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AP Interst Calculation Process Flow

The document outlines the process for calculating interest and discounts for vendor payments in Oracle Payables. It discusses setting up accounts, interest rates, payment terms, and supplier profiles to enable automatic calculation of interest invoices for late payments and discounts for early payments. When an early payment is made, the system generates a journal voucher to account for the discount taken against the original invoice.

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SivaKumar
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Download as DOCX, PDF, TXT or read online on Scribd
78 views

AP Interst Calculation Process Flow

The document outlines the process for calculating interest and discounts for vendor payments in Oracle Payables. It discusses setting up accounts, interest rates, payment terms, and supplier profiles to enable automatic calculation of interest invoices for late payments and discounts for early payments. When an early payment is made, the system generates a journal voucher to account for the discount taken against the original invoice.

Uploaded by

SivaKumar
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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AIM BR 100

AP INTEREST & DISCOUNT CALCULATION


PROCESS FLOW
AP INTEREST CALCULATION PROCESS FLOW

Business Case:

In the Business process, deal / agreement is made with the Vendor on the
payment terms for the settlement. Payment terms mays be Immediate, 30 Days, 60
Days or LC. There are some vendors, who charge of interest & also provide
discount based on the payments against the reference of AP Invoice. System needs
to do auto calculation on the Interest for the late payment and Discount for the early
payments.

Setups in Oracle to interest calculation:

Perquisites

o Define of GL Account in Payable Options


o Define Percentage of interest based on date
o Supplier Master enable of Interest Calculation

a) Define of GL Account in Payable Options

Payable Options in the Payables Setup, GL Account ie., Liability and


Expenses account to be stated and to check enable “ALLOW INTERST INVOICE”,
which automatically generate Interest Invoice.

Navigation: Oracle Payable >> Setup >> Options -> Payable Options ->
Interest Tab
b) Define Percentage of Interest based on Date

Percentage of interest for the date range to be stated it is mandatory because


based on the interest percentage, interest invoice is raised.

Navigation: Oracle Payable >> Setup >> Payments -> Interest Rate
c) Supplier Master enable of Interest Calculation

Supplier who charge interest for late payment, Enable interest calculation in-
order to state that the respective supplier charge interest for the late payment.

Check “CREATE INTEEST INVOICE” in the Invoice Management tab of


Supplier master.
Generation of Invoice :

AP invoice is to be generated with the respective payment terms. Payment


terms default from the Supplier master and if required it can be changed.

In the above example, Invoice Date is 01-APR-2014 and the payment terms is COD.

Payment to Vendor:

If the payment to vendor on the same of invoice, system will not calculate
interest which to be paid to vendor, if it varies automatic interest will be calculated
and its supplementary invoice will be generated. Payment can be quick or manual or
batch
In the above example, payment date is 25-APR-2014. So system automatic
calculates Interest and inserts a new line in the payment lines.

Subsequently new interest will be generated with the invoice number as similar to
actual AP Invoice with the prefix as INT1.

On the date of Receipt, Interest Type invoice is generated automatically


Setups in Oracle to Discount calculation:

Perquisites

o Define of GL Account in Financial Options for Discount


o Define the Payment Terms along with discount if any
o Supplier Master update of Pay Date Basis

a) Define of GL Account in Financial Options

Discount Taken GL Account is defined in the Financial options, which hits the
GL on the date of payment.

Navigation: Oracle Payable >> Setup >> Options -> Finance Options.
b) Define Payment terms with discount

If the company has the policy or agreement with the vendor for avail of Discount on
early payment before the due date, it is defined in the payment terms mentioning
about the percentage and days.

Navigation: Oracle Payable >> Setup >> Invoice -> Finance Options.
The discount rate mentioned here for the period if it is paid with in 30 days.
Schedulde of discount can be provided inorder to apportionate.

c) Supplier Master Update on Pay Day Basis

In order to effect the Discount on the AP Invoice and Payment, in the Supplier
master enable Pay Day Basis as “DISCOUNT” and enable Always Take Discount in
the KEY PARAMETER TAB of Organisation Window of Vendor Master
o Enable the Always Take Discount Supplier option. Payables takes a discount
regardless of when you pay the invoice.

o Select Discount for the Pay Date Basis for the supplier, and disable the Pay
Only When Due check box for your payment batch. Payables takes a
discount and pays the invoice within the discount period.
Generation of Invoice :

AP invoice is to be generated with the respective payment terms. Payment


terms default from the Supplier master and if required it can be changed.

In the above example, AP Invoice with 60 Days payment terms is created on 24-apr-
2014.

Payment to Vendor:

If the payment to vendor before the due date, system will automatically
calculates the discount as per the percentage stated in the Payment Term master
and the GL account is taken from the Financial Options.
In the above example, Payment to vendor is done before the due date, ie., 25-APR-
2014, so system automatically calcualtes Discount as Rs.13000 i.e,. 65000 x 20%.

Journal Voucher

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