Overview
Businesses can agree to trade on cash or credit terms. With a credit sale, the seller delivers and then invoices the goods and services before payment is made by the customer. The credit terms are agreed to by the buyer and seller before sale, and are typically included on the invoice addressed to the customer, together with the value of the goods and services supplied. The buyer has an obligation to pay for the goods or services supplied on the terms agreed. Securing payment is, however, just one of the purposes of an invoice. The primary purpose of the invoice is to document and confirm the sales agreement, the terms and conditions of the sale, and the taxes that apply.
The sales invoices and payments received against these invoices are recorded in the Accounts Receivable ledger. The total balance on the Accounts Receivable ledger is the total monies outstanding for credit sales and is itemized by individual customer within the ledger. The purpose of the Accounts Receivable ledger is to monitor the amount of credit extended to customers and to help secure payment.
The Accounts Receivable flow begins with the sales order. When the sales order is confirmed, the process of shipping goods or delivering services is started. When the shipment or delivery is confirmed, the system creates an invoice in Invoice Post and Print (7.13.4). You then process the invoice using the AR functions described in the following sections. You collect receivables by tracking customer activity, and identifying and resolving overdue invoices.
You can also process customer-initiated payments using the Self-Billing function. Use self-billing functions to match customer remittances against original invoices. The program creates an open item for the amounts, which you can then process using standard Financials payment functions. The program also creates prepayments for over- and under payments in the remittances, and can be configured to create automatic payments with predefined statuses. See
Self‑Billing.
These stages are represented by the following processes:
• Invoice Customers
• Process Receivables
• Collect Receivables
• Customer Self-Billing
Note: Many of the values that control AR processing are associated with the customer record. Setting up customers is described in
Setting Up Customer Data.
You complete these processes using the following AR functions:
• Process invoices created in customer management.
• Create miscellaneous invoices directly in AR.
• Process payments using payment instruments.
• Adjust the open balance of a customer invoice or credit note.
• Track and report customer AR activity.
• Send statements and reminder letters for overdue payments.
• Calculate finance charges.
• Report on all customer invoice-related transactions and statuses.
• Match customer remittances against shipping invoices using Self-Billing.