Cash Management Set Up Steps and Usage Aspects

From Accounts Receivables Perspective Amit Kumar Singh Oracle Corporation

#racle Cash Management Release 00i -ser.s +uide Chapter 1 and pages 1/1 to 1/12. 3 Top Tech 4ocuments/ Cash Management )rom the website above you can select Cash Management to see online documentation.

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 C" Reconciliations with #racle general ledger and #racle Payables also. All screenshots included in this paper is from AR side.

I. Overview Of Cash Management.
Cash Management includes5 a6 Clearing manually or automatically your uncleared transactions lying in Accounts Receivables Accounts payables #racle Payroll ! +eneral ,edger modules. b6 It helps the user to reconcile manually or automatically the payments and receipts and then review and correct the unreconciled transactions. c6 "nter *ank &tatements manually or automatically by importing from #pen Interface tables. d6 Prepare Cash forecast. e6 Cash management also handles Multi Currency *ank &tatements and its reconcilation.

I. #verview #f Cash Management. II. Clearing $s Reconciliation III. %hat are the &et up Re'uired for Manual and Auto Reconcilations I$. %hat e(tra sets re'uired for Reversals and Corrections $. )oreign Currency *anks Reconciliations $I. %hat are the &et ups for Reconciliation with #racle +eneral ,edger and #racle Payables Please note that this paper does not replace your Cash Management -ser.s +uide. This paper is intended to give you a 'uick overview of the application and some step/by/step setup instructions.

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. %hereas Reconciliation is 7ust tallying of lines appearing in the bank statement with the Receipts in AR. 8owever 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.

)or detailed information on all the Cash Management features please read the following references.


Cash Management Set Up Steps & Usage Aspects

&ubmit . If the Remittance method is &tandard or )actoring or &td ! )actoring then the Receipt status will be Confirmed and this will re'uire first Remittance which will then bring status of receipt to Remitted and then you can clear the same. Create one Account Code Combination 9CCI46 for your bank Account in #racle +eneral .edger Create a *ank account and specify the above CCI4 in the Cash Account Create a Receipt Class and -se the above bank and *ank Account Create Manual Receipts -sing the above Receipt class 4escription )igure 0 &hows Receipt class and types of Clearance Methods. b$ Clearing of Receipts and %a&ments in C' ii. +o to AR . Receivables . Remittance Method5 if this is :o Remittance then the receipt status will be remitted and this will re'uire Clearing in C". If the Method is *y Automatic Clearing then the Receipt can be both Auto Cleared or Manually cleared. Clearing remitted receipts debits your cash account and credits your remittance or factoring account. iii. ii. Receipt &tatus depends on three important fields in Receipt Class. iv. Automatic Clearing of Receipts Program :ote5 This Method will clear only those receipts which have Automatic clearing as Matching Method. I) the Method is *y matching then Automatic clearing is not available only manual option can be used. %ith Remittance method other than :o Remittance this 4irectly is not available. i. 4irectly is available only if you have no remittance. There are two methods to clear the receipts and3or payments5 Automatic Clearing5 &ubmit the Automatic Clearing program to automatically clear remitted receipts and clear or risk eliminate factored receipts in Receivables. Re'uests . 1 Cash Management Set Up Steps & Usage Aspects .III. hat are the Set !p Re"!ired for Man!al and A!to Reconciliations# a$ Set !p Re"!irements in Acco!nts Receivables for the p!rpose of Man!al and A!to Reconciliation i. Matching5 If the matching is 4irectly then the &tatus will be cleared. &et up/ Receipts/Receipt Class :ote5 &tatus of a Receipt is important field from Cash management perspective.

Complete the statement once no further changes are re'uired. Although this is not a mandatory set up but is re'uired for Auto Reconciliation to identify the source of the statement line correction method matching method. ii. :ote 5 >ou cannot change the amount of Receipt when you use Create from &tatement. :ote 5 >ou must define bank Transaction codes for the bank . :avigation5 $iew/Re'uests 4escription )igure < &hows the #utput of Program ran in )igure 1 . Create a Receipt3 Misc Receipt3Payment directly from C" :ote 5 %hen you create Misc Receipt system prompts for Creation of Misc Receipt with Reconciled status which is not in the case of Cash Receipt. 4escription )igure 1 running of Automatic Clearing Program in AR.>ou can change iv. "nter &tatement . ii. 8eader details about *ank *ank Account Totals/control ! Actual :umber of lines unreconciled and its amount . Manually Reconcile with the available transactions or you can create manually a AR Receipt3 Misc Receipt 3 Payment from C" and then Reconcile.the dates to any date but not prior to the date of previous clearing 3reconciliation.ines. Man!al Reconciliation In Manual Reconciliation &ystem works solely on the 7udgment of user "nter *ank &tatement :ote5 *ank &tatement has two parts / 8eader and . i. < Cash Management Set Up Steps & Usage Aspects . :avigation 5 $iew/Re'uests Manual Clearing5 This is done by going to C" / = *ank Reconciliation / = Manual Clearing = you can also undo the cleared status of a cleared payment receipt or open interface transaction. c$ Man!al and A!tomatic Reconciliations in Cash Management I.ine &tatement line can be either Receipt Misc Receipt Payment Misc Payment :&) Re7ected &topped. Change 4efault 4ates5 >ou can change the 4efault dates which appear at the time of selecting the Receipt by going to 4efault 4ates .

iii. Mark &tatement .ine5 >ou can mark a statement line as "rror or "(ternal. 4escription )igure ? &ystem Parameters form .s are set up in this form which is then used in Reconciliation Process. <. Matching #rder Transaction5 If order is transaction then the system will create *ank Charges for the difference amount. Tolerance in &ystem Parameters form is in )unctional Currency. v. *atch 5 If *atch is the #rder then the system will create a Misc Receipt for the tolerance amount. Matching Criteria %hen Transaction is matching #rder 5 9 4ifference goes to *ank Charges6 0. Automatic Reconciliation matches the &tatement lines of a statement with the &ub ledger Transactions automatically on the basis of following5 i. )or e(ample if value in &ystem parameter form is *atch 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. Tolerance5 &ystem Parameter has two fields in Auto tab region5 Amount and Percent. Tolerance amount is the lower of two. vii. Receipts selected will be Receipt Amount @ A Receipt Amount B3/ Tolerance Amount = After tolerance amount system looks for the matching #rder. Marking makes the line not available for Reconciliation. The &tatus of Receipt will change back to Cleared and the statement details will get deleted from the cash management tab in Receipt form . &et up/&ystem parameters 1. Receipt :umber should match &tatement :umber or Invoice :umber Customer :ame and Customer *ank Account in statement line should match the Receipt 4etails or Invoice :umber and Customer *ank Account in statement line should match the Receipt 4etails ? Cash Management Set Up Steps & Usage Aspects .Check Receipt &tatus after Reconciliation and status of line in bank statement Cash management tab gets populated with statement details and status changes from Remitted to Cleared if it was a remitted receipt.The Matching Criteria. &tatement line gets Reconciled Amount and status changes from -nreconciled to Reconciled. vi. II. :avigation5 Cash Management . :ote5 Auto Reconciliation selects the transactions on the basis of Tolerance amount. -nreconcile 5 >ou can unreconcile the reconciled line by going to Reconciled and selecting the line and then press -nreconcile. A!tomatic Reconciliation :ote 5 After checking on the basis of Matching #rder value in &ystem Parameter form it looks for the receipts on the basis of value which was not selected. ii. Percent is calculated on statement amount.

hat e(tra sets re"!ired for Reversals and Corrections Reversals and Corrections Reversals take place when the check clearing done by bank is reversed due to following reasons5 0. 1. If the receipt is not reversed in the AR and in *ank statement there is a reversal line then Auto 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 :&) line with the reversal line of Receipt. Create a bank &tatement statement line Amount @ 0CCC Create a AR receipt of Rs EFC Run Auto Reconciliation from &ubmit Re'uest in C" Result / . &elect :&) Action IV. Create a bank transaction code with :&) as type Create a bank statement line with Receipt type and second line with :&) type. &topped 9 this is for AP payments only 6 &imulation Cases on Auto Reconciliation Tolerance 5 Amount @ 0CC and Percent 1CD Case 0 . -se the :&) code.ine will be reconciled. <. Reverse Payment 1. ?.%hen *atch is matching #rder then 4eposit :umber is the matching Criteria in the absence of 4eposit :umber batch :ame. 9 )or the difference Misc receipt is created6 <. Run Auto Recon.&et up/ *ank transaction Code F Cash Management Set Up Steps & Usage Aspects . Check the bank charges field / 0CC is in bank charges Case < / create a remittance batch with three receipts amounting to 0CCC Create a statement line with amount @ 0CFC Run Auto Reconciliation from &ubmit Re'uest in C" Result 5 system will create a Misc Receipt of Rs. :&) 9 :on &ufficient funds6 Re7ected 4escription )igure F &hows bank transaction Code screen. :avigation 5 Cash Management . Reversal can be 9 :&) Action in Auto Recon parameters6 5 0. 1. 4ebit memo reversal &teps 5 0.ine will not be reconciled Case 1 / :ow change the Amount above to GCC Run Auto Reconciliation from &ubmit Re'uest in C" Result . FC :ote 5 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.

transaction number as the ad7ustment line. )or e(ample if the reversal entry is a miscellaneous receipt then the program matches to a payment or miscellaneous payment. Create a bank transaction code for Misc Payment type line with Reversal as correction method and another for Ad7ustment correction method. 8owever 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. &elect matching against stt 3stt misc 3misc3misc stt Create lines for reversal method 9one original one Misc Payment for reversal and then 4escription )igure 2 1. *ank Reconciliations/*ank &tatements 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 9Reversal Correction method6 or gives differential credit or debit to correct the mistake 9Ad7ustment method6 0. If the amounts net out to Iero then the program assumes there is a match and reconciles the statement lines. 4escription )igure H &hows the :&) line created to demonstrate the Reversal functionality with type as :&) :avigation 5 Cash Management . 4escription )igure E &hows the Ad7ustment Method :avigation 5 Cash Management . J Ad*!stment Method) Tries to find both a statement line and a transaction to match to the ad7ustment entry. The statement line must contain the same H Cash Management Set Up Steps & Usage Aspects . *ank Reconciliations/*ank &tatements :ote 5 in Reversal method reversal statement line and original line matches with each other And new correct entry matches with original receipt. <. Reversal Method) Tries to match the reversal entry to a statement line that contains the same transaction number and opposite transaction type.

Create a *ank Transaction Code for AP and +l &ource Create a Receipt or Payment Type in *ank transaction code screen with &ource as Kournals Matching Criteria 0 CCI4 of *ank Account in Kournal .eneral /edger and Oracle %a&ables i.ine must be Posted < 4escription field and the :umber )ield is the Matching Criteria used 4escription )igure G &hows the Ad7ustment Method :avigation 5 Cash Management . 2 Cash Management Set Up Steps & Usage Aspects . *oth Receipt and *ank 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 &ystem Parameters form. +oreign C!rrenc& .ine must be same as Cash Account in the *ank 4efinition 1 Kournal . "ither Manually Reconcile or Auto )or any &topped Payment line in *ank &tatement define bank transaction code for &topped as type and source payables and then use this code in statement line. :ote 5 Rest will remain same as covered till now. 0 1 < ? F H 2 Assign a Payables 4ocument to the bank 4efine one &upplier Create one Invoice and make payment in full Create *ank Transaction Code with &ource as Payables "nter one *ank statement line of Type Payment in *ank &tatement.VI. hat are the Set !ps for Reconciliation with Oracle . *ank Reconciliations/*ank &tatements Reconciliation of AP to C" &teps Reconciliations )oreign Currency Transactions Receipt is in )oreign Currency 3 *ank is )unctional Currency In this case the tolerance amount will be the difference in Converted Amount of Receipt and &tatement amount.

Payables/ Payments/Payment 4escription )igure 01 &hows Reconciliation of &topped line with AP void payment :avigation 5 Cash Management . There could be two scenarios which would affect the *ank &tatement *alance5 Case 0 E Cash Management Set Up Steps & Usage Aspects . 4escription )igure 00 &hows Payment created in AP. This is the basis for the treatment of stopped payments by the method described above.The bank records both the original payment and the stopped payment on the same statement.Payables/ Payments/Payment Cash Management treats Payments as a source of Cash #utflow and Stopped Payments as a source of Cash Inflows. 4escription )igure 0C &hows Payment created in AP. *ank Reconciliations/*ank &tatements Case 1 The bank records the original payment and the stopped payment on two different statements or 7ust records the stopped payment and not the original payment. :avigation . In this case the closing balance would be impacted. &ince the *ank &tatement 8eader has one field for Cash Inflow &ources 9Receipts6 and one for #utflow sources 9Payments6 Stopped Payments show up in the Receipts )ield. In this case the two transactions would null out and have no effect on the closing balance. :avigation .

Kournals/"nter Concl!sions It is our hope that this paper has helped you understand what Cash Management Reconciliations is and how to set it up.ines in Cash Management reconciliation with Kournals in #racle +eneral . 4escription )igure 0? &hows the . :avigation 5 Cash Management .edger.edger with 4escription field populated . #racle +eneral .&et up/ *ank transaction Code 4escription )igure 0F &hows the Kournal Created in oracle general .4escription )igure 0< &hows bank transaction code for Kournal as &ource . :avigation . :avigation 5 Cash Management . *ank Reconciliations/*ank &tatements G Cash Management Set Up Steps & Usage Aspects .edger .

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