Define Payment Variances when Processing Bank Statements

This document explains how you define allowed payment variances. The variances control how cash discounts and overpayment are processed when invoices are automatically allocated to bank statement lines.

Note that if an invoice has a cash discount, the variance defined here is an additional variance, that is, a variance when consideration has already been given to the cash discount.

Outcome

Variances between the invoice's net amount and the amount on the statement line detail are processed according to your definitions. This means that when an invoice is allocated to a statement line, expected payments (with consideration given to any cash discounts or variances) are calculated. If several invoices are allocated to the line, expected payments are added and compared with the statement line's total net amount.

If variances are approved, they are automatically distributed proportionately to the allocated invoices, based on the invoices' gross amounts. If variances are not approved, the statement line will not be considered fully allocated.

You can review information on amounts and expected payments in:

Note: The payment variance check must be activated in 'Bank Account Identifier. Open' (ABS900) so that checks can be carried out during allocation.

The FABTAB table is updated.

Before you start

Parameters to set

Program ID/Panel Field The field indicates …
(ABS920/B) Allocation way

… whether the variances will apply when invoices are automatically or manually allocated to statement lines.

Alternatives

1 = Automatic allocation. Used when you select one of the automatic options to carry out the allocation of invoices to bank statement lines.

2 = Manual allocation. Note: This alternative is not supported in the current version of the system.

(ABS920/B) Variance type

… the type of variance to which the definitions apply.

Alternatives

1 = Cash discount limits; 2 = Overpayment; 3 = Underpayment.

Variance type 1 – cash discount limits – define the additional cash discount amount deducted per invoice that you accept in addition to the amount defined in the cash discount terms used for the invoice. M3 Business Engine allocates, proportionally to the respective invoice amounts, the total of the additional, accepted cash discount to all the invoices in a specific bank statement line up to the maximum amount allowed for all invoices.

The purpose of the limit values – the allowed variances – for underpayments and overpayments is to enable M3 Business Engine to book small payment variances automatically instead of forcing you as a user to book them manually. Amounts accepted based on variance types 2 and 3 – underpayments and overpayments – are not allocated to the invoices. Instead, they are booked as an additional total variance per statement line based on accounting rule AB10-185. If there are no variances defined, M3 Business Engine does not accept any variances in the allocation of payments to invoices.

For underpayments, make sure to set the allowed variance for underpayments to a very low amount in order to avoid following scenario: The customer pays too little and consequently deducts too much cash discount. Normally, the ABS module would not accept such a payment for the invoices in question. However, if the allowed variance for underpayments is not low enough, the remaining amount missing (that is, the total amount paid minus the maximum cash discount amount accepted) would risk being booked automatically as an underpayment variance.

(ABS920/B) AR/AP payment

… whether the variances apply for accounts receivable transactions or accounts payable transactions.

Alternatives

1 = Accounts receivable (AR); 2 = Accounts payable (AP); Accounts receivable, accounts payable, general ledger.

(ABS920/E) Allowed payment variance – amount

… the allowed variance between the expected payment and the actual payment, expressed as an amount. The variance applies to each invoice allocated.

Note that if the company does not use an amount limit for payment variances, enter 9 in the field. Otherwise, if you enter a percentage limit but keeps the amount limit as 0, M3 Business Engine interprets this setup as both of the limit values being 0 and, consequently, that payment variances are not allowed at all.

You can also define a payment variance as a percentage. M3 Business Engine automatically applies the lowest variance amount when checking payment variances during the allocation of payments to invoices.

Example: Variances in Deducted Cash Discount

An invoice of USD 100 has a cash discount of 5%. The defined variance is 2% or USD 5. The expected payment is USD 95. The allowed variance is USD 2 (that is, 2% of USD 100) or USD 5. Consequently, the allowed payment is USD 93 (95 minus 2).

Example: Variances Due to Overpayment:

The invoice amount is USD 100. The allowed variance is 2% or USD 5. Consequently, the maximum overpayment allowed is USD 102 (100 plus 2).

(ABS920/E) Allowed payment variance – percentage

… The field indicates the allowed variance between the expected payment and the actual payment, expressed as a percentage. The variance applies to each invoice allocated.

Note that if the company does not use a percentage limit for payment variances, enter 9 in the field. Otherwise, if you enter an amount limit but keeps the percentage limit as 0, M3 Business Engine interprets this setup as both of the limit values being 0 and, consequently, that payment variances are not allowed at all.

You can also define a payment variance as an amount. M3 Business Engine automatically applies the lowest variance amount when checking payment variances during the allocation of payments to invoices. For examples, see the description of field 'Allowed payment variance – amount' above.

Follow these steps

  1. Based on the field descriptions above, identify which settings are required.

  2. Start 'Payment Variance Control. Open' (ABS920/B).

  3. Enter the key values based on which the variance will apply. Click Create.

  4. On the E panel, enter the variances. Press Enter.

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