Example: Open Item Customer
The following example shows how Automatic Cash Application Audit (AR130) processes open records for an open item customer.
Assume the customer has the following program options defined.
| Variance | 10.00 |
| Maximum invoices | 3 |
| Combination | 2 |
Invoices and debit memos are sorted by general ledger date.
| Transaction # | GL date | Open amount |
|---|---|---|
| P 101 | 10/17/97 | 200.00 |
| P 105 | 10/21/97 | 250.00 |
| P 102 | 10/30/97 | 100.00 |
| C 201 | 10/27/97 | 70.00 |
| C 202 | 11/05/97 | 140.00 |
| I 301 | 10/10/97 | 150.00 |
| I 302 | 10/14/97 | 90.00 |
| D 401 | 10/22/97 | 40.00 |
| I 303 | 10/29/97 | 100.00 |
| D 402 | 11/03/97 | 100.00 |
| I 304 | 11/07/97 | 200.00 |
The algorithm method applies the oldest open payment to the oldest open item or combination of open items.
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The oldest open payment, payment 101 (200.00), is compared with the three (maximum invoices) oldest open invoices: invoice 301 (150.00), invoice 302 (90.00), and invoice 303 (100.00).
No one-to-one match occurs because the payment and individual invoice amounts differ by more than the variance (10.00). Even though the fourth invoice, invoice 304 (200.00), is the same amount as payment 101 (200.00), it is not applied because the customer defined the maximum number of invoices as three.
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The same three invoice amounts are then compared with the payment amount in combinations of two (combination). Because no combination matches payment 101 (200.00), the payment is bypassed.
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The next oldest open payment, payment 105 (250.00), is compared with the three oldest open invoices, invoice 301 (150.00), invoice 302 (90.00), and invoice 303 (100.00).
No one-to-one match occurs because the payment and individual invoice amounts differ by more than the variance (10.00).
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The same three invoice amounts are then compared with the payment amount in combinations of two (combination).
Even though the combination of invoice 301 (150.00) and invoice 302 (90.00) is within the variance (10.00) compared with payment 105 (250.00), no application occurs because the variance does not apply during invoice combination.
Invoice 301 (150.00) and invoice 303 (100.00) combine to exactly match payment 105 (250.00), creating two applied records (150.00 and 100.00) for the fully applied invoices 301 (150.00) and 303 (100.00).
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The next oldest open payment, payment 102 (100.00), is compared with the two remaining invoices, invoice 302 (90.00) and invoice 304 (200.00). Because the difference between payment 102 (100.00) and invoice 302 (90.00) is within the variance (10.00), the application occurs. An applied record (90.00), including the 10.00 adjustment, and an adjustment record (10.00) are created for the fully applied invoice 302 (90.00).