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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.
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
You can enter several types of information when creating a customer. These
include customer addresses, business purpose, contacts and contact roles,
customer relationships, and profile classes.
Note When using the Multiple Organization support feature (multi-org),
you cannot enter a salesperson or a tax code at the time of
creating the customer. You can assign this information to the
customer site only after the customer is created. If you are not
using the multiple organizations feature, then you can assign a
salesperson and tax code at both the customer and site levels.
For each customer, you can enter multiple addresses. You can also provide one or
more Business Purposes for each address. When an address is created, its status
is Active by default. When an address is inactive, you cannot enter new transactions
for that address but can continue to process existing transactions.
You can validate addresses using flexible address formats or the address validation
system option. The validation rules for address information are:
• The home country is defined in the Default Country field of the Systems
Options window. You can use this information for tax calculation, flexible bank
structures, flexible address formats, and taxpayer ID and tax registration
number validation.
• The Sales Tax Location Flexfield structure validates addresses within the home
country and calculates the sales tax based on the shipping address of the
customer. You must enter a Location Flexfield Structure in the System Options
window so that you can determine whether the Tax Method is Sales or VAT.
• If you are using a location-based tax method and you enter the value for your
home country in this field, the system requires you to enter a value for every
component of your Sales Tax Location Flexfield. If you have implemented the
Flexible Address Formats feature, then enter a value in the Country field that is
assigned to an address style.
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.
Customers may have multiple addresses. For each address, you can assign a
business purpose. Functions performed at a particular customer site are described
by the business purpose. Table below describes common business purposes:
Table : Business Purpose Types
Business Description
Purpose Type
Bill-to Send Invoice to this address. There can be only one primary
active Bill to site for a customer.
Table : Business Purpose Types
Business Description
Purpose Type
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 Oracle application enables you to enter, add, change, or deactivate information
for customer contact roles. A contact role enables you to assign a contact person to
a particular business purpose or function. For example, you may have a customer
address with a Ship-To and Bill-To business purpose. If there are two different
contact persons assigned to each address, then you can assign the Ship-To role to
one person and the Bill-To role to the other. When entering this information, you
can:
• Enter any number of contacts as required for a customer.
• Enter the contact details, including last and first name, title, job, mail stop, and
reference.
• Assign a specific customer contact for a business purpose.
• Enter several telephone numbers for each contact. There can be only one
primary telephone number.
• Enter the telephone Type. The types of telephone numbers are:
○ General
○ Fax
○ Inbound Watts
○ Outbound Watts
○ Telex
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.
You can define relationships among customers to control payment and commitment
applications. You can create relationships between any numbers of customers and
specify the relationship as either one-way or reciprocal.
In a one-way relationship, the company can apply receipts only to the invoice of the
customer for whom the receipts are generated. The invoice for the related customer
cannot be applied to the parent customer. In addition, a customer can only apply
invoices to commitments that it owns or to commitments of a parent customer to
which it is related. In reciprocal relationships, customers can pay each other's debit
items. They can also enter invoices against each other's commitments. For
example, you might have two customers who are business partners, but individually
conduct business with your company. In this case, you can create a relationship
between these two customers.
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.
You need to assign a profile class and address for each customer in the Customers
window. The customer profile class provides default values when entering customer
information. You can optionally customize these values for each customer or
address. The default values set by the profile class take precedence over the values
set when creating a customer.
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.
○ Manual: Use manual batch sources with transactions that you enter
manually in the Transaction and Transactions Summary windows.
○ Imported: Use imported batch sources to import transactions into
Receivables using AutoInvoice.
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.
Defining Accounting Rules
The accounting rules create revenue recognition schedules for invoices. You need
to define accounting rules depending upon the need of the organization where
Receivables is installed. Accounting rules determine the percentage of total revenue
to record in each accounting period. You can use accounting rules with transactions
that have been imported into AR and with invoices that have been created manually
in the Transaction windows. You can define multiple accounting rules. You can
assign a default accounting rule to the items in the Master Item window and to
Standard Memo Lines in the Standard Memo Lines window.
The invoicing rules and accounting rules are not applicable if the cash basis method
of accounting is used. There are two types of Accounting rule types in AR, Fixed
Duration and Variable Duration. Screenshot shows the window where you can
define Accounting rules:
The Invoicing and Accounting Rules Window
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.
Defining Receivables Activities
Define Receivables activities to provide default accounting information for miscellaneous cash,
discounts, finance charges, and adjustments. Activities that are defined in this window appear as
lists of values in various Receivables windows, such as the bank, adjustment, and system options
windows. You can define multiple activities.Screenshot shows the window, where you can define a
Receivables activity:
Note
For Bank Error type activities, you cannot implement tax accounting because
there is no business need to calculate tax on these activities. After you define an
activity, you cannot change its type. In addition, you cannot update the GL
account for an existing activity if you have assigned the activity to a transaction.
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.
Entering Invoices with Rules
You can create invoices that span over several accounting periods. The accounting rule determines
the accounting period in which the revenue distributions for the invoice or the Invoice lines are
stored. The invoicing rule determines the accounting period in which the receivable amount is stored.
You can either manually assign invoicing and accounting rules to transactions you create or import
these rules into Receivables using the AutoInvoice utility.
You can also use the accounting rules to determine revenue recognition schedules. The duration
over a predefined number of periods and variable duration lets you define the number of periods
during invoice entry.
The invoicing rules determine when to recognize the receivables for invoices that span over multiple
accounting periods. There are two types of invoicing rules, bills in advance and bills in arrears.
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:
The Credit Transaction Window
○ 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
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 -
The Receipts Window
To enter receipts:
1. Open the Receipts window and choose a receipt type.
2. Enter the receipt number, currency, receipt amount, GL date, and receipt date.
3. Enter a payment method. The payment method determines the accounting and remittance
bank accounts for this receipt.
4. Enter a unique document number if you are using manual document numbering. If you are
using automatic document numbering, a unique number is assigned automatically.
5. Enter the transaction number of the customer for the receipt. The name customer associated
with this transaction appears in the Receipts window.
6. If you have not entered the transaction, apply the receipt number by pressing the Application
button and then choose the transaction.
7. From the remittance tabbed region enter the receipt deposit date. This value is optional.
8. The default remittance bank account is displayed from the payment method you enter. 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.
9. Save the data.
Manually Applying Receipts
If the receipt is not applied to the respective debit item in the Enter Receipt window, then you need to
use the Applications window to apply the receipts. You can apply all receipts, a part of the receipt, or
on account credit to a single debit item or to several debit items, as shown -
The Applications Window
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:
The Remittance Window
You can create remittance batches to automatically select receipts for remittance to the customer's
bank and to initiate the transfer of funds. You can either create one remittance batch for every
remittance bank account or choose a clearing institution to get the receipts cleared. If you choose to
approve and format your batch when you create it, then AR initiates an additional process that
creates the formatted batch information.