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Allocation Principles

Allocations are used in order to settle the outstanding Balance of accounts by assigning credit Financial Transactions against Invoices. Allocations are applied automatically by the System following the Allocation Principle specified on the /wiki/spaces/WIP/pages/10010232.

Two possible Allocation Principles are supported by CRM.COM but only one can be selected by the System at a time.

• FIFO: First In First Out
  • Allocation occurs at posting
  • All unallocated transactions are taken into consideration, regardless of which one is being posted
  • The oldest credit transaction is allocated against the oldest Invoice. 
  • The oldest credit transaction is identified by comparing the Posting Date. 
  • The oldest Invoice is identified by comparing the Due Date. 
  • The Allocation Type is set to FIFO
• FIFO & Against Item
  • Allocation occur at posting
  • Allocations are always performed Against Item when the credit Financial Transaction refers to one or more specific (Intended) Invoices. 

  • If the credit Financial Transaction refers to more than one Invoice, then the Allocation is applied on those Invoices using the FIFO principle. 
    For more information on Intended Invoices visit Managing Financial Transactions.

Allocating a Financial Transaction

Allocations are performed automatically during the Posting of a Financial Transaction and according to the selected principle. If the selected principle is FIFO & Against Item, then it is necessary to define the Intended Invoices or Bills when creating the Payment.

For more information on creating Payments and setting Intended Invoices view Managing Financial Transactions

If no Intended Invoices are defined, then the System will apply the FIFO principle.  If the selected Principle is FIFO, it is not necessary to define any Invoices.

How does the FIFO Allocation Principle work?

Allocations based on the FIFO Principle follow these rules:

• Allocations are always performed first in first out. 

  • The oldest credit transaction is identified by comparing the Posting Dates. 

  • The oldest Invoice is identified by comparing the Due Dates.

  • The oldest credit transaction is allocated against the oldest Invoice. 

• Allocations are performed Against Item only when an Invoice Cancellation is posted

  • In the case of an Invoice Cancellation, the cancellation transaction is always allocated against the selected Invoice and the Allocation Type is set to 'Against Item'

  • If there are other transactions which are already allocated against the selected Invoice, then they are de-allocated and allocated again using 'FIFO'

• If a Payment which was already allocated against an Invoice is cancelled, then the Payment is de-allocated and the Invoice is re-allocated following the same principle

• The de-allocation is performed by creating an Allocation record with negative amount and setting the Allocation Type to 'De-allocation'

• The de-allocated record keeps a reference to the Allocation record that resulted in its de-Allocation. 

The System always keeps a record of the Type of Allocation that has been performed.

How does FIFO and Against Item Principle work?

Allocations based on FIFO & Against Item Allocation Principle are performed using the following rules:

• Allocations are always performed Against Item when the credit Financial Transaction refers to one or more specific Invoices. 

  • If the credit Financial Transaction is referring to more than one Invoice, then the Allocation is applied on those Invoices using FIFO

  • If the amount to be allocated to the Invoice is more than the unallocated amount then
    • If there are other transactions which are already allocated against an Invoice using FIFO, then they are de-allocated and re-allocated based on 'FIFO'
    • If the amount that should be allocated is still more than the unallocated amount of the Invoice, then an amount equal to the unallocated amount is allocated against that Invoice, setting the Allocation Type to 'Against Item' and the remaining amount of the credit Financial Transaction is allocated using FIFO.

  • Otherwise, "If the credit Financial Transaction amount is just enough to cover the invoice  then the whole amount of the credit Financial Transaction is allocated against the Invoice, setting the Allocation Type to 'Against Item'

• Allocations are always performed on a FIFO basis if the credit Financial Transaction is not referring to specific Invoices.

• Allocations are always performed on an Against Item basis when an Invoice Cancellation is posted.

  • In the case of an Invoice Cancellation, the cancellation is always allocated against the referred Invoice and the Allocation Type is set to 'Against Item'

  • If other transactions were already allocated against the Invoice, then they are de-allocated and allocated again based on 'FIFO'

• When cancelling a Payment already allocated against an Invoice, the cancelled Payment is de-allocated and the Invoice is allocated again based on 'FIFO'
• De-allocation is performed by creating an Allocation record with a negative amount and setting the Allocation Type to 'De-allocation'
• The de-allocated record keeps a reference to the Allocation record that resulted in its de-Allocation.