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Understanding Financial Transactions

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What are Financial Transactions?

A Financial Transaction is an agreement between a buyer and a seller to exchange Services or Physical Goods for payment. The transaction’s nature is differentiated by its Type (Invoice, Credit Note, Payment, Refund etc.) It involves a change in the status of the finances of the businesses or individuals involved, which is directly reflected on the customer's Accounts Receivable  by updating its balance.

Financial Transactions Glossary

TermsDescription
Financial Transaction Classification

The Classification determines the nature of the Financial Transaction, including its notation in the double-entry accounting system (debit or credit). Financial transaction type classifications are predefined in the system and cannot be overridden.

The following Classifications are available:

  • Payment : Used to credit the account. i.e. deduct money from balance
  • Invoice: Used to debit the account. i.e. add money to balance
  • Credit Note: Used to credit the account. i.e. deduct money from balance
  • Refund: Used to debit the account. i.e. add money to balance (Can only be created if a negative account balance exists)
  • Invoice Cancellation: Used to credit the account. i.e. deduct money from balance
  • Payment Cancellation: Used to debit the account. i.e. add money to balance
PaymentA Payment is a financial document issued by a customer to a business to settle an outstanding balance. Payments are crediting Accounts Receivable
InvoiceAn Invoice is a financial document that shows a list of services or physical goods and the prices to be paid for them. Invoices are debiting Accounts Receivable
Credit NoteA Credit Note is a financial document issued by a business to a customer to correct mistakes or adjust the amount that the customer was invoiced. Credit Notes are crediting Accounts Receivable
RefundA Refund is a financial document issued by a business to a customer in order to pay back a specific amount of money. Refunds are typically issued to customers who are not satisfied with the Services or Physical Goods that were provided to them and not to adjust or cancel specific Invoices. Refunds are debiting Accounts Receivable
Invoice CancellationAn Invoice Cancellation is a financial document which is issued to cancel a specific Invoice. Invoice Cancellations are crediting Accounts Receivable
Payment CancellationA Payment Cancellation is a financial document which is used to cancel a specific Payment. Payment Cancellations are debiting Accounts Receivable
Financial Transaction Life Cycle State: 'Draft'A 'Draft' Life Cycle State represents a Financial Transaction which is not yet posted, and can still be edited, posted or rejected in the future. Financial Transactions in a 'Draft' Life Cycle State do not affect the Accounts Receivable Balance.
Financial Transaction Life Cycle State: 'Posted'A 'Posted' Life Cycle State represents a Financial Transactions that can no longer be edited. Financial Transactions in a 'Posted' State affect the Accounts Receivable Balance.
Financial Transaction Life Cycle State: 'Rejected'A 'Rejected' Life Cycle State represents Financial Transactions that went from being 'Draft' to being ''Rejected'' instead of being 'Posted'. 'Rejected' Financial Transactions cannot be edited and do not affect Accounts Receivable Balance.
Due DateThe date by which an Invoice must be settled. Due Date is set either manually or automatically and must always meet predefined configurable system rules.
Issued DateThe date on which a Financial Transaction is issued, either in a 'Draft' or 'Posted' Life Cycle State.
Posted Date

The date on which a Financial Transaction is 'Posted'.

Financial Transactions Key Processes and Concepts

Processes / ConceptDescription

'Cancelling' Vs 'Rejecting' Financial Transactions

Financial Transactions cannot be deleted. If they have been created accidentally, then this can be corrected by using the 'Cancel' or 'Reject' action. Neither action will be taken into consideration by any of the system's financial processes.

  • Use the 'Cancel' action for Invoices and Payments that have already been 'Posted'. The Cancel action creates new Financial Transactions of the respective classification
    • Invoice Cancellation
    • Payment Cancellation 
  • Use the 'Reject' action for all Financial Transaction Classifications, if the Transaction is still is 'Draft' Life Cycle State.
    Reject action will change the Financial Transaction's Life Cycle State to Draft. 
Posting of Financial Transactions

Financial Transactions created in 'Draft' Life Cycle State by using the Save As Draft button can be posted at a later stage by using the ' Post' action.Alternatively, you can set the Life Cycle State of a Financial Transaction directly to 'Posted' by using the SAVE button instead of Save as Draft

  • Use the 'Save as Draft' to save as 'Draft', when you do not want the Financial Transaction to be taken into consideration by any System financial process, yet
  • Use Save to save as 'Posted' and have the Financial Transaction being taken into consideration by System Financial Processes
Allocation of Credit Transactions on Invoices

Allocations are used to allocate Credit Financial Transactions against Invoices, in order to settle any outstanding amount. Allocations are applied automatically by the System based on the allocation principle specified on the active Accounts Receivable Definition.

View Understanding Accounts Receivable as well as Understanding the Allocation Principles for a description of how the allocation principle works in CRM.COM

Financial Transactions Access & Viewing Controls

Business Network Characteristics define the level of access for each record. i.e., whether the record will be available for selection, viewing or editing.

EntityNetwork CharacteristicsDescription

Financial Transaction Types

  • A Type can be applied on a Financial Transaction, by users who belong to one of the Allowed Organisational Units defined in the Type,or by Users who belong to a Group that collaborates with the Allowed Organisational Units, or by Super Users.
Financial Transactions
  • Financial Transaction records can be accessed viewed and modified by Users who belong to the Group defined at the Owned By Group of the related Accounts Receivable, or that belong to a Group that collaborates with the specified Group or by Super Users

Financial Transactions Related Modules

EntityInteraction with the Entity
Accounts ReceivableFinancial Transactions are Posted against Accounts Receivable. The balance of the account is updated when Financial Transactions are posted
BillsFinancial Transactions are included in the Bill as Bill Lines
Wallet TransactionsFinancial Transactions can be related with Wallet Transactions via the Wallet related to the Accounts Receivable. i.e. if configured accordingly, whenever a Financial Transaction is created against the Accounts Receivable, a respective Wallet Transaction can be created against the Wallet.

Financial Transactions  - Business Examples

The following section provides business examples of how the Financial Transactions module is used in CRM.COM.

Posting Refunds after Bank Payment confirmation

Posting Refunds after Bank payment confirmation

Business Requirement

Company ZX would like to create Refunds once a month for its customers with a negative outstanding balance. The Refunds are paid out to thecustomerstrough their bank account. Once the bank makes the Payment to the customer's account, the bank sends a file back to Company ZX with all the successful Payments. Company ZX can theupdatethe customer's accounts balances.

CRM.COM Solution

  • User Process
    All the Refunds should be created in a 'Draft' Life Cycle State and be sent out to the bank. Once the file with the successful Payments is received from the bank, the Refunds should be updated to 'Posted', (automatically) updating the Balance of the account by that amount.

More Information on Posting Refunds can be found at Managing Financial Transactions.

Cancelling Invoices created by Error

 

Cancelling erroneously created Invoices

Business Requirement

Company ZX would like to cancel 'Posted' Invoices that were created by error.

CRM.COM Solution

  • Configuration
    An 'Operations' user should be responsible for cancelling Invoices created by error. 'Admin' users can configure different types of 'Invoice Cancellation Classified Transactions', in order to differentiate between reasons for cancelling an Invoice. For example, Cancellation Error Invoices & Cancellation Complaint Invoices.
  • User Process

    The user should select the Invoice to be cancelled and create a Financial Transaction of the appropriate Type.

    As a result, the Invoice will be available for future reference without affecting the account's Balance. The Financial Transaction 'Invoice Cancellation Type' indicates the reason the Invoice was cancelled. More detailed information can be viewed through the Cancellation's Issue Reason.

 

More Information on Cancelling Invoices can be found at Managing Financial Transactions.

 

Cancelling Payments created by Error

Provide a title for the business example. (Keep simple and short)

Business Requirement

Company ZX would like to cancel Payments that are already 'Posted' that have been created by error.

CRM.COM Solution

  • Configuration
    An 'Operations' user should be responsible for cancelling such Payments. 'Admin' users can configure different types of 'Payment Cancellation Classified Transactions', in order to differentiate between different reasons for cancelling a Payment. For example, Erroneous Payments Cancellation & Erroneously Allocated Payments Cancellation.
  • User Process

    The user should select the Invoice to be cancelled and create a Financial Transaction of the appropriate Type.

    As a result, the Payment will be available for future reference without affecting the account's Balance. The Financial Transaction 'Payment Cancellation Classification' indicates the reason the Payment was cancelled. More detailed information can be viewed through the Cancellation's Issue Reason.

 

More Information on Cancelling Payments can be found at Managing Financial Transactions.

 

Move Payments from Suspense Account to Customer Accounts

Move Payments from Suspense Account to customer accounts

Business Requirement

Company ZX imports Payments from the bank through an import file.
If the intended account is not found the Payment will be created in Company ZX system Suspense account. Back office personnel are responsible to manually check and move the Payments to the correct customer account.

CRM.COM Solution

  • User Process

    Back office operators should follow the process described below:

    Company's ZX Back office personnel should access Company's ZX suspense account daily. The action "Move to Account" should be executed for each of the Payments once the intended account has been determined.

     

More Information on Move Payments from Suspense Account to customer accounts can be found at Managing Financial Transactions.

 

Company ZX issuing an Invoice with a Discount

Company ZX issuing an invoice with Discount

Business Requirement

A customer of Company ZX purchases 2 Cards. He gets a discount for both, 15% for the first one and €20 for the other one. One of the two cards is charged a VAT rate of 0%.

CRM.COM Solution

  • User Process

    Create a new Financial Transaction of Type Invoice. In the Items tab add 2 lines with the following information

    1. Card 1
      • Cost: 100
      • Quantity: 1
      • Discount
        • Discount Percentage: 15%
      • VAT Rate
        • VAT rate:15%
    2. Card 2
      1. Cost: 100
      2. Quantity: 1
      3. Discount
        • Discount Amount: €20
      4. VAT Rate
        • VAT rate: 0%

    System Calculations:

    1. Card 1
      1. VAT Amount: (100-15)*15/100 = 12.75
      2. Subtotal: (100-15+12.75) = 97.75
    2. Card 2
      1. VAT Amount: 0
      2. Subtotal: 80

 

More Information on Issuing Invoices can be found at Managing Financial Transactions.


 

Company ZX - Invoice Due Dates - Fixed Date

Company ZX - Invoice Due Dates - Fixed Date

Business Requirement

Company ZX wants the 15th day of the month as the Invoice 'Due Date'.

CRM.COM Solution

  • Configuration 

    The Accounts Receivable Credit Rule should be set up defining the nth day to be equal to 15 after x months are equal to 1.

  • User Process
    When Posting the Invoice:

    • If the user defines a date, the system either validates the date or returns an error message. e.g. In case the Date of Posting is on 20 May:
    • If the 'Due Date' is Set to 21/05 an "Invalid Due Date" message is returned from the system
    • If the 'Due Date' is Set to 16/06 an "Invalid Due Date" message is returned from the system
    • If the 'Due Date' is Set to 15/06 no error message is returned and the 'Due Date' is saved successfully
  • If the user leaves the 'Due Date' empty the system will set it to 15/06

Business Requirement

Company ZX would like to have the 'Due Date' always set 10 days after the 'Posted Date'.

CRM.COM Solution

  • Configuration
         The Accounts Receivable definition 'Credit Rule' should be set up defining X Days after the transaction's 'Posted Date' ( X = 10)
  • User Process 

    When Posting the Invoice:

    • If the user defines a date, the system either validates the date or returns an error message. e.g. In case the Date of Posting is on 20 May:
      • If the 'Due Date' is Set to 28/05 an "Invalid Due Date" message is returned from the system
      • If the 'Due Date' is Set to 31/05 an "Invalid Due Date" message is returned from the system
      • If the 'Due Date' is Set to 30/06 no error message is returned and the 'Due Date' is saved successfully
    • If the user leaves the 'Due Date' empty then the system will set it to 30/06

Business Requirement

Even though Company ZX would like to allow agents to set the 'Due Date' at a maximum of 10 days after the 'Posted Date', it requires the System to set the 'Due Date' to 5 days after the 'Posted Date'.

CRM.COM Solution

  • Configuration

    The Accounts Receivable definition 'Credit Rule' should be set up defining X Days after transaction's 'Posted Date' (X = 10)

    Proximity range should be set to -5

  • User Process

    When Posting the Invoice:

    • If the user defines a date, the System either validates the date or returns an error message. e.g. In case the Date of Posting is on 20 May:
      • If the 'Due Date' is Set to 28/05 no error message is returned and the 'Due Date' is saved successfully
      • If the 'Due Date' is Set to 31/05 an "Invalid Due Date" message is returned from the system
      • If the 'Due Date' is Set to 30/06 no error message is returned and the 'Due Date' is saved successfully
    • If the user leaves the 'Due Date' empty then the system will set it to 25/05 (the smallest allowed 'Due Date' based on the set 'Proximity Range')

More Information on Invoice Due Dates can be found at Handling Invoice Due Dates.

 

FIFO Versus FIFO & Against Item Principle

FIFO Versus FIFO & Against Item Principle

FIFO Principle

In the following example, we have one Invoice which has already been allocated to a Credit Note using the FIFO model. After a second Invoice is created the first Invoice is cancelled.

  1. Invoice 1: €20
  2. Invoice 2: €10
  3. Credit Note 1: €20
No
Action
Intended Invoices
Allocations
Allocation Type
Allocation amount
Unallocated Amount
1Creation of Invoice 1N/AN/AN/A  
2Creation of Invoice 2N/AN/AN/A  
3Creation of Credit Note 1N/ACredit Note 1 allocated on Invoice 1FIFO20 
4Cancellation of Invoice 1Invoice 1

 

 

   
4a

Credit Note 1 de-allocated from Invoice 1

N/AN/ADe-allocation20 
4b

Creation of Cancellation Invoice 1

N/AInvoice 1 allocated on Cancellation Invoice 1Against Item20 
4cCredit Note 1 allocated on Invoice 2N/ACredit Note 1 allocated on Invoice 2FIFO1010

 

FIFO & Against Item Principle

In the following example, we have 3 Invoices of which the 2 first are allocated from Credit Notes that were intended for the invoices in question. The first Invoice is then cancelled.

  1. Invoice 1: €10
  2. Invoice 2: €20
  3. Invoice 2: €30
  4. Credit Note 1 : €20 (Intended Invoice: Invoice 2)
  5. Credit Note 1 : €10 (Intended Invoice: Invoice 1)
No
Action
Intended Invoice
Allocations
Allocation Type
Allocation amount
Unallocated Amount
1Creation of Invoice 1N/AN/AN/A  
2Creation of Invoice 2N/AN/AN/A  
3Creation of Invoice 2N/AN/AN/A  
4Creation of Credit Note 1Invoice 1Credit Note 1 allocated on Invoice 1FIFO and Against Item100
5Creation of Credit Note 2Invoice 2Credit Note 2 allocated on Invoice 2FIFO and Against Item200
4Cancellation of Invoice 1 

 

 

   
4a

Credit Note 1 de-allocated from Invoice 1

 N/ADe-allocation100
4b

Creation of Cancellation Invoice 1

 Invoice 1 allocated on Cancellation Invoice 1Against Item200
4cCredit Note 1 allocated on Invoice 3 Credit Note 1 allocated on Invoice 3FIFO1010

More Information on FIFO Versus FIFO & Against Item Principle can be found at Using the Allocation Principles.

 

Payment Methods accepted by Company ZX

Payment Methods accepted by Company ZX

Business Requirement

Company ZX only allows its customers to pay using Cash and Credit Cards. It wants to introduce a new way of Payment in order to allow customers to also pay via PayPal. This type of Payments would need to be distinguished on the Payment level as more types of online Payment other than Paypal might be added in the future.

CRM.COM Solution

  • Configuration

    Three Payment Types will need to be configured in the system:

    • Cash
    • Credit Card
    • PayPal

    Two different Payment Types should be created in the Financial Transaction Types Configuration Module:

    • Normal Payment
    • Online Payment

    For each of the 2 Payment Types different Allowed Payment Methods will be configured:

    • Normal Payment
      • Cash
      • Credit Card
    • Online Payment
      • Paypal

More Information on Payment Methods can be found at Configuring Payment Methods.

 


Rejecting Payments Options 

Rejecting Payments Options

Business Requirement

Company ZX allows Payments to be rejected in the following cases:

  • Agent Error
  • System Error
  • On customer request

CRM.COM Solution

  • Configuration

    The following four reasons for Payment rejection should be set up for use in the system:

    • Agent Error
    • System Error
    • On customer Request
    • Other (the user can give an explanation for the rejection in the "Issue Reason" text box

 

More Information on Rejecting Payments Options can be found at Configuring Rejection Reasons.

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