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The Accounts Receivable (AR) module is a part of the Oracle Financial Applications 11i. This
module enables you manage the tasks related to raising invoices, debit notes, credit notes,
deposit notes, and guarantees. It also helps you manage transactions, receipts, and collections
and track payments from customers after a sale is complete. You can integrate AR with the
Oracle General Ledger, Order Management, Oracle Inventory, Oracle Cash Management, and
Oracle Party Model/Customer modules, but you do not need to install these modules to work
with AR. You can also install AR as an independent module.
This ReferencePoint explains how to record and track information pertaining to transactions and
receipts in an organization and how to record the remittance to the bank. It also explains how to
record customer information using the AR module.
Customers
Before you start the process of tracking Account Receivables in Oracle, you need to enter
customer information in the database. All information related to a customer must be entered
when customer makes the first purchase from your organization. When entering this
information, you can also define customized fields. For example, you can create fields to store
multiple addresses for each customer.Figure below shows the different types of customer
information:
Customer Information
Note You can specify how the system will respond, if an invalid
address is entered. The system can display an error message, a
warning, or perform no validation when an invalid address is
entered.
You can deactivate a business purpose for an address if that particular site is not to be used later.
The information that you enter for a customer is stored using the customer site. This information is
used as default customer information in different windows in the application. When accessing this
information, the system uses a hierarchy to determine the order in which the default values are
selected for a transaction entry. The order is:
Ship-To address
Bill-To address
Information at the customer level
You can enter the business purpose for the selected address in the Usage field of the customer
form. Each business purpose chosen is active and non-primary by default. You can set a business
purpose as primary by selecting the Primary checkbox. If Automatic Site Numbering in the
System Options window is set to No, then you must enter a number for this business purpose in
the Location field. If you do not enter a number, then the system automatically assigns a location
number when the data is saved. Location names are used as shortcuts to refer to a customer
address.
The various the fields in the Contacts and Roles tabbed region of the Customers and Customer
Addresses windows are:
Active: Indicates whether the contact information is active. You can choose only the contact
persons whose status is Active in the Contact fields of the Sales Orders window.
Description: Sets the role of the contact person, such as Bill-To, Ship-To, Statements, or
Marketing.
Email: Specifies the e-mail address for the contact.
Job: Displays the default job title for the contact person, when you select a contact person.
This field is available in the Customer Calls window.
Mail Stop: Sets the mail address for the selected contact.
Reference: Sets the reference information for the contact. This field is for informational
purpose only, but the value of this field must be unique for each contact.
In the system option window, if you set the Allow Payment of Unrelated Invoices option to Yes,
then the relationship for each customer need not be defined. If you do not want a relationship to
be active, then clear the Active check box in the Customer Relation Tab.
Most of the fields in the Define Customer Profile Classes window are self-explanatory. Some
important fields in this window are:
Account Status: Checks the status of this account. If required, you can define the account
status for a customer in the Receivable Lookups window by selecting the lookup type,
Account Status.
Credit Limit: Sets the credit limit of the customer to whom this profile class is assigned. If
credit limit check is active and the outstanding credit balance for a customer exceeds the
limit, then all new orders for this customer are automatically put on hold in Oracle Order
Management.
Credit Rating: Sets the credit rating for this customer. You can define additional credit rating
names in the Receivables Lookups window by selecting the lookup type, Credit Rating for
customers. For example, the default credit ratings for a customer include, average and
excellent.
Currency: Sets the currency to define credit limits.
Finance Charges Interest Rate (%): Sets the interest rate to be charged to customers assigned
to the profile class. Finance charges are calculated on statements and dunning letters.
Maximum Interest per Invoice: Sets the maximum interest to be charged from the customers.
This value overrides the value that you specify in the Finance Charges Interest Rate field.
Minimum Customer Balance for Finance Charges: Determines whether or not the finance
charges will be assessed when a customer submits dunning letters or statements. If the
customer balance of past due items in a particular currency is less than the minimum
amount specified in this field then the finance charges are not assessed.
Minimum Receipt Amount: Sets the minimum amount due from a customer. The system
will not generate automatic receipts in a particular currency that is less than the minimum
receipt amount. You can also define a minimum receipt amount for a payment method.
When creating automatic receipts, AR uses the greater of the two minimum receipt amounts.
Minimum Statement Amount: Sets the minimum outstanding balance for Receivables to
generate a statement for customers assigned to a particular profile.
Minimum Dunning Amount: Sets the minimum dunning for a customer. If a customer has a
past due amount that is greater than the minimum dunning amount specified, then AR
selects this customer for dunning.
Minimum Dunning Invoice Amount: Customers with this profile option do not receive
dunning letters if the amount in this filed is greater than the balance of their past due
payments.
Percent Collectable: Sets the percentage amount of the customer account balances that you
regularly collect for customers assigned to a particular profile.
Important Assign a profile class to an address that already has a Bill-to
location defined.
Note You can also update specific information for a customer. This
information can differ from that provided for the assigned Profile
Class. When you change the information for a certain customer
assigned to a particular profile, the changes affect only that
customer and not the other customers assigned to the same
profile.
When you modify an existing Profile class in the Customer Profile Classes window, the system
displays a pop-up window that lets you decide how to apply changes. You can choose one of
these options:
Do Not Update Existing Profiles: Prevents update of existing customer profiles with the new
profile class values. When you choose this option, the system assigns the new profile values
to only the new customers assigned to this profile class.
Update All Profiles: Updates new profile class values for all the customers assigned to the
profile class.
After the customer profiles are updated, AR generates the Update Customer Profiles report
that helps you track changes made to a profile.
Update All Uncustomized Profiles: Updates customer profiles for only those options that
currently have the same original setting as the profile class. After the customer profiles are
updated, AR generates the Update Customer Profiles report. The Exceptions section of this
report mentions the customized profile classes that were excluded from the update process
but can be updated manually.
For the AR module to function, you must enter the customer name, number, and address in a
profile class. If you do not specify this information or do not assign a profile class, then the
system assigns the profile class, Default, to each new customer entered.
Enter a clearing account for invoice or debit memo transactions. Receivables use the clearing
account if you have enabled this feature for transaction sources that are used for imported
transactions.
AR uses the Unearned Account field to determine the Unearned Revenue account for
invoices with the rule, Bill In Advance.
AR does not require you to enter a revenue account for credit memo transaction types if the
profile option, Use Invoice Accounting for Credit Memos, is set to Yes. If the option is set to
No, you must enter a revenue account.
Freight account combinations must be defined. This field is skipped if the transaction type
class is deposit or guarantee. If the Allow Freight option is not checked, you do not need to
enter the Freight Account.
Defining AutoAccounting
You must define AutoAccounting before entering transactions in Receivables. AutoAccounting
specifies how AR determines the general ledger accounts for transactions that have been either
manually entered or imported using AutoInvoice. AR creates default account codes for revenues,
receivables, freights, taxes, unearned revenues, unbilled receivables, finance charges, and
AutoInvoice clearing accounts using the information provided in this window. When you enter
transactions in AR, you can override the default general ledger accounts that AutoAccounting
creates. AutoAccounting controls the value assigned to each segment. You can define
AutoAccounting rules in the window shown -
2. If the batch source is a Manual source, and you want to automatically number new batches
created using this source, check the Automatic Batch Numbering option, and enter a Last
Number. For example, to start numbering your batches with 100, enter 99 in the Last
Number field. If you are defining an Imported transaction batch source, Receivables
automatically numbers the batch with the batch source name, request ID.
3. For Imported transaction batch sources, define how AutoInvoice should handle imported
transactions that have Invalid Tax Rates. Choose Correct if you want AutoInvoice to
automatically update the tax rate and choose Reject if you want AutoInvoice to reject the
transaction.
4. Determine how you want AutoInvoice to handle imported transactions with Invalid Lines
by entering either Reject Invoice or Create Invoice.
5. Determine how you want AutoInvoice to handle imported transactions that have lines in the
Interface Lines table that are in a closed period. Enter Adjust in the GL Date in a Closed
Period field for AutoInvoice to automatically set the GL date to the first GL date of the next
open or future enterable period. Enter Reject to reject these transactions.
6. Enter a Grouping Rule to use for a transaction line.
7. Check the Create Clearing option. This option sets the revenue amount for each transaction
line. The revenue is equal to the selling price multiplied by the quantity specified for that
line.
8. In the Customer Information tabbed region, choose either Value or ID for each option to
indicate whether AutoInvoice validates customer information for this batch source. Choose
Value to import a record into the AutoInvoice tables using its actual name, or choose ID to
use its internal identifier.
9. In the Accounting Information tabbed region, choose ID, Value, or None to indicate how
AutoInvoice validates Invoice and Accounting Rule data for the batch source. Choose either
ID or Segment to indicate whether you want AutoInvoice to validate the identifier or the
flexfield segment for this batch source.
10. Check the Derive Date option to derive the default rule start date and default GL date from
the ship date, rule start date, order date, and the default date that you supply when
submitting AutoInvoice.
11. In the Other Information tabbed region, specify the validations for AutoInvoice data.
12. In the Sales Credits Data Validation tabbed region, specify validations for salespersons, sales
credit types, and sales credit.
When you create or import transactions, the transaction batch source determines whether to
automatically generate the batch and transaction numbers or to enter these numbers manually.
The transaction batch source also determines whether the same number is used for both the
document and the transaction number.
To ensure that the document number and transaction numbers are the same for the transactions
of a batch source:
1. Open the Transaction Sources window.
2. Enter or query the transaction source from this window.
3. Mark the Copy Document Number to Transaction Number check box.
4. Save the data.
5. In the Document Sequences window, enter the name, type, and initial value for the number
sequence.
6. Assign a sequence to one or more combinations of Application, Document Category, and
Range of Transaction Dates. When you define a new payment method, transaction type, a
Receivables Activity of type Adjustment or Finance Charge, then Receivables automatically
creates a corresponding document category with the same name.
7. If the Oracle General Ledger module is installed, and you have sequential numbering
enabled for this application, then you can define sequences, categories, and assignments for
the journal entry categories.
Entering Commitments
A commitment may be an oral or written commitment for certain goods or services for a
prevailing rate. In AR, you can create two types of commitments, Deposits and Guarantee. You
need to follow the same steps to enter commitments as those used to create invoices. The only
difference is that you need to specify the transaction type as either Deposit or Guarantee.
Deposits
Deposits are created to record any advance payment made by customer for goods or services that
will be delivered in the future. The Invoice is raised for the goods or services and then the deposit
invoice is adjusted against it. The steps to create a Deposit Invoice are similar to that of creating a
regular Invoice. To create a deposit invoice, specify the transaction class, Deposit, in the set up.
After a Deposit invoice is entered and payment is received against the deposit, several journals
are created for the transaction. These are Customers Deposit Account Debit, Revenue Account
Credit, Bank Account Debit, and Customer Deposit Account Credit.
When an order is placed and an Invoice is raised for the goods and services, against the deposit
then the customer's receivable account is debited and the revenue account is credited. The
unearned revenue account is also debited and the customer invoice account is credited.
Guarantees
A guarantee is created to record a contractual agreement with a customer to conduct business
over a specified period. The invoice for the guarantee is raised and it is adjusted against the
invoice raised for the goods or services. Creating an Invoice for guarantee is similar to creating a
regular Invoice. Commitments do not include tax or freight charges. Use the transaction class,
Guarantee, to enter Invoices for a guarantee. In the Commitment tabbed region, you can enter a
range of effective dates for this commitment. If you do not assign an end date, Receivables lets
you enter invoices and credit memos against this commitment until the amount due becomes
zero.
After the full cycle of Guarantees is complete, a set of accounting entries are generated in
receivables, when:
The Invoice for the Guarantee is raised, the unbilled receivable account is debited, and the
unearned revenue account is credited.
The Invoice is raised for goods or services for the guarantee. The customer account is debited
and the revenue account is credited.
Money is received against the goods or services. The bank account is debited and the
customer account is credited.
Bills in Advance
The bills in advance rule is used to recognize the receivables at the time when the bill is raised. It
is an invoice created before the revenue is recognized.
For example, if your company provides services and has to enter into a contract for the next three
months, then you should recognize revenues in that particular month even though you may have
received the payment when you started the service. The invoice raised is a bill in advance and
revenue is recognized in the months ahead. For example, in April you raise an invoice of $1,500
for a three-month contract. The Accounting rule is three months fixed duration. The entries
passed for this invoice are:
In April, when the invoice is raised, the receivable account debit is $1,500 and the unearned
revenue credit is $1,500. The unearned revenue debit is $500 and the revenue credit is $500.
In May, when the invoice is raised, the unearned revenue debit is $500 and the revenue
credit is $500.
In June, when the invoice is raised, the unearned revenue debit is $500 and the revenue
credit is $500.
Bills in Arrears
You use the bill in arrears rule if you want to record the receivables at the end of the revenue
recognition schedule.
For example, for the invoice of $1,500 raised for a three-month contract, the accounting entries
passed are:
In April, when the invoice is raised, the unbilled receivable debit is $500 and the revenue
credit is $500.
In May, when the invoice is raised, the unbilled receivable debit is $500 and the revenue
credit is $500.
In June, when the invoice is raised, the unbilled receivable debit is $500, the revenue credit is
$500, the receivable debit is $1,500, and the unbilled receivable is $1,500.
You need to run the revenue recognition program to generate the revenue distribution.
Note If the GL date for a transaction is in a period that has a status of
either Closed or Close Pending, then Revenue Recognition
changes the revenue GL date to the first subsequent period that
has a status of Open, Future, or Not Open.
Crediting Transactions
Credit memos are created to reduce the balance due for a transaction. From the Credit
Transactions window, you can enter, update, and review credit memos against specific invoices,
debit memos, or commitments. When you credit a transaction, the appropriate accounting entries
are created. You can credit an entire invoice or specific invoice lines. Freight can also be credited
for an entire invoice or only for specific invoice lines.
You can also delete an incomplete credit memo if the Allow Invoice Deletion option is set to Yes
in the system option window. Before you create a credit memo for the transaction, the transaction
must be complete. Screenshot shows the window where you create crediting transactions:
Defining Banks
Enter the bank information for bank branches with which you do business. Each bank branch can
have several bank accounts and each bank account defined can be associated with the payables
payment documents and receivables payment methods. If you are using Oracle Cash
Management, define a Bank Errors Account, a Bank Charges Account, and a Cash Clearing
Account for each bank account you plan to reconciliate. Screenshot shows the Banks window
where you enter information on the bank:
o By Matching: Use this method if you want to clear the receipts manually in Oracle
Cash Management.
7. Enter the payment method for this receipt class.
8. Save the data and click the bank account button to assign remittance bank information.
When you click the bank account button, the Remittance Banks window is displayed, as
shown -
The Remittance Banks Window
In the Remittance Banks window:
1. Enter information related to the remittance bank, such as the bank name, branch, account
name, and a range of effective dates.
2. Enter a minimum receipt amount if the creation method of the receipt class is automatic.
3. Clear the Primary check box, if you do not want this account to be the primary remittance
bank account in this currency for the payment method.
4. Enter GL Account information for the remittance bank. When you select a receipt batch
source to enter receipts, AR automatically uses the cash, unapplied, unidentified, on-
account, or earned and unearned discount account information assigned to this payment
method.
5. Enter the formatting program information only if the creation method of the associated
receipt class is automatic.
6. Save the data and close the window.
Entering Receipts
You use the Receipts window to enter receipt transactions. There are two types of receipts:
Cash receipts: Receipts, such as cash or cheques received from customers for goods or
services.
Miscellaneous transactions: Receipts earned from investments, interest, refunds, and stock
sales other than regular sales.
You apply receipts to invoices, debit memos, deposits, guarantees, on-account credits, and
chargebacks. You can apply receipts either fully or partially to a single debit item or to multiple
debit items from the Receipts window, as shown -
Remittances
You need to perform the remittance process to initiate receipts to the bank from the bank account
of the customer. You have to create, approve, and format remittances. You can also combine
these tasks into a single task. Screenshot shows the Remittance window, where you perform the
remittance process: