Cash Management Set Up Steps

Oracle Cash Management Release 11i User’s Guide,

and Usage Aspects Chapter 2 and pages 2-2 to 2-27.
From Accounts Receivables Perspective
Amit Kumar Singh
Oracle Corporation Metalink.oracle.com /
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Abstract

Improve your knowledge of Reconciliation Process

in Cash Management by learning how to set up Cash
Management and how to use it. This paper provides
an overview of the Manual and Auto Reconciliation
process, and basic functionalities involved in the
process for instance Reversals & Corrections. I. Overview Of Cash Management.
This paper is written from the perspective of
Accounts Receivable Module although it will contain
some useful information for CE Reconciliations with Cash Management includes:
Oracle general ledger and Oracle Payables also.
All screenshots included in this paper is from AR a) Clearing manually or automatically
side. your uncleared transactions lying in
Accounts Receivables, Accounts
payables, Oracle Payroll & General
Ledger modules.
b) It helps the user to reconcile manually
Scope or automatically the payments and
receipts and then review and correct the
unreconciled transactions.
I. Overview Of Cash Management. c) Enter Bank Statements manually or
II. Clearing Vs Reconciliation automatically by importing from Open
III. What are the Set up Required for Manual Interface tables.
and Auto Reconcilations d) Prepare Cash forecast.
IV. What extra sets required for Reversals and e) Cash management also handles Multi
Corrections Currency Bank Statements and its
V. Foreign Currency Banks Reconciliations reconcilation.
VI. What are the Set ups for Reconciliation with
Oracle General Ledger and Oracle Payables II. Clearing Of A Receipt Vs
Reconciliation of a Receipt
Please note that this paper does not replace your Cash Clearing is an accounting event whereas
Management User’s Guide. This paper is intended to reconciliation is not an accounting event.
give you a quick overview of the application, and Clearing Transfers the amount from Remittance
some step-by-step setup instructions. account to Cash Account. Whereas
Reconciliation is just tallying of lines appearing
in the bank statement with the Receipts in AR.
However if you reconcile directly the transaction
then the transaction gets cleared first itself and
then in such a case reconciliation becomes an
References accounting event also.
For detailed information on all the Cash Management
features, please read the following references.
1 Cash Management Set Up Steps
& Usage Aspects
III. What are the Set up Required for
Manual and Auto Reconciliations?

a) Set up Requirements in Accounts

Receivables for the purpose of
Manual and Auto Reconciliation
i. Create one Account Code
Combination (CCID) for your bank
Account in Oracle General Ledger
ii. Create a Bank account and specify
the above CCID in the Cash
Account
iii. Create a Receipt Class and Use the
above bank and Bank Account
iv. Create Manual Receipts Using the Description Figure 1 Shows Receipt class and types
above Receipt class of Clearance Methods.
Receivables – Set up- Receipts-Receipt Class
Note: Status of a Receipt is important field from Cash
management perspective. Receipt Status depends on
three important fields in Receipt Class.

i. Remittance Method: if this is No

Remittance then the receipt status will
be remitted and this will require
Clearing in CE. If the Remittance
method is Standard or Factoring or Std b) Clearing of Receipts and Payments in
& Factoring then the Receipt status will CE
be Confirmed and this will require first
Remittance which will then bring status
of receipt to Remitted and then you can
clear the same.
There are two methods to clear the receipts and/or
ii. Matching: If the matching is Directly payments:
then the Status will be cleared. Directly
is available only if you have no Automatic Clearing: Submit the Automatic Clearing
remittance. With Remittance method program to automatically clear remitted receipts and
other than No Remittance this Directly clear or risk eliminate factored receipts in
is not available. If the Method is By Receivables. Clearing remitted receipts debits your
Automatic Clearing then the Receipt cash account and credits your remittance or factoring
can be both Auto Cleared or Manually account.
cleared. IF the Method is By matching
then Automatic clearing is not available Go to AR – Requests – Submit – Automatic Clearing
only manual option can be used. of Receipts Program

Note: This Method will clear only those receipts,

which have Automatic clearing as Matching Method.

2 Cash Management Set Up Steps

& Usage Aspects
 the dates to any date but not prior to the date of
previous clearing /reconciliation.

c) Manual and Automatic

Reconciliations in Cash
Management
I. Manual Reconciliation

In Manual Reconciliation System works solely

on the judgment of user

i. Enter Bank Statement

Note: Bank Statement has two parts -
Header and Lines.
Description Figure 2 running of Automatic Clearing Header details about Bank , Bank Account,
Program in AR. Totals-control & Actual , Number of lines
Navigation: View-Requests unreconciled and its amount . Complete the
statement once no further changes are
required.

ii. Enter Statement Line

Statement line can be either Receipt, Misc

Receipt, Payment, Misc Payment, NSF ,
Rejected, Stopped.
Note : You must define bank Transaction
codes for the bank . Although this is not a
mandatory set up but is required for Auto
Reconciliation to identify the source of the
statement line , correction method ,
matching method.

ii. Manually Reconcile with the available

transactions or you can create manually
a AR Receipt/ Misc Receipt / Payment
from CE and then Reconcile.

Description Figure 3 Shows the Output of Program iv. Create a Receipt/ Misc Receipt/Payment
ran in Figure 2 . directly from CE
Navigation : View-Requests
Note : When you create Misc Receipt system
Manual Clearing: This is done by going to CE - > prompts for Creation of Misc Receipt with
Bank Reconciliation - > Manual Clearing > you can Reconciled status which is not in the case of Cash
also undo the cleared status of a cleared payment, Receipt.
receipt, or open interface transaction.
Note : You cannot change the amount of Receipt
when you use Create from Statement.
Change Default Dates: You can change the Default
dates which appear at the time of selecting the
Receipt by going to Default Dates .You can change

3 Cash Management Set Up Steps

& Usage Aspects
 v. Check Receipt Status after Automatic Reconciliation matches the Statement
Reconciliation and status of line in bank lines of a statement with the Sub ledger Transactions
statement automatically on the basis of following:
Cash management tab gets populated with statement
details and status changes from Remitted to Cleared i. Tolerance: System Parameter has two
if it was a remitted receipt. fields in Auto tab region: Amount and
Statement line gets Reconciled Amount and status Percent. Percent is calculated on
changes from Unreconciled to Reconciled. statement amount. Tolerance amount is
the lower of two. Tolerance in System
Parameters form is in Functional
Currency.
vi. Mark Statement Line: You can mark a
statement line as Error or External. Marking makes Note: Auto Reconciliation selects the transactions on
the line not available for Reconciliation. the basis of Tolerance amount.
Receipts selected will be Receipt Amount
= < Receipt Amount +/- Tolerance Amount
vii. Unreconcile : You can unreconcile the >
reconciled line by going to Reconciled and selecting After tolerance amount system looks for the matching
the line and then press Unreconcile. The Status of Order.
Receipt will change back to Cleared and the
statement details will get deleted from the cash
management tab in Receipt form . ii. Matching Order

Transaction: If order is transaction then the system

will create Bank Charges for the difference amount.
Batch : If Batch is the Order then the system will
create a Misc Receipt for the tolerance amount.

II. Automatic Reconciliation

Note : After checking on the basis of Matching Order
value in System Parameter form it looks for the
receipts on the basis of value which was not selected.
For example if value in System parameter form is
Batch then after looking for on the basis of batch if
unable to find a batch system will then check for
transactions with the number given in statement line.

iii. Matching Criteria

When Transaction is matching Order : ( Difference

goes to Bank Charges)

1. Receipt Number should match Statement

Description Figure 4 System Parameters form .The Number or
Matching Criteria’s are set up in this form which is 2. Invoice Number , Customer Name and
then used in Reconciliation Process. Customer Bank Account in statement line
Navigation: Cash Management – Set up-System should match the Receipt Details or
parameters 3. Invoice Number and Customer Bank Account
in statement line should match the Receipt
Details

4 Cash Management Set Up Steps

& Usage Aspects
When Batch is matching Order then Deposit Number 3. Stopped ( this is for AP payments only )
is the matching Criteria in the absence of Deposit
Number batch Name. ( For the difference Misc
receipt is created) If the receipt is not reversed in the AR and in Bank
statement there is a reversal line then Auto
Reconciliation first clears the receipt and reconciles
the receipt line in bank with the cleared line of
Simulation Cases on Auto Reconciliation Receipt and then it reverses the receipt and reconciles
the NSF line with the reversal line of Receipt.
Tolerance : Amount = 100 and Percent 20%
Reversal can be ( NSF Action in Auto Recon
Case 1 – Create a bank Statement , statement line parameters) :
Amount = 1000
Create a AR receipt of Rs 850 1. Reverse Payment
Run Auto Reconciliation from Submit Request in CE 2. Debit memo reversal
Result - Line will not be reconciled Steps :

1. Create a bank transaction code with NSF as

Case 2 - Now change the Amount above to 900 type
Run Auto Reconciliation from Submit Request in CE 2. Create a bank statement line with Receipt
Result Line will be reconciled. type and second line with NSF type. Use the
Check the bank charges field - 100 is in bank NSF code.
charges 3. Run Auto Recon.
4. Select NSF Action

Case 3 - create a remittance batch with three receipts

amounting to 1000
Create a statement line with amount = 1050
Run Auto Reconciliation from Submit Request in CE
Result : system will create a Misc Receipt of Rs. 50

Note : Incase of Remittance batch ensure that while

running Auto Recon you must specify the payment
method and Receivable activity other wise Auto
Recon will fail.

IV. What extra sets

required for Reversals Description Figure 5 Shows bank transaction Code
and Corrections screen.
Navigation : Cash Management –Set up- Bank
transaction Code
Reversals and Corrections

Reversals take place when the check clearing done by

bank is reversed due to following reasons:

1. NSF ( Non Sufficient funds)

2. Rejected
5 Cash Management Set Up Steps
& Usage Aspects
 transaction number as the adjustment line. However,
the statement line can be a payment, receipt,
miscellaneous payment, or miscellaneous receipt, as
long as the
amount netted out is within the tolerance of the
original transaction.

Description Figure 6 Shows the NSF line created to

demonstrate the Reversal functionality with type as
NSF
Navigation : Cash Management – Bank
Reconciliations-Bank Statements

Corrections takes place when bank gives wrong

credit and then to correct the error it either reverses
the original credit and then gives a new credit
(Reversal Correction method) or gives differential
credit or debit to correct the mistake (Adjustment Description Figure 7
method)

1. Create a bank transaction code for Misc

Payment type line with Reversal as
correction method and another for
Adjustment correction method.
2. Select matching against stt /stt, misc
/misc/misc,stt
3. Create lines for reversal method (one
original, one Misc Payment for reversal and
then

Reversal Method: Tries to match the reversal entry

to a statement line that contains the same transaction
number and opposite transaction type. For example,
if the reversal entry is a miscellaneous receipt, then
the program matches to a payment or miscellaneous
payment. If the amounts net out to zero, then the Description Figure 8 Shows the Adjustment Method
program assumes there is a match and reconciles the Navigation : Cash Management – Bank
statement lines. Reconciliations-Bank Statements

Note : in Reversal method reversal statement line and

• Adjustment Method: Tries to find both a statement original line matches with each other
line and a transaction to match to the adjustment And new correct entry matches with original receipt.
entry. The statement line must contain the same
6 Cash Management Set Up Steps
& Usage Aspects
 VI. What are the Set ups for
Reconciliation with Oracle General
Ledger and Oracle Payables

i. Create a Bank Transaction Code for AP and

Gl Source
Create a Receipt or Payment Type in Bank
transaction code screen with Source as Journals

Matching Criteria

1 CCID of Bank Account in Journal Line must

be same as Cash Account in the Bank Definition
2 Journal Line must be Posted
3 Description field and the Number Field is
the Matching Criteria used

Description Figure 9 Shows the Adjustment Method

Navigation : Cash Management – Bank Reconciliation of AP to CE
Reconciliations-Bank Statements

Steps

V. Foreign Currency Banks 1 Assign a Payables Document to the bank

Reconciliations 2 Define one Supplier
3 Create one Invoice and make payment in
Foreign Currency Transactions full
4 Create Bank Transaction Code with Source
as Payables
Receipt is in Foreign Currency / Bank is Functional 5 Enter one Bank statement line of Type
Currency Payment in Bank Statement.
6 Either Manually Reconcile or Auto
In this case the tolerance amount will be the 7 For any Stopped Payment line in Bank
difference in Converted Amount of Receipt and Statement define bank transaction code for
Statement amount. Stopped as type and source payables and
then use this code in statement line.

Both Receipt and Bank is in foreign Currency

In this case the Tolerance amount will first be

converted into foreign currency using Rate type and
Rate date as specified in System Parameters form.

Note : Rest will remain same as covered till now.

7 Cash Management Set Up Steps

& Usage Aspects
 The bank records both the original payment and the
stopped payment on the same statement. In this
case, the two transactions would null out and have no
effect on the closing balance. This is the basis for the
treatment of stopped payments by the method
described above.

Description Figure 10 Shows Payment created in AP.

Navigation –Payables- Payments-Payment

Description Figure 12 Shows Reconciliation of

Stopped line with AP void payment
Navigation : Cash Management – Bank
Reconciliations-Bank Statements

Case 2

The bank records the original payment and the

stopped payment on two different statements or just
Description Figure 11 Shows Payment created in AP. records the stopped payment and not the original
Navigation –Payables- Payments-Payment payment. In this case, the closing balance would be
impacted.
Cash Management treats Payments as a source of
Cash Outflow and Stopped Payments
as a source of Cash Inflows. Since the Bank
Statement Header has one field for
Cash Inflow Sources (Receipts) and one for Outflow
sources (Payments), Stopped
Payments show up in the Receipts Field.

There could be two scenarios, which would affect the

Bank Statement Balance:

Case 1

8 Cash Management Set Up Steps

& Usage Aspects
Description Figure 13 Shows bank transaction code Description Figure 15 Shows the Journal Created in
for Journal as Source . oracle general Ledger with Description field
Navigation : Cash Management –Set up- Bank populated .
transaction Code Navigation – Oracle General Ledger – Journals-Enter

Conclusions
It is our hope that this paper has helped you
understand what Cash Management Reconciliations
is , and how to set it up.

Description Figure 14 Shows the Lines in Cash

Management reconciliation with Journals in Oracle
General Ledger.
Navigation : Cash Management – Bank
Reconciliations-Bank Statements

9 Cash Management Set Up Steps

& Usage Aspects
Cash Management Set Up Steps and Usage Aspects
From Accounts Receivables Perspective
January 2005
Author : Amit Kumar Singh

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10 Cash Management Set Up Steps

& Usage Aspects