How Does Automatic Application Use the Remit/Transaction Match Method?

This method applies a payment to an open item using a remittance advice record. The payments and their remittance advice must be loaded into the application using Lock Box Interface (AR570), Payment 2 Interface (AR580), Payment1 Interface (AR575), or during cash entry in Cash Remittance (AR21.4).

When you run the program Automatic Cash Application (AR130), the system uses the invoice remittance record to match the referenced invoices, credit memos, or debit memos. Whether the referenced item is not found or has been applied, the cash remains unapplied on the customer's account where it can be applied using one of the other automatic application options in AR130 or using Cash Entry Application (AR30). Because the only valid transaction types when creating Remit records are credit memos and invoices, remit records that point to debit memos are treated differently when you run AR130. When the program tries to apply remit records, and the remit transaction type is Invoice, it will attempt to apply the payment to the invoice. If it is not found, the program then searches the database for a debit memo with that transaction number to apply.

Specific rules exist for the automatic application of credits and payments for a national account relationship. The matching process attempts to select the national account's open items first, then the invoiced customer's open items. If the matching process crosses companies, the base currencies for the companies involved must be the same for the open item to be selected.

Discount Conditions

The program discounts an invoice during application if the following conditions exist.

  • The payment deposit date is on or before the discount date plus the number of payment grace days are defined for the customer on Customer (AR10.1).

  • A discount reason code has been assigned to the customer on Customer (AR10.1).

  • The invoice has not been partially applied.

The program creates an adjustment record to reflect the discount.

Processing Conditions

The system will first process credit remittance records which will increase the applicable value of the payment. Then the invoice or debit remittance records will be processed. The credit remittance record will not be processed if the credit memo is not found or does not have an open amount. If the program locates the credit memo and it is open, the amount on the credit remittance record is applied to the remaining open items. This process continues until all credit remittance records have been processed or the open items are fully applied.

If the last open item is not fully applied after remittance records are processed, tolerance logic applies. If the open item amount is less than or equal to the maximum amount or percent defined for the customer in Customer (AR10.1), the program fully applies the open item and creates an adjustment record with the associated tolerance reason code.

Processing Results

The program creates an applied record for each remittance record applied to the open item, creates an adjustment record for each discount and tolerance processed, and updates status of all remittance records when processing is complete.