Splitting Linked Transactions

One of the requirements of a Broker Ledger in a Pay As Paid environment is to only release transactions for payment when the corresponding cash has been received from the relevant third party. For example, to only pay an underwriter an amount due for a new policy, once the premium has been paid by the client.

To achieve this, Financials uses an intra-transaction reference to identify the set of ledger transactions that make up a particular business transaction (claim or premium). This reference is maintained on each ledger transaction in the group in the Link Reference 2 field.

The Pay As Paid principle must be applied if a transaction within a linked set of transactions is split. When one of the linked transactions is split, the remaining transactions in the set are automatically split in the same proportions. For example, if a client only pays half of an outstanding premium, the premium posting is split manually to reflect this. When this split is posted, the system automatically splits the corresponding underwriter and commission transactions in same proportion, that is, in half.

In some cases not all of the linked transactions are split, or the linked transactions are grouped prior to being split.

If, subsequently, one of the split transactions is split further, the system splits the related transactions in the same way. To achieve this it assigns a Split Link Reference to each set of split transactions to enable them to be grouped together for further processing, if required.

This processing is best illustrated using an example. Different colors are used to identify the related transactions and links.

Stage 1: A new premium is sold, resulting in the following new journal posting. All the transactions in the journal have the same transaction reference and intra-transaction reference.

Tx Ref	Account	Amount	Intra-Tx Ref (Link Ref 2)	Split Link Ref
ABC	Client	100 DR	1
ABC	Underwriter	90 CR	1
ABC	Commission	10 CR	1

Stage 2: The client pays only GBP 50 of the outstanding premium and this is posted to the client account using Ledger Entry. The same intra-transaction link reference is assigned to the cash posting.

Tx Ref	Account	Amount	Intra-Tx Ref (Link Ref 2)	Split Link Ref
ABC	Client	50 CR	1

Stage 3: The original client premium posting is split in Account Allocations (ACA) to record the part payment, resulting in the following new set of transactions on the client account. A split link reference is assigned to each split transaction.

Tx Ref	Account	Amount	Intra-Tx Ref (Link Ref 2)	Split Link Ref
ABC	Client	50 DR	1	1
ABC	Client	50 DR	1	2

Stage 4: The system automatically splits the other postings with the same Transaction Reference/Intra-Transaction Reference. The appropriate split link reference is assigned to each split transaction to group each set of related split transactions.

Tx Ref	Account	Amount	Intra-Tx Ref (Link Ref 2)	Split Link Ref
ABC	Underwriter	45 CR	1	1
ABC	Underwriter	45 CR	1	2
ABC	Commission	5 CR	1	1
ABC	Commission	5 CR	1	2

Stage 5: The client cash receipt is matched to the outstanding premium.

Tx Ref	Account	Amount	Intra-Tx Ref (Link Ref 2)	Split Link Ref	Allocation Marker
ABC	Client	50 DR	1	1	Allocated
ABC	Client	50 DR	1	2	Not Allocated
ABC	Client	50 CR	1		Allocated