What are scheduled payments?
Scheduled Payments allow transaction lines to be automatically split according to a schedule of percentages and date information that you configure using Scheduled Payments Setup (SCH).
Scheduled Payments can split transactions in Debtor, Creditor and Client account types. The relevant transaction lines are split during Ledger Entry (LEN) and Ledger Import (LIM).
Using scheduled payments, you can automate the task of staging creditor payments or debtor collections, and this is especially useful in countries where it is common practice to pay invoices in instalments. For example, a creditor may require an invoice to be paid in twelve monthly instalments. You need only enter the invoice as one transaction in Ledger Entry, then, depending on the details of the schedule you configure, the system automatically splits the invoice line into twelve individual transaction lines. You can check the transaction split generated before you post the journal.
You define a split by percentages, which must always add to as near 100 as possible, and set the
option to determine whether the any remainder amount due to rounding is added to the first or last instalment. In the above example, each instalment would have a percentage of 8.333.The combination of percentages and due date information on the Payments Schedule record determines how the debtor or creditor transaction line is split; specifically the number of split lines (instalments) to generate, their due dates, and the amount for each instalment.
You can choose to either overwrite originating transaction lines, or to preserve them (thus creating the split lines separately). If you overwrite the original line, it is replaced by the first instalment of the split. However, if you choose to preserve it, then a reversal line is created. In this case, both the original and the reversal line are marked with the Correction allocation marker, and all of the split lines are created separately. All of the lines within the journal are then renumbered so that the line numbers for each reference are held consecutively together. The option to either preserve or overwrite the original transaction lines must be set for the entire ledger, using the Preserve original line values option on the Transaction Rules tab of the Ledger Setup (LES).
Once you have created a scheduled payments record, you attach it to a payment terms group record which must in turn be attached to a customer or supplier record.
When is a Scheduled Payments Split Invoked?
The split is only invoked in Ledger Entry (LEN) and Ledger Import (LIM) under specific circumstances:
- The Journal Type used must be one which allows scheduled payments. To configure this, you must set the Allow Scheduled Payments option in Journal Type (JNT).
- The account must be a debtor, creditor, or client account type.
- The Customer or Supplier record must have a Payment Terms Code attached which in turn has the required Payment Schedule Code attached.
In Ledger Entry, when you complete the journal line to the customer or supplier account, providing the above conditions are met, the instalment lines are generated in the Ledger Entry form.
Journal line numbering is treated similarly to automatically generated tax. For example, assuming the original transaction has journal line number 1.0, the split lines are numbered 1.1, 1.2, 1.3, and so on. If the original transaction is preserved (by setting the Preserve original line value in Ledger Setup), then journal line 1.0 is preserved, a reversal is created in 1.1, and the split instalment lines start from 1.2. If, on the other hand, the original transaction is overwritten, line number 1.0 ceases to exist and the instalment line numbers start from 1.1.
What Information is Included in the Split Lines?
The following information is included in the split lines, based on the combination of the source transaction and the options you set in Scheduled Payments Setup (SCH):
- Journal line details such as transaction reference, period, date, account, description and analysis codes, are copied from the original line onto the split lines.
- Rounding adjustments are applied on the first or last split line, depending on the option.
- Using the option, you can include all tax in the first instalment and then apply the split to the remainder of the debtor/creditor amount, as is legally required in some countries on this type of business transaction. Alternatively, you can divide the tax equally over all the split lines, or add it only to the last line.
How do Scheduled Payments Interact with Other Processes?
Scheduled Payments works in conjunction with other automatic features during ledger entry and ledger import as follows:
- The scheduled payments split is performed after the calculation of automatic tax and stoppages (only relevant in Ledger Entry). This is so that any tax is included in the debtor or creditor line before the transaction is split.
- The scheduled payments split is performed before the standard Payment Terms calculation, so that document dates, discount dates and interest dates can be calculated on each individual instalment line generated in the split.
If a transaction is subject to a split via scheduled payments, it is only split once even if two or more processes affect the same transaction, such as holding the journal and subsequently posting it to the Actuals ledger. The split is only generated in Ledger Entry if the transaction has not been split already.
An Example:
The following entries might be generated on a ledger entry transaction to record a sales invoice:
Dr Debtor 117.5
Cr Sales 100
Cr Tax 17.5
(generated via automatic tax)
In applying Scheduled Payments, the number of splits necessary, the percentages of those splits, and the due dates to assign to those split transaction lines is determined.
For this example, we assume a split of 4 equal amounts of 25%, with the default options for Last instalment) and Tax Treatment (Apply Against All to split equally). We also assume 2 decimal places is used for the currency.
(set toThe split debtor amounts are calculated as follows:
Instalment for Due Date 1: 29.38
Instalment for Due Date 2: 29.38
Instalment for Due Date 3: 29.38
Instalment for Due Date 4: 29.36
(accounting for the rounding adjustment on the final value)
At this point, additional ledger lines have been generated, but not posted. Before posting, Payment Terms are applied to each of the individual split lines, to generate additional dates such as document dates, discount dates and interest start dates, which may be governed by the due date, now generated for each line.