Transaction Allocations

Allocating Foreign Currency Transactions

Invoice ‘To allocate’ value & VAT adjustments for Settlement Discount

Allocation is the process of matching outstanding credit notes, discount, payments, refunds or credit adjustments to outstanding invoices or debit adjustments. Once matched, the transactions are considered to be 'cleared' and are removed from the data files when you use the End of Period command in the Sales Ledger. This happens provided the transactions exceed the number of periods specified in the Keep Transactions box on either the Options form associated with each customer's record on the Processing form or the Sales Options form.

Allocations can be done at the same time as entering a receipt or refund using the Receipt and Refund commands on the Action menu associated with the Customer form, provided the On Account option is cleared. Alternatively, you can use the Allocate command on the Action menu that provides access directly to the Allocations form. You can then allocate existing transactions, including other credits, such as credit notes.

Settlement discount is automatically taken into account according to customer settlement discount terms. Click here to see a flowchart of the checks that are made to decide whether settlement discount should be included on an invoice. You can also use the allocation process to put on hold (and subsequently release) disputed transactions. Disputed transactions are available for allocation but are ignored when you use the Exhaust command on the Action menu associated with the Allocations form. The Allocations form displays all the outstanding transactions for the selected customer account. To include a transaction in an allocation action, click to select the transaction in the grid. You then select the relevant command from the Action menu according to what you want to do.

Use this command	To
Cancel Allocation	Cancel the allocation marker for the selected transaction.
Pay Full	Allocate the full value of the transaction as paid.
Pay Part	Allocate part of the transaction value. You enter the amount to be allocated in the Part Pay box that appears. Unless settlement discount is being taken, the Part Pay box is automatically updated with a calculated part payment amount. If settlement discount is being taken, you must enter the part payment amount.
No Disc	Settlement discount is calculated if a receipt pays one or more invoices in full and settlement discount is due. If your customer has paid you in full, you can cancel the settlement discount calculations by using this command. The No Disc command will revert settlement discount that has been calculated for all the lines displayed in the grid. This command only applies to allocations made when using the Receipts Allocations form (posting a new receipt in the Sales - Processing - Receipt command).
Exhaust	Allocate the receipt to as many outstanding invoices as possible starting with the oldest outstanding item, until the value of the receipt is exhausted. The command does not part-pay invoices; it pays the oldest outstanding items provided these can be fully paid by the value of the receipt. If an item cannot be fully paid, the next oldest outstanding item (which can be paid in full) will be paid instead. Example ... Suppose a customer has these invoices that have outstanding balances: - Invoice 1 posted on 26 February for £100.00, balance = £100.00 - Invoice 2 posted on 28 February for £105.00, balance = £75.00 - Invoice 3 posted on 15 March for £13.00, balance = £13.00 - Invoice 4 posted on 19 March for £45.00, balance = £30.00 - Invoice 5 posted on 23 March for £65.00, balance = £65.00 You post a receipt for the value of £160.00 received from the customer on 29 March. You use the Exhaust command to automatically pay the oldest invoices with an outstanding balance first. The result is: - Invoice 1 posted on 26 February for £100.00 - paid (receipt balance = £60.00) - Invoice 2 posted on 28 February for £105.00 - ignored (outstanding invoice balance cannot be paid) - Invoice 3 posted on 15 March for £13.00 - paid (receipt balance £47.00) - Invoice 4 posted on 19 March for £45.00 - paid (receipt balance £17.00) - Invoice 5 posted on 23 March for £65.00 - ignored (receipt balance of £17.00 cannot pay the invoice so must be allocated manually) This command only applies to allocations made when using the Receipts Allocations form (posting a new receipt in the Sales - Processing - Receipt command). Important: The Exhaust command ignores transactions that are in dispute, those in a foreign currency, and Brought Forward Balance transactions. Brought Forward Balance transactions are created by the End of Period command for accounts that are not set as Open Item accounts.
Accept	Accept the allocations, assuming that the value alongside the to Allocate title is zero. If the balance to allocate is not zero, you must amend your entries otherwise you cannot accept them, except as noted below for foreign currency transactions.
(Un)Dispute	Place the selected transaction under dispute, or, if already in dispute, release the transaction. You can select a reason description from the Reason Code list box.
Due Date	Change an invoice's due date to today's date or later.

Allocating Foreign Currency Transactions

In you use the multi-currency application, when you are allocating foreign currency invoices, you can view values in both the home and foreign currency. The exchange rate shown is the one that was current when the transactions were posted. Allocations can then be made in the transaction's currency or in another currency including the home currency. If you allocate to an invoice in the transaction's currency, the system compares the exchange rate prevailing at the time the individual postings were made.

If a discrepancy arises, the loss or gain is posted to the Nominal Ledger account defined for the foreign currency concerned on the Exchange Rates form in the System Manager. If you allocate a receipt to an invoice in a currency other than the transaction's currency, the system converts both currencies to the home currency using the exchange rates prevailing at the time the debit and credit postings were made and posts the value of any difference to the nominal account identified in the Exchange Gain/Loss box on the Adjustment Names form.

Allocating Advanced Transactions

You can allocate debits to credits, in part or in full, regardless of whether they are 'advanced' transactions. For example, you can allocate a payment posted for the current period to an invoice that has been posted to the next period. Similarly, a payment posted to the next period can be allocated to invoices in the current period. Advanced transactions are only possible if the Allow Advanced Posting option is selected on the Sales Options form.

Disputed Transactions

You can use the Allocations command to mark transactions that are in dispute.

You can assign a reason code to a disputed transaction. If the Mandatory Reason Code option is selected on the Sales Ledger - Utilities - Set Options form, you must select a reason code when you mark a transaction as disputed. Otherwise a reason code is optional. A note is added to the customer account when a transaction is marked as disputed or when the dispute indicator is cleared.

Disputed transactions are ignored in these commands:

The Exhaust command used to allocate a receipt to one or more invoices from the Sales Ledger - Processing form.
The Print Debtors Letters report from either the Reports menu or the Credit Management Centre.

You can add new reason codes using the Sales Ledger - Maintenance - Reasons form.

Invoice ‘To allocate’ value & VAT adjustments for Settlement Discount

When receipts or payments are posted and allocated to invoices, the Allocations form shows the balance to allocate. When receipts or payments are posted within settlement terms, the form shows both the settlement discount taken, and the balance to allocate. However, once the transactions are allocated together the ‘to Allocate’ value will be shown as a negative value. The reason is just mathematical. You need to ignore that it is negative when understanding what the VAT adjustment must be.

Using an example to explain why this is.

Your customer buys standard rate VAT (20%) goods for £100 with 10% settlement discount. They pay the next day and take £10 goods discount and reduce the VAT by £2. The VAT should now be £18 ((£100 - 10%) * 20% ) rather than £20 on the original posting. £108 will now clear the invoice.

The £120 invoice is fully allocated with the discount of £10 (£120 - £10), the allocated value is then subtracted from the actual receipt value (£110). So £108-£110 = -£2.

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