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    Tausif Mulla
    Bank Charge Bearer code and Bank charge deduction type...
    Topic posted February 25, 2019 by Tausif MullaBronze Medal: 1,250+ Points, tagged Financials, Payables, Tip 
    259 Views, 7 Comments
    Title:
    Bank Charge Bearer code and Bank charge deduction type fields on supplier creation page
    Summary:
    Bank Charge Bearer code and Bank charge deduction type fields on supplier creation page
    Content:

    Hi,

    Have anyone used Bank Charge Bearer code and Bank charge deduction type fields on supplier creation page ?

    What is the significance of these fields and how does these fields behave when populated for any supplier ?

    We have a scenario where bank charges 0.2% for every payment transaction. Our client would like to understand how can we record in oracle who will bear these charges while making the payment to supplier ?

     

    Thanks for your inputs !

    Tausif Mulla

    Comment

     

    • Becky Alvarez

      Sorry for the delayed response but had to reach out to several places before I got the right person with the right answers.  Here is your answer.

       

      So you are trying to understand how the bank charges bearer details are passed in the ISO payment file and how these are accounted in the system.  Your bank charges .02% for each payment so we will use that as our example.

      The bank charge bearer value provided on the supplier setup indicates who is going to bear the bank charges. There are 4 values in the ISO implementation:

      • CRED: Borne By Creditor All transaction charges are to be borne by the creditor.
      • DEBT: Borne By Debtor All transaction charges are to be borne by the debtor.
      • SHAR:  Shared In a credit transfer context, means that transaction charges on the sender side are to be borne by the debtor, transaction charges on the receiver side are to be borne by the creditor. In a direct debit context, means that transaction charges on the sender side are to be borne by the creditor, transaction charges on the receiver side are to be borne by the debtor.
      • SLEV: Following Service Level Charges are to be applied following the rules agreed in the service level and/or scheme.

      Now I will try to explain this by taking an example using your 0.2%.

      Suppose a payment is created for USD 1000. There is a bank charge of USD 2 (0.2% of 1000) that is charged by bank. Depending on who is going to bear the charges, they need to select the value on the supplier setup.

      • If the charges are all borne by the deploying company, then they have to select the value as DEBT and this will be passed in payment file. When the bank statement is received, it will contain an amount of USD 1002. After the statement line is reconciled, the difference of 2 dollars can be accounted to the bank charges account available on the bank account setup and an external transaction will be created in Cash Manement. The net accounting impact will be as below:

      Liability debit                       1000

      Cash Clearing credit       1000

       

      Cash Clearing debit              1000

      Bank Charges debit                   2

      Cash credit                    1002

       

      • If the bank charges are borne by the supplier, then they need to select the value as CRED and this value will be passed in the payment file. In addition they also need to setup the bank charges so that these charges are deducted while making the payment. When the payment is made, the system will deduct the charges of 2 and post it to discount earned account. The payment of 1000 will be passed in the payment file. The bank statement will contain an amount of 1000 and it will be reconciled. The accounting will take care of additional 2 dollars charged. Here the net effect will be that cash outflow will be 1000 and the accounting:

       

      Liability  debit                       1000

      Discount earned credit        2

      Cash clearing credit         998

       

      Cash clearing     debit             998

      Bank charges     debit                2

      Cash credit                    1000

       

      The same way the other 2 values(SHAR/SLEV) need to be selected on the supplier setup.

      Hope this clarifies.

    • Thomas Paul

      Hi,

      Had a follow up question on this part:

      • If the charges are all borne by the deploying company, then they have to select the value as DEBT and this will be passed in payment file. When the bank statement is received, it will contain an amount of USD 1002. After the statement line is reconciled, the difference of 2 dollars can be accounted to the bank charges account available on the bank account setup and an external transaction will be created in Cash Manement. The net accounting impact will be as below:

      Liability debit                       1000

      Cash Clearing credit       1000

       

      Cash Clearing debit              1000

      Bank Charges debit                   2

      Cash credit                    1002

      ------------------------------------------

       

      Could you explain this"difference of 2 dollars can be accounted to the bank charges account available on the bank account setup". I am looking at Bank Accounts Setup and do not see this field? Also, how is this field used since I believe this is what the system is doing:

      AP Payment: Dr Liab   1000

      Cr Bank   1000

      Bank Statement comes in with 2 lines $ 1000 and $ 2

      I am assuming the reconciliation will take care of $ 1000 and for the $ 2, we should create an External Transaction rule for this to be created and reconciled(where you will specify the bank charge account)

      If the above is true, what would this be used for "bank charges account available on the bank account setup".

      Thanks!

      Thomas

       

       

    • Becky Alvarez

      So the bank charges account is under the Business Unit Assignment on the account.  If you go to the BU tab click on the BU row to highlight it then click the pencil icon to edit, you will see the bank charges account.  You can use whatever account you want to use there.

      You can create the external transaction rule but I am pretty sure the system will automatically create the external transaction for you but I will double check that for you.

    • Thomas Paul

      Thanks for the response. I do see the Bank Charges Account now. Looking forward to hearing your thoughts on creating the external transaction as well.

    • Becky Alvarez

      Per Development:

      It will depend if the bank charges amount is part of the statement line amount, or if the bank charges amount comes in a separate statement line.

      In the case explained below, it seems that the bank charges amount comes in a separate bank statement line:

      • In this case, they will need to set up the Bank Statement Transaction Creation Rule to identify the unreconciled bank statement lines that contain the bank charges
      • The accounting information is defined in the rule.
      • The rule is associated to the bank account setup.
      • After submitting “Create Bank Statement Transactions” ESS process, the external transactions are automatically created and reconciled with origin “Bank Statement”.
      • Reference Attached Document: How to create Bank Statement Transaction Creation Rules and account Bank Charges, Fees or Interest

      If the bank charges amount is part of the statement line amount:

      • Then, the bank charge account setup under BU assignment on the bank account will be used for 1-1 matching type reconciliation.
      • Accounting information is defined in the bank account setup (under BU assignment).
      • During the reconciliation, the tolerance rules are used to identify the amount difference between the statement line and the payment.
      • The system identifies if the difference is related to bank charges or currency exchange difference to use the correct account information.
      • The external transaction is automatically created and reconciled with origin “Reconciliation Difference”.
      • Reference Attached Document: 18C - Create External Transactions for Exchange Gain/Loss or Bank Charges
    • Thomas Paul

      Thanks for the additional information. Will try out the same.