Define Payment Variances when Processing Bank Statements

… in what allocation situation the variances will apply.

Alternative

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

… 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.

… the type of payments for which M3 Business Engine accepts additional payment variances during the allocation of payments to invoices.

Alternatives

1 = Accounts receivable (AR)

3 = Accounts receivable, accounts payable, general ledger.

Alternative 1 (accounts receivable) can be used in combination with variance type 1 (cash discount).

Alternative 3 (AR/AP/GL) can be used in combination with variance type 2 (overpayment) or 3 (underpayment).

… 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, the field should be completed with nines. That is, '9999999999999.99'. 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).

… 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, the field should be completed with nines. That is, '99.99'. 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.