cannot change the amount of Receipt

when you use Create from Statement.
Change Default Dates: You can change the Default

dates which appear at the time of selecting the
Receipt by going to Default Dates .You can change
v.
Check Receipt Status after

Reconciliation and status of line in bank
statement

& Usage Aspects
Cash management tab gets populated with statement

details and status changes from Remitted to Cleared
if it was a remitted receipt.
Statement line gets Reconciled Amount and status
changes from Unreconciled to Reconciled.
i.
vi. Mark Statement Line: You can mark a

statement line as Error or External. Marking makes
the line not available for Reconciliation.
Tolerance: System Parameter has two

fields in Auto tab region: Amount and
Percent. Percent is calculated on
statement amount. Tolerance amount is
the lower of two. Tolerance in System
Parameters form is in Functional
Currency.
Note: Auto Reconciliation selects the transactions on

the basis of Tolerance amount.
Receipts selected will be Receipt Amount
= < Receipt Amount +/- Tolerance Amount
>
After tolerance amount system looks for the matching
Order.
vii. Unreconcile : You can unreconcile the

reconciled line by going to Reconciled and selecting
the line and then press Unreconcile. The Status of
Receipt will change back to Cleared and the
statement details will get deleted from the cash
management tab in Receipt form .
ii.
Matching Order
Transaction: If order is transaction then the system

will create Bank Charges for the difference amount.
Batch : If Batch is the Order then the system will
create a Misc Receipt for the tolerance amount.
II. Automatic Reconciliation
Note : After checking on the basis of Matching Order

value in System Parameter form it looks for the
receipts on the basis of value which was not selected.
For example if value in System parameter form is
Batch then after looking for on the basis of batch if
unable to find a batch system will then check for
transactions with the number given in statement line.
iii.
Matching Criteria
When Transaction is matching Order : ( Difference

goes to Bank Charges)
1.
2.
Description Figure 4 System Parameters form .The

Matching Criterias are set up in this form which is
then used in Reconciliation Process.
Navigation: Cash Management Set up-System
parameters
3.
Automatic Reconciliation matches the Statement

lines of a statement with the Sub ledger Transactions
automatically on the basis of following:
Receipt Number should match Statement

Number or
Invoice Number , Customer Name and
Customer Bank Account in statement line
should match the Receipt Details or
Invoice Number and Customer Bank Account
in statement line should match the Receipt
Details
When Batch is matching Order then Deposit Number

is the matching Criteria in the absence of Deposit
Number batch Name. ( For the difference Misc
receipt is created)

& Usage Aspects
Reconciliation first clears the receipt and reconciles

the receipt line in bank with the cleared line of
Receipt and then it reverses the receipt and reconciles
the NSF line with the reversal line of Receipt.
Simulation Cases on Auto Reconciliation

Tolerance : Amount = 100 and Percent 20%
Reversal can be ( NSF Action in Auto Recon

parameters) :
Case 1 Create a bank Statement , statement line

Amount = 1000
Create a AR receipt of Rs 850
Run Auto Reconciliation from Submit Request in CE
Result - Line will not be reconciled
1. Reverse Payment
2. Debit memo reversal
Steps :
1.
Case 2 - Now change the Amount above to 900

Result Line will be reconciled.
Check the bank charges field - 100 is in bank charges
2.
3.
4.
Create a bank transaction code with NSF as

type
Create a bank statement line with Receipt
type and second line with NSF type. Use the
NSF code.
Run Auto Recon.
Select NSF Action
Case 3 - create a remittance batch with three receipts

amounting to 1000
Create a statement line with amount = 1050
Result : system will create a Misc Receipt of Rs. 50
Note : Incase of Remittance batch ensure that while
running Auto Recon you must specify the payment
method and Receivable activity other wise Auto
Recon will fail.
IV.
What extra sets

required for Reversals
and Corrections
Description Figure 5 Shows bank transaction Code

screen.
Navigation : Cash Management Set up- Bank
transaction Code
Reversals and Corrections

Reversals take place when the check clearing done by
bank is reversed due to following reasons:
1.
2.
3.
NSF ( Non Sufficient funds)

Rejected
Stopped ( this is for AP payments only )
If the receipt is not reversed in the AR and in Bank

statement there is a reversal line then Auto

& Usage Aspects
transaction number as the adjustment line. However,

the statement line can be a payment, receipt,
miscellaneous payment, or miscellaneous receipt, as
long as the
amount netted out is within the tolerance of the
original transaction.
Description Figure 6 Shows the NSF line created to

demonstrate the Reversal functionality with type as
NSF
Navigation : Cash Management Bank
Reconciliations-Bank Statements
Corrections takes place when bank gives wrong
credit and then to correct the error it either reverses
the original credit and then gives a new credit
(Reversal Correction method) or gives differential
credit or debit to correct the mistake (Adjustment
method)
1.
2.
3.
Description Figure 7
Create a bank transaction code for Misc

Payment type line with Reversal as
correction method and another for
Adjustment correction method.
Select matching against stt /stt, misc
/misc/misc,stt
Create lines for reversal method (one
original, one Misc Payment for reversal and
then
Reversal Method: Tries to match the reversal entry

to a statement line that contains the same transaction
number and opposite transaction type. For example,
if the reversal entry is a miscellaneous receipt, then
the program matches to a payment or miscellaneous
payment. If the amounts net out to zero, then the
program assumes there is a match and reconciles the
statement lines.
Description Figure 8 Shows the Adjustment Method

Note : in Reversal method reversal statement line and
original line matches with each other
And new correct entry matches with original receipt.
Adjustment Method: Tries to find both a statement

line and a transaction to match to the adjustment
entry. The statement line must contain the same

& Usage Aspects
VI. What are the Set ups for

Reconciliation with Oracle General
Ledger and Oracle Payables
i.
Create a Bank Transaction Code for AP and
Gl Source
Create a Receipt or Payment Type in Bank
transaction code screen with Source as Journals
Matching Criteria
1 CCID of Bank Account in Journal Line must
be same as Cash Account in the Bank Definition
2 Journal Line must be Posted
3 Description field and the Number Field is
the Matching Criteria used
Description Figure 9 Shows the Adjustment Method

Reconciliation of AP to CE
Steps
1 Assign a Payables Document to the bank
2 Define one Supplier
3 Create one Invoice and make payment in
full
4 Create Bank Transaction Code with Source
as Payables
5 Enter one Bank statement line of Type
Payment in Bank Statement.
6 Either Manually Reconcile or Auto
7 For any Stopped Payment line in Bank
Statement define bank transaction code for
Stopped as type and source payables and
then use this code in statement line.
V. Foreign Currency Banks

Reconciliations
Foreign Currency Transactions
Receipt is in Foreign Currency / Bank is Functional
Currency
In this case the tolerance amount will be the
difference in Converted Amount of Receipt and
Statement amount.
Both Receipt and Bank is in foreign Currency

In this case the Tolerance amount will first be
converted into foreign currency using Rate type and
Rate date as specified in System Parameters form.
Note : Rest will remain same as covered till now.

& Usage Aspects
The bank records both the original payment and the

stopped payment on the same statement. In this
case, the two transactions would null out and have no
effect on the closing balance. This is the basis for the
treatment of stopped payments by the method
described above.
Description Figure 10 Shows Payment created in AP.

Navigation Payables- Payments-Payment
Description Figure 12 Shows Reconciliation of

Stopped line with AP void payment
Case 2
The bank records the original payment and the
stopped payment on two different statements or just
records the stopped payment and not the original
payment. In this case, the closing balance would be
impacted.
Description Figure 11 Shows Payment created in AP.

Navigation Payables- Payments-Payment
Cash Management treats Payments as a source of
Cash Outflow and Stopped Payments
as a source of Cash Inflows. Since the Bank
Statement Header has one field for
Cash Inflow Sources (Receipts) and one for Outflow
sources (Payments), Stopped
Payments show up in the Receipts Field.
There could be two scenarios, which would affect the
Bank Statement Balance:
Case 1

& Usage Aspects
Description Figure 15 Shows the Journal Created in

oracle general Ledger with Description field
populated .
Navigation Oracle General Ledger Journals-Enter
Description Figure 13 Shows bank transaction code

for Journal as Source .
Navigation : Cash Management Set up- Bank
transaction Code
Conclusions
It is our hope that this paper has helped you
understand what Cash Management Reconciliations
is , and how to set it up.
Description Figure 14 Shows the Lines in Cash

Management reconciliation with Journals in Oracle
General Ledger.

& Usage Aspects
Cash Management Set Up Steps and Usage Aspects

From Accounts Receivables Perspective
January 2005
Author : Amit Kumar Singh
Oracle Corporation
World Headquarters
500 Oracle Parkway
Redwood Shores, CA 94065
U.S.A.
Worldwide Inquiries:
Phone: +1.650.506.7000
Fax: +1.650.506.7200
www.oracle.com
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Cash Management Set Up Steps

and Usage Aspects

Oracle Cash Management Release 11i Users Guide,

From Accounts Receivables Perspective

I. Overview Of Cash Management.

Clearing manually or automatically

II. Clearing Of A Receipt Vs