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Automatic settlement and prioritization

  • Article

This article describes how transactions are settled if you select Automatic settlement on the Accounts receivable parameters page. It also explains how automatic settlement can be used in combination with the payment priority.

You have two options when you settle payments with invoices and other transactions. You can manually select the transactions to settle, or the system can select the transactions automatically by using the automatic settlement functionality. You can also customize how automatic settlements are processed by using the Prioritize settlement option. All these options are part of the settlement parameters that are defined on the Accounts receivable parameters page. The way that transactions are automatically settled can differ, depending on the method that you use for automatic settlement. The following methods are available:

  • User-defined settlement priority
  • Default automatic settlement

The following sections describe how transactions are settled for each method.

Example transactions

The examples of settlements later in this article are based on the following transactions. All transactions are for customer 2050.

Transaction Date Amount Cash discount terms Cash discount date Comments
Invoice 1 August 15 100.00 2%14, Net 30 August 29
Invoice 2 September 1 250.00 2%14, Net 30 September 15
Invoice 3 October 15 500.00 2% 14/Net 30 October 29
Interest note October 15 7.00 This interest note is for invoice 1 and invoice 2. The amount is calculated as 2-percent interest on amounts that are 30 or more days past due. For example, 0.02 × (100.00 + 250.00) = 7.00.

User-defined settlement priority

If you set Use priority for automatic settlements to Yes on the Accounts receivable parameters page, the settlement priority that you define on the Settlement priority page is used when transactions are selected for automatic settlement. For this example, the following settlement priority is defined:

  1. Transaction type

    • Payment fees
    • Collection letters
    • Interest notes
    • Invoices

  2. Transaction date, Ascending

  3. Voucher

If you post a payment for 700.00 on October 25, the payment is settled to the transactions in the following order.

Voucher Date Invoice Amount in transaction currency Amount to settle Balance Currency
Interest note 10/15/2015 7.00 7.00 0.00 USD
Invoice 1 8/15/2015 10001 100.00 100.00 0.00 USD
Invoice 2 9/1/2015 10002 250.00 250.00 0.00 USD
Invoice 3 10/15/2015 500.00 343.00 157.00 USD

Default automatic settlement

If there is no user-defined settlement priority, transactions are automatically selected for settlement based on the due date. The transactions that are settled must have the same currency as the transaction that they are settled with. If you post a payment for 700.00 on October 25, the following transactions are selected for settlement.

Voucher Date Invoice Amount in transaction currency Amount to settle Balance Currency
Invoice 1 8/15/2015 10001 100.00 100.00 0.00 USD
Invoice 2 9/1/2015 10002 250.00 250.00 0.00 USD
Invoice 3 10/15/2015 500.00 350.00 150.00 USD
Interest note 10/15/2015 7.00 0.00 7.00 USD