Professional Documents
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White Paper
INTRODUCTION ....................................................................................................................................................3
Objective .........................................................................................................................................................3
Scope ..............................................................................................................................................................3
Overview .........................................................................................................................................................3
Terms Used .....................................................................................................................................................4
BUSINESS SCENARIO ...........................................................................................................................................5
BANK CHARGE SETUPS .......................................................................................................................................7
Enable Operating Unit to Use the Bank Charge Feature...............................................................................7
Define Bank Charges ......................................................................................................................................8
Enable Bank Charges for Supplier .................................................................................................................8
PROCESS FOR TESTING BUSINESS SCENARIO ..................................................................................................... 10
Step 1: Create 2 Invoices .............................................................................................................................. 10
Step 2: Create PPR to Pay Invoices ............................................................................................................. 13
Step 3: Review Payment Created .................................................................................................................. 15
Step 4: Review Payment Accounting ............................................................................................................ 16
Objective
In this white paper we provide an overview of the Bank Charges feature in Oracle
Payables, Release 12. We also included step-by-step instructions to configure the
Bank Charges feature.
Scope
This paper includes the setup steps, transaction flow, and relevant accounting for
the transactions.
Overview
Banks can impose fees for different activities and services, such as:
Interest on overdraft
Monthly charges
Other service charges, and
Charges levied on funds transfer requests to other banks
In this document we will discuss bank charges for Fund Transfer Requests.
You can pay your suppliers for their goods and services in many different waysi.e.,
issue a check, pay by money order, credit card, or cashiers check. You can also
transfer funds from your bank account to your suppliers bank account.
For the service of transferring funds between the two bank accounts, your bank may
impose bank charges.
c) Transfer priority
d) Currency
Transfer PriorityBank charges levied may depend on the transfer priority. For
example, a Normal Transfer Priority may be cheaper in comparison to an Express
Transfer Priority.
Bank Charge TypeBanks may also provide differential rates, such as a Standard
Rate vs. Negotiated Rate for Fund Transfers. Negotiated rates are often lower than
the standard rate.
In this business scenario, the bank charges a fee for transfers between two different banks.
The Bank Charges are based on the payment amount and bank charge rate (i.e., Standard vs.
Negotiated). In our example, if the payment amount is between 1 and 5000, the bank
charges $10 for the Standard rate and $7 for the Negotiated rate. Payment amounts over
$5000 are charged $12 for the Standard rate and $8 for the Negotiated rate.
Priority: Express
Currency: USD
Transferring BankBank Name: SANBANK1, Branch: SANBRANCH1
- This is your bank account
Receiving BankBank Name: SANBANK, Branch: SANBRANCH.
- This is your Suppliers bank account
To test the Bank Charges feature, we will use the following example:
1. Initiate a Funds Transfer Request (i.e., a Payment) from the Transferring account
(Bank: SANBANK1 and Branch: SANBRANCH1) to the Receiving bank account
(Bank: SANBANK and Branch: SANBRANCH).
2. In our example, the payment will be applied to two invoices for the amounts of
$3000 and $6000
3. Because the total payment is more than $5000, the system will calculate the bank
charge for the amount of $12, as per the setup under the Define Bank Charge
Calculation section of this white paper.
4. The $12 will be deducted from the payment of $9000. The bank charge is pro-rated
based on the payment amount for each invoice.
Invoice#1
Invoice Amount: 3000
Amount Paid = 3000 (12*3000/(3000+6000)) = 3000 4 = 2996
Invoice#2
Invoice Amount: 6000
Amount Paid = 6000 (12*6000/(3000+6000)) = 3000 8 = 5992
To create the above scenario, you must have the following transactions:
Select the checkbox Enable Bank Charge Deduction from Payment and select the
respective value for Deduct Bank Charge from Payment.
The same setup will default on the Supplier Site Definition form, but it can be
overridden.
The bank charge rate is dependent on the Transferring Bank (i.e., your bank), the
Receiving Bank (i.e., your Suppliers bank), and the Transfer Priority. This
information is entered on the Bank Charge Calculation form.
You must enable the Bank Charges feature at the Supplier Site. You can complete
this task under the Invoice Management tab by accessing your suppliers bank
account information.
2) To define the Suppliers bank account, navigate to the Banking Details tab
The Suppliers bank account defined here should belong to the Receiving
Bank details mentioned in the Bank Charge Calculation window.
This completes the Setup required.
PPR#TR220112-02
The remittance was applied to the invoices and the payment amount was as
expectedi.e., 2996 and 5992, respectively.
The bank charge was prorated as expected and the accounting was as
follows:
The $12 was recorded as a discount in the General Ledger because the
Supplier paid the bank charges.