oracle bank charges

Bank Charges in R12 Doc ID 1461830.1 1

Oracle Applications

White Paper

Bank Charges in R12

Contributors: Sanjay Prasad / Sriram Ramanujam

Versions: 1.0

Create Date: 01-APR-2012

Update: 25-MAY-2012


Table of Contents

INTRODUCTION .................................................................................................................................................... 3 Objective ......................................................................................................................................................... 3 Scope .............................................................................................................................................................. 3 Overview ......................................................................................................................................................... 3 Terms Used ..................................................................................................................................................... 4

BUSINESS SCENARIO ........................................................................................................................................... 5 BANK CHARGE SETUPS ....................................................................................................................................... 7

Enable Operating Unit to Use the Bank Charge Feature ............................................................................... 7 Define Bank Charges ...................................................................................................................................... 8 Enable Bank Charges for Supplier ................................................................................................................. 8

PROCESS FOR TESTING BUSINESS SCENARIO ..................................................................................................... 10 Step 1: Create 2 Invoices .............................................................................................................................. 10 Step 2: Create PPR to Pay Invoices ............................................................................................................. 13 Step 3: Review Payment Created .................................................................................................................. 15 Step 4: Review Payment Accounting ............................................................................................................ 16


Introduction

Objective In this white paper we provide an overview of the Bank Charges feature in Oracle

Payables, Release 12. We also included step-by-step instructions to configure the

Bank Charges feature.

Scope This paper includes the setup steps, transaction flow, and relevant accounting for

the transactions.

Overview Banks can impose fees for different activities and services, such as:

Interest on overdraft

Monthly charges

Other service charges, and

Charges levied on funds transfer requests to other banks

In this document we will discuss bank charges for Fund Transfer Requests.

You can pay your suppliers for their goods and services in many different waysi.e.,

issue a check, pay by money order, credit card, or cashiers check. You can also

transfer funds from your bank account to your suppliers bank account.

For the service of transferring funds between the two bank accounts, your bank may

impose bank charges.

The bank charge may depend on several factors, such as:

a) Transferring bank: From where the funds will be disbursed

b) Receiving bank: To where the funds will be transferred

c) Transfer priority

d) Currency

e) Payment amount, and

f) Bank charge typesuch as Standard or Negotiated


Terms Used Transferring Bankthe bank from where the funds will be disbursed

In Oracle Payables, this is your bank account

Receiving Bankthe bank to where funds will be transferred

In Oracle Payables, this is your Suppliers bank account

Transfer PriorityBank charges levied may depend on the transfer priority. For

example, a Normal Transfer Priority may be cheaper in comparison to an Express

Transfer Priority.

Bank Charge TypeBanks may also provide differential rates, such as a Standard

Rate vs. Negotiated Rate for Fund Transfers. Negotiated rates are often lower than

the standard rate.


Business Scenario

In this business scenario, the bank charges a fee for transfers between two different banks.

The Bank Charges are based on the payment amount and bank charge rate (i.e., Standard vs.

Negotiated). In our example, if the payment amount is between 1 and 5000, the bank

charges $10 for the Standard rate and $7 for the Negotiated rate. Payment amounts over

$5000 are charged $12 for the Standard rate and $8 for the Negotiated rate.

Payment Amount Range Bank Charge Rate

Payment Amount

From Range

Payment Amount

To Range

Standard Negotiated

1 5000 10 7

5000 12 8

Priority: Express

Currency: USD

Transferring BankBank Name: SANBANK1, Branch: SANBRANCH1

- This is your bank account

Receiving BankBank Name: SANBANK, Branch: SANBRANCH.

- This is your Suppliers bank account

To test the Bank Charges feature, we will use the following example:

1. Initiate a Funds Transfer Request (i.e., a Payment) from the Transferring account

(Bank: SANBANK1 and Branch: SANBRANCH1) to the Receiving bank account

(Bank: SANBANK and Branch: SANBRANCH).

2. In our example, the payment will be applied to two invoices for the amounts of

$3000 and $6000

3. Because the total payment is more than $5000, the system will calculate the bank

charge for the amount of $12, as per the setup under the Define Bank Charge

Calculation section of this white paper.

4. The $12 will be deducted from the payment of $9000. The bank charge is pro-rated

based on the payment amount for each invoice.

Invoice#1

Invoice Amount: 3000

Amount Paid = 3000 (12*3000/(3000+6000)) = 3000 4 = 2996

Invoice#2


Amount Paid = 6000 (12*6000/(3000+6000)) = 3000 8 = 5992


In order for the system to calculate and apply the correct pro-rated bank charge to each

invoice, the following configuration must be completed.

1) Enable the Operating Unit to use Bank Charge

2) Define Bank Charges

3) Enable Supplier Site to use Bank Charge

To create the above scenario, you must have the following transactions:

1) Create two invoices

2) Create a Payment Process Request (PPR) to pay the two invoices

3) Review the Payment amount

4) Review the accounting entries


Bank Charge Setups

To set up Bank Charges, you must do the following:

Enable the Operating Unit to use the Bank Charge feature

Define Bank Charge Rates between the Transferring Bank and Receiving

Bank

Enable Supplier Site to use the Bank Charge feature

Enable Operating Unit to Use the Bank Charge Feature

Bank charges must be enabled at the Operating Unit level.

Navigation: Set up > Options > Payables Options > Payment

Select the checkbox Enable Bank Charge Deduction from Payment and select the

respective value for Deduct Bank Charge from Payment.

Applicable Values are:

1. NoNo bank charges will be deducted

2. Supplier/Standardbank charges will be paid by the Supplier and the bank

charge will be deducted at the Standard Rate.


3. Supplier/Negotiatedbank charges will be paid by the Supplier and the

bank charge will be deducted at the Negotiated rate.

The same setup will default on the Supplier Site Definition form, but it can be

overridden.

Define Bank Charges

The bank charge rate is dependent on the Transferring Bank (i.e., your bank), the

Receiving Bank (i.e., your Suppliers bank), and the Transfer Priority. This

information is entered on the Bank Charge Calculation form.

Navigation: Set up > Payments > Bank Charge Calculation

Enable Bank Charges for Supplier

You must enable the Bank Charges feature at the Supplier Site. You can complete

this task under the Invoice Management tab by accessing your suppliers bank

account information.

Navigation: Suppliers > Entry Query/Enter Supplier

1) Navigate to the Invoice Management Tab


If the Supplier Site is already defined, then select the appropriate value for

Deduct Bank Charge from Payment.

If a new Supplier Site is defined, the system will default the values from the

setups completed at the Operating Unit level.

2) To define the Suppliers bank account, navigate to the Banking Details tab

The Suppliers bank account defined here should belong to the Receiving

Bank details mentioned in the Bank Charge Calculation window.

This completes the Setup required.


Process for Testing Business Scenario Complete the following steps to test the business scenario:

1) Create two invoices

2) Create a Payment Process Request (PPR) to pay the two invoices

3) Review the Payment Amount

4) Review the Accounting Entries

Step 1: Create 2 Invoices

Invoices created in Batch Name TR220112-01


Invoice#TR220112-01


Status: Validated and Approved

The Remit to Bank account in our example is bank: SANBANK and

branch: SANBRANCH. This is the Receiving bank or the Suppliers Bank. For

more information, refer to the Enable Bank Charges for Supplier section of

this document.


Invoice# TR220112-02


Status: Validated and Approved

Remit to bank account is bank: SANBANK and branch: SANBRANCH.

This is the Receiving Bank or the Suppliers Bank. For more information,

refer to the Enable Bank Charges for Supplier section of this document.


Step 2: Create PPR to Pay Invoices

PPR#TR220112-02

Transfer Priority: Express

Bank Account: SANACCOUNT

--This is the Transferring bank or your bank account

--Bank: SANBANK1 and Branch: SANBRANCH1.


Complete the PPR

PPR created payment# 6


Step 3: Review Payment Created

The remittance was applied to the invoices and the payment amount was as

expectedi.e., 2996 and 5992, respectively.


Step 4: Review Payment Accounting

The bank charge was prorated as expected and the accounting was as

follows:

Liability for Invoice# 1 DR 2996




Cash Clearing CR 8988

Discount CR 12

The $12 was recorded as a discount in the General Ledger because the

Supplier paid the bank charges.

oracle bank charges

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