When a customer or vendor payment is entered in one company and is settled with an invoice that was entered in another company, the applicable settlement, due-to, and due-from transactions are automatically generated for each company. A settlement record is created for each combination of invoice and payment in the transaction. Each settlement record is assigned a new voucher number, which is based on the Payment vouchernumber sequence series specified in the Accounts receivable parametersform for customers and in the Accounts payable parametersform for vendors.

If additional settlement records are generated for cash discounts, currency exchange adjustments, penny differences, overpayments, or underpayments, they are assigned the later date of the payment or invoice transaction. If settlement takes place after the payment is posted, the settlement records use the settlement posting date that is specified in the Open transaction editingform.

For information about posting for cross-company payment settlements, see About centralized customer paymentsand About centralized vendor payments.

Posting types, transaction types, and transaction text

Intercompany settlement voucher transactions use the Intercompany settlementposting type and the There are transactions in journals for current period.and Intercompany vendor settlementtransaction types. You can set up information for the transaction type in the Transaction text form.

The following transaction types are available for use in single-company and cross-company settlements:

Settlement
Cash discount
Exchange adjustment (includes realized and unrealized exchange adjustments)
Penny difference
Overpayment/underpayment

You also can define transaction text for intercompany settlement vouchers. For more information, see Set up centralized customer paymentsand Set up centralized vendor payments.

Currency exchange gains or losses

The exchange rate that is used for customer or vendor transactions is stored with the transaction.

Realized gains or losses for currency exchanges are posted to either the invoice company or the payment company, depending on the option selected for the Post currency exchange gain or lossfield in the Intercompany accounting form for the payment company.

The following examples use these currencies:

Payment company currency: EUR
Invoice company currency: USD
Payment transaction currency: DKK
Invoice transaction currency: CAD

Currency calculations

When settling an invoice that is entered in one company with a payment that is entered in another company, the transaction currency of the payment (DKK) is converted in three steps:

Converted to the company currency of the payment (EUR), using the exchange rates from the payment company
Converted to the company currency of the invoice (USD)
Converted to the transaction currency of the invoice (CAD), using the exchange rates from the invoice company

The conversion process uses the exchange rates as of the payment date. If the resulting payment amount in the transaction currency of the invoice (CAD) is equal to the invoice amount (CAD), the invoice is considered fully paid.

When the Open transaction editingform is opened from a payment journal where the payment amount was not entered, the amount to settle is calculated based on the invoices that are selected for settlement in the Open transaction editingform. The amount to settle is converted in three steps:

Converted to the company currency of the invoice (USD), using the exchange rates from the invoice company as of the payment date
Converted to the company currency of the payment (EUR), using the exchange rates from the invoice company as of the payment date
Converted to the transaction currency of the payment (DKK)

The resulting payment amount is transferred to the payment journal line when you close the Open transaction editingform.

Posting for gain or loss due to different company currencies

If there is a currency exchange gain or loss, the gain or loss is posted to the company specified for the Post currency exchange gain or lossfield in the Intercompany accounting form for the payment company. The gain or loss amount is converted to the company currency of the company where it is posted, using the exchange rate that is defined for that company.

Cash discounts

Cash discounts that are generated during the cross-company settlement process are posted to either the invoice company or the payment company, depending on the option selected for the Post cash discountfield in the Intercompany accounting form for the payment company. A corresponding settlement transaction is generated in the invoice company.

Note
Cash discounts that are generated during the cross-company settlement for a credit note are posted to the company of the credit note. For information about posting cash discounts, see About centralized customer paymentsand About centralized vendor payments.

Overpayments/underpayments

Overpayment/underpayment and penny difference tolerances are determined based on the company of the payment for overpayments, and on the company of the invoice for underpayments. The posting account that is used is determined by the setting in the Cash-discount administrationfield in the Accounts receivable parametersform for customers, and the Cash-discount administrationfield in the Accounts payable parametersform for vendors:

If the cash discount administration setting is Specific, or if the setting is Unspecificand the applicable cash discount is posted in a different company from the overpayment, the system account for Customer cash discount, Vendor cash discount, or Penny difference in default currencyis used. You can specify these accounts in the System accounts form ( General ledger> Setup> Posting> System accounts ).
If the cash discount administration setting is Unspecificand the cash discount is posted in the same company as the overpayment (the payment company and the invoice company are the same), the cash discount account is adjusted. For example, if an invoice for 100.00 with an available cash discount of 3.00 is settled with a payment for 98.00, the cash discount account is adjusted for 1.00. The net discount amount is 2.00.
If the cash discount administration setting is Unspecific, the cash discount is posted in the same company as the overpayment, and the overpayment or underpayment is settled with multiple invoices with cash discounts, the cash discount account for the last invoice is adjusted.

If the cash discount administration selection is Unspecific, unspecific payment settlement rules apply only in the following situations:

There is an overpayment.
The overpayment is settled with one or more invoices that has a cash discount.
The cash discount is posted in the same company as the overpayment.

In all other situations, overpayments or underpayments are posted to the system account for Customer cash discount, Vendor cash discount, or Penny difference in default currency.

Sales tax

Sales tax transactions remain in the company where they were originally posted.

If sales tax was posted for a prepayment, the cross-company settlement reverses the sales tax on the prepayment in the prepayment company. The taxes in the invoice company remain in the invoice company.

Financial dimensions

For customer payments, the due-to and due-from transactions in the payment company use the financial dimensions that are specified for the accounts receivable summary account from the payment being settled. In the invoice company, due-to and due-from transactions use the financial dimensions that are specified for the Accounts receivable summary account from the invoice being settled.

For vendor payments, the due-to and due-from transactions in the payment company use the financial dimensions that are specified for the accounts payable summary account from the payment being settled. In the invoice company, due-to and due-from transactions use the financial dimensions that are specified for the Accounts payable summary account from the invoice being settled.