Accounts Receivable

ACCOUNTS RECEIVABLE

This Module is used to recognize Revenue,Process cash receipts, and collect money that is owed to you. It is a subledger to the GL.and it is closely related to the modules Order Management and Inventory. This document contains a brief overview of various setups required and transations to be performed in the Accounts Receivable module of Oracle Applications.

The Mandatory Setups for Accounts Receivables are:

1. Defining Key Flexfields
2. Defining Payment Terms
3. Defining Transaction Types
4. Defining Transaction Sources
5. Defining Receipt Classes
6. Defining Payment Methods
7. Defining Receipt Sources
8. Defining Banks
9. Defining Receivable Activites
10. Defining Profile Classes

In addition to the above there are some optional Setup requirements and all these were discussed in brief hereunder.

Define Flexfields

Define Key Flexfields (Required)

You can use the Location flexfield for recording and customized reporting on your location information. Receivables provides a default structure for your Location flexfield. You can associate Location flexfields with salespeople, invoices, commitments, and customer business purposes.

Note: You must enable at least one segment of your Location flexfield.

Next, set your AR: Item Flexfield Mode profile option to choose your preferred method of entry for this flexfield within Receivables. This default value is concatenated segment entry.

Define Transaction Flexfield Structure (Optional)

If you are not using AutoInvoice, proceed to the next step.

If you use AutoInvoice to import information from an external system and create transactions in Oracle Receivables, define Transaction Flexfields to uniquely identify these transactions. Because Transaction Flexfields are unique, you can also use them to link and reference other transaction lines.

Define AutoCash Rule Sets (Optional)

If you are using AutoCash, define your AutoCash rule sets before defining system parameters or customer profiles classes. AutoCash rules determine the sequence of application methods Receivables uses when applying receipts imported using AutoLockbox to open debit items.

Define Invoice Line Ordering Rules (Optional)

If you are using AutoInvoice, define invoice line ordering rules to specify how you want to order and number transaction lines after AutoInvoice groups them into invoices, debit memos, and credit memos. Receivables provides many attributes that you can use to

define your line ordering rules.

Define Grouping Rules (Optional)

If you are using AutoInvoice, define grouping rules to indicate how you want to group transaction lines imported by AutoInvoice. For example, to include specific transaction lines on a single transaction, certain attributes must be identical. Receivables provides many attributes that you can use to define your grouping rules.

Define Application Rule Sets (Optional)

Define Application Rule Sets to control how Receivables reduces the balance due for your open debit items when you apply payments using either the Applications window or Post QuickCash. You can define your own application rule sets, assign them to transaction types, and specify a default rule set in the System Options window.

Default – If you skip this step, Receivables uses the rule set Line First –

Tax After as the default. This rule set first applies the payment to the line amount and then applies the remaining amount to any associated tax.

Define System Options (Required)

Define your accounting, discount, tax, and invoice system options to control how Receivables works. System options determine your accounting method, set of books, accounting flexfields, whether you use header or line–level rounding, and control the default operation of the AutoInvoice and Automatic Receipt programs. System options also control how Receivables calculates tax on your transactions. You must specify a tax method, choose a Location Flexfield Structure, indicate whether to compound tax, select the address validation to use, and define tax defaults and rounding options. As you can set up your system to calculate Sales Tax, Value Added Tax, or Canadian Tax, we have to review the appropriate implementing tax essay before defining system options.

Set Up Flexible Address Formats (Optional)

To enter customer, supplier, bank, check, and remit–to addresses in country–specific formats, set up flexible address formats.

Maintain Countries and Territories (Optional)

Use the address style field to assign address styles to countries if you want to use the Flexible Address Formats feature. You can identify which countries are part of the European Union (EU) by entering a VAT Member State Code for these countries. The Receivables European Sales Listing report uses this information to produce a listing of all sales to customers in European Community member states other than your own.

Define Payment Terms (Required)

Define payment terms to determine the payment schedule and discount information for customer invoices, debit memos, and deposits. You can also define proxima payment terms to pay regular expenses such as telephone bills and credit card bills that occur on the same day each month and create split payment terms for invoice installments that have different due dates.

Default – If you skip this step, Receivables uses 30 NET as the default. This payment term indicates that payment is due within 30 days.

Assign Reporting Set of Books (Optional)

If you are not using Multiple Reporting Currencies (MRC) functionality, skip this step.

To maintain transactions and account balances in multiple currencies, assign your reporting set of books to your primary set of books. This enables you to generate reports in each of your reporting currencies. For example, you can maintain a primary set of books in USD (US dollars) and have Oracle General Ledger maintain reporting sets of

books in CAD (Canadian dollars) and EUR (euros).

Define Accounting Rules (Optional)

If your accounting method is Accrual, define accounting rules to create revenue recognition schedules for your invoices. Accounting rules determine the number of periods and percentage of total revenue to record in each accounting period.

When you use accounting rules, you also need to define the appropriate periods to which your rule refers. You enter these periods in the Calendar window and they must refer to the same period type as your accounting rule. For example, if you are using an accounting rule that recognizes revenue monthly from Jan–99 through Jun–99, you

must define peri ods from Jan–99 through Jun–99 where the period type is Month. These periods must be defined in the same calendar as your accounting periods. You define Calendars in Oracle General Ledger.

Open Accounting Periods (Required)

Open or close periods in your accounting calendar to control the recording of accounting information for these periods. Receivables uses the status of these accounting periods to control transaction entry and journal entry creation to your general ledger. You cannot enter an activity in a closed accounting period.

Note: Define your Receivables calendar in the Accounting Calendar window in Oracle General Ledger.

Define AutoAccounting (Required)

Define AutoAccounting to specify the general ledger accounts for transactions that you enter manually or import using AutoInvoice. AutoAccounting uses this information to create the default revenue, receivable, freight, tax, unearned revenue, unbilled receivable, finance charges, bills receivable accounts, and AutoInvoice clearing (suspense) accounts.

Set Up Cash Basis Accounting Method (Optional)

If you are not using the Cash Basis accounting method, skip this step. If you are using the Cash Basis accounting method, you must set your Accounting Method system option to Cash Basis, define transaction types, set up an Unallocated Revenue account, and run a script to make the GL Transfer and Journal Entry Reports incompatible with each

other.

Define Transaction Types (Required)

Define the transaction types that you assign to invoices, debit memos, commitments, chargebacks, credit memos, on–account credits, and bills receivable. Receivables uses transaction types to default payment term, account, tax, freight, creation sign, posting, and receivables information. Receivables provides two predefined transaction types:

Invoice and Credit Memo.

Define Transaction Sources (Required)

Define the transaction sources that you assign to invoices, debit memos, commitments, credit memos, on–account credits, and bills receivable. Receivables uses transaction sources to control your transaction and transaction batch numbering, provide default transaction types for transactions in batch, and to select validation options for imported transactions. Receivables provides the following predefined transaction sources: MANUAL–OTHER, DM Reversal, and Chargeback.

Define Collectors (Required)

Define collectors to assign to your customers through credit profile class assignments. Collectors can use the Collections windows and Receivables collection reports to keep apprised of a customer’s past due items. Receivables provides a predefined collector called DEFAULT.

Define Approval Limits (Required)

Define approval limits to determine whether a Receivables user can approve adjustments or credit memo requests. You define approval limits by document type, dollar amount, reason code, and currency. Approval limits affect the Adjustments, Submit AutoAdjustments,

Define Remittance Banks (Required)

Proceed to the next step if you already defined your remittance banks in Oracle Payables.

Define all of the banks and bank accounts you remit your payments. You can define as many banks and bank accounts as you need and define multiple currency bank accounts to accept payments in more than one currency.

Define Distribution Sets (Optional)

Define distribution sets if you enter non–invoice related receipts and you want to use a predefined revenue distribution set. Distribution sets are predefined groups of general ledger accounting codes that determine the credit accounts for positive miscellaneous receipt amounts and the debit accounts for negative receipt amounts.

Define Receivables Activities (Required)

Define Receivables Activities to provide default accounting information when you create adjustments, discounts, finance charges, miscellaneous cash transactions, and bills receivable. Receivables also uses Receivables Activities to account for tax if you calculate tax on these activities.

Define Receipt Programs (Optional)

To create Automatic Receipts, define additional receipt or remittance format programs that you use to send paper and electronic documents to your customers and remittance banks. You can define as many receipt programs as you need.

Default – If you skip this step, Receivables uses the Automatic Receipt print program ’Print Created Receipts’ (ARXAPFRC.rdf).

Define Receipt Classes (Required)

Define receipt classes to specify whether receipts are created manually or automatically. For manual receipts, you can specify whether to automatically remit it to the bank and/or clear your accounts. For automatic receipts, you can specify a remittance and clearance method, and whether receipts using this class require confirmation.

Define Payment Methods (Required)

Define the payment methods to account for your receipt entries and applications and to determine a customer’s remittance bank information. When defining payment methods, you must enter a receipt class, remittance bank information, and the accounts associated

with your payment receivables type. You can also specify accounts for confirmation, remittance, factoring, bank charges, and short–term debt.

Define Receipt Sources (Required)

Define receipt sources to provide default values for the receipt class, payment method, and remittance bank account for receipts in a batch. Receipt Sources also determine whether the numbering for receipts in a batch is automatic or manual.

Define Aging Buckets (Optional)

Define aging buckets to review and report on open receivables based on the number of days each item is past due. For example, the 4–Bucket Aging bucket that Receivables provides consists of four periods: –999 to 0 days past due, 1 to 30 days past due, 31–61 days past due, and 61–91 days past due.

Define Statement Cycles (Optional)

Define statement cycles to control when you create customer statements. You assign statement cycles to customers in the Customer Profile Classes window.

Define Standard Messages (Optional)

Define standard messages to customize the content of customer statements. Standard messages automatically print on the bottom of your statements. Use the Print Statements window to assign statement messages and submit statements for printing.

Define Dunning Letters (Optional)

Define dunning letters to inform your customers of past due items and finance charges. Receivables provides three predefined letters named STANDARD1, STANDARD2 and STANDARD3 as well as ten letters that you can customize. we can also create our own dunning letters.

Define Dunning Letter Sets (Optional)

Define dunning letters sets if you want to send your customers dunning letters. You can use dunning letter sets to combine a sequence of dunning letters into one group and increase the severity of each letter. Receivables provides one letter set called STANDARD which includes the three STANDARD letters described in the previous step.

Define Territories (Optional)

If you defined a Location Flexfield and want to create customized reports based on Location information, define Location Flexfield combinations. You can assign Location Flexfields to salespersons, invoices, and customer business purposes.

Define Salespersons (Required)

Define salespersons to allocate sales credits to invoices, debit memos, and commitments. If you do not want to assign sales credits for a transaction, you can enter No Sales Credit. If AutoAccounting depends on salesperson, Receivables uses the general ledger accounts

that you enter for each salesperson along with your AutoAccounting rules to determine the default revenue, freight, and receivable accounts for transactions.

Define System Profile Options (Required)

Define profile options to provide default values for some Receivables operations, specify how Receivables processes data, and control which actions users can perform.

Define Customer Profile Classes (Required)

Define customer profile classes to categorize customers based on credit, payment terms, statement cycle, automatic receipt, finance charge, dunning, and invoicing information. When you initially set up your customers, you assign each customer to a profile class. To customize the profile class for a specific customer, use the Customer Profile Classes window.

Default – If you skip this step, Receivables uses the profile class

DEFAULT.

Define Customers (Required)

Proceed to the next step if you defined customers while setting up another Oracle Applications product. Define customers and customer site uses to enter transactions and

receipts in Receivables. When you enter a new customer, you must enter the customer’s name, profile class and number (if automatic customer numbering is set to No). You can optionally enter customer addresses, contacts, site uses and telephone numbers. You must enter all the components of your chosen Sales Tax Location Flexfield when entering customer addresses in your home country.

Define Remit–To Addresses (Required)

Define remit–to addresses to inform your customers where to send payments. Associate each remit–to address with one or more state, country, and postal code combinations. For example, if you want your customers in California and Nevada to send their payments to a specific address, enter the remit–to address and associate the states CA and NV with this address. Remit–to addresses are assigned based on the bill–to address on the transaction.

Suggestion: It is a good idea to set up a default remit–to address, even if you have other remit–to addresses defined, because Receivables can use this address if the bill–to location on the transaction is not covered by any other remit–to address

_

Define Lockboxes (Optional)

To import receipts from a bank file using AutoLockbox, define lockboxes. For each lockbox, enter the lockbox number, bank name, batch source, bank account, bank origination number and cash account.

Define Transmission Formats (Optional)

If you use AutoLockbox to import receipts, define a transmission file format. Transmission formats specify how data in your lockbox bank file is organized so it can be successfully imported into the Receivables interface tables. Receivables provides several standard transmission formats you can modify to meet your needs.

Define Standard Memo Lines (Optional)

Define standard memo lines to enter predefined lines for debit memos, on–account credits, and invoices. When you define standard memo lines, you can specify whether a line is for charges, freight, line, or tax.Receivables also lets you define one chargeback and one debit memo reversal line.

Define Document Sequences (Optional)

By assigning unique numbers to documents, you can account for each transaction you enter and the document that accompanies it. To enable sequential numbering, set the Sequential Numbering profile option to either ’Always’ or ’Partially Used’. You must then define and assign categories and sequences for each transaction type, payment

method, adjustment, and finance charge activity that you use.

Transactions in AR

Use the Transaction window to enter your invoices, debit memos, credit memos, and commitments. You can also query and update your transactions in this window and review your transactions and chargebacks in the Transactions Summary window.

You can enter transactions one at a time or in a group called a batch.

Transaction types determine whether a transaction updates your open receivables, can be posted to your general ledger, if Receivables calculates tax, the transaction’s creation sign, and whether transactions with this type use natural application only or will allow overapplication. The transaction type also provides the default transaction class, payment term, and printing options for each transaction.

To manually enter an invoice or a debit memo:

1. Navigate to the Transactions window.

2. If your batch source does not specify Automatic Invoice Numbering, enter a transaction Number. Otherwise, Receivables assigns a number when you save. If you are adding transactions to a batch, the transaction number must be unique within this batch.

Attention: Once you save a transaction, you cannot update the transaction number.

3. Enter the Date and Currency of this transaction. The default date is either the batch date or, if there is no batch information, the current date. The default currency is either the currency entered at the batch level or your functional currency, but you can change it to any currency that is defined in Receivables. If the currency is different from your functional currency, and you have not defined daily conversion rates, enter exchange rate information.

4. Enter the transaction batch Source for this transaction. The default is the source you entered at the batch level. If there is no batch information, you must enter a source. The transaction batch source specifies automatic or manual batch and invoice numbering and the standard transaction type.

5. Choose a transaction Type with a class of Invoice or Debit Memo (optional).

6. If the transaction batch source you entered has Post to GL set to Yes, enter the GL Date for this transaction. The default GL Date is the current date. However, if the current date is not in an open period, the default is the last date of the most recent open period. The GL Date you enter must be in an Open or Future period.

7. Enter the customer Bill–to Name and Location for this transaction.

8. Enter the payment Terms for this transaction. Receivables calculates the Due Date based on the payment terms and date of this transaction. If you enter a split payment term, the due date is the date that the first payment is due. See: Entering Invoices with

Installments.

Receivables uses the following hierarchy to determine the default

payment terms, stopping when one is found:

customer bill–to site level

customer address level

customer level

Transaction Type

9. If you are creating an invoice against a commitment, enter the Commitment, or choose one from the list of values.

11. If you are using manual sequence numbering, open the More tabbed region, then enter a unique Document Number. Otherwise,Receivables assigns a document number when you save.

12. Open the Remit To tabbed region, then enter the Remit To Address for this transaction. The default is the remit–to address assigned to the country, state, and postal code combination for this customer’s address.

13. To enter Freight information for this transaction, choose Freight.

14. To enter the goods or services to bill to this customer, choose Line Items, then enter the Item, Quantity, and Unit Price for each item.

Receivables automatically calculates the total Amount for each line.

You can use standard memo lines instead of items if, for example, if you want to enter a line that is not a standard inventory item.

To enter a memo line, place your cursor in the Description field, then select a standard memo line from the list of values. (You must use the list of values when entering a standard memo line.)

15. If you entered an inventory item, enter a Warehouse Name to indicate the ship–from location for this item (optional). If AutoAccounting is based on Standard Lines, you can use the inventory item and warehouse name to create accounting flexfield information. For example, you use multiple inventory organizations and set up AutoAccounting to create the Revenue account based on standard lines. AutoAccounting uses the item and

warehouse that you enter here to create the Product segment of your Revenue account.

To review or update accounting information, choose Accounting.

Receipts

Use the Receipts window to enter new or query existing receipts. For each receipt, you can see whether the receipt is identified and what portion of the receipt has been applied, placed on–account, and left unapplied.

You can enter two types of receipts in Receivables:

• Cash receipts: Payment (such as cash or a check) that you receive from your customers for goods or services.

• Miscellaneous receipts: Revenue earned from investments , interest, refunds, and stock sales.

You can apply receipts to invoices, debit memos, deposits, guarantees, on–account credits, and chargebacks. You can partially or fully apply areceipt to a single debit item or to several debit items. You can enter receipts and apply them to transactions in either Open or Future accounting periods. You can also create chargebacks or adjustments

against these transactions.

Receipt Status

A receipt can have one of the following statuses:

Approved: This receipt has been approved for automatic receipt creation. This status is only valid for automatic receipts.

Confirmed: For manually entered receipts, this status indicates the receipt belongs to a receipt class that requires remittance. For automatic receipts, this status indicates the receipt has been confirmed.

Remitted: This receipt has been remitted. This status is valid for both automatic and manually entered receipts.

Cleared: The payment of this receipt was transferred to your bank account and the bank statement has been reconciled with Receivables. This status is valid for both automatic and manually entered receipts.

Reversed: This receipt has been reversed. You can reverse a receipt when your customer stops payment on a receipt, if a receipt comes from an account with non–sufficient funds or if you want to re–enter and reapply it in Receivables. You can reverse cash receipts and miscellaneous receipts.

To manually enter a receipt:

1. Navigate to the Receipts or Receipts Summary window.

2. Choose a receipt type of ’Cash.’

3. Enter the receipt information, including receipt number, currency, receipt amount, GL date, and receipt date.

4. Enter a payment method. Receivables uses the payment method to determine the accounting and remittance bank accounts for this receipt. You can only select payment methods that have remittance bank accounts that are in the same currency as the receipt.

5. If you are using manual document numbering, enter a unique document number. If you are using automatic document numbering, Receivables assigns this transaction a unique number when you save.

6. If you are manually entering an automatic receipt, enter a bank name or account number.

7. Receivables derives the default remittance bank account from the payment method you entered. You can accept this value or enter any bank account assigned to the payment method if the bank account is in the same currency as that of the receipt or the Multi–Currency flag for the remittance bank is set to Yes. Only bank accounts that are in your functional currency can accept multiple currency deposits.

Accounts Receivables Interface with other Modules can be diagramatically dipcted as follows: