Cash application in advanced bank reconciliation

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Cash application refers to the process of matching incoming customer payments to the corresponding invoices or open receivables in the system. When customers make payments, whether by bank transfer, check, or electronic payment, the system records these transactions in the bank statement.

Prerequisites

Before your organization can use cash application in advanced bank reconciliation, you must complete various prerequisites.

1. Go to the Feature management workspace and turn on the Modern bank reconciliation, Enable prepayment and posting profile when generating payment journal in advanced bank reconciliation, and Enable default descriptions for advanced bank reconciliation features.
2. After you turn on the required features in the Feature management workspace, complete the setup of the default customer payment journal name and the default vendor payment journal name for the bank account.
3. Import a bank statement.

Perform cash application on the reconciliation worksheet

To perform cash application on the reconciliation worksheet, follow these steps.

1. Go to Cash and bank management > Bank statement reconciliation > Bank reconciliation and open or create a bank reconciliation worksheet.
2. Select the Unmatched transactions tab and then select the bank statement transactions that you want to post to the general ledger.
3. Select Generate payment journal.
4. On the Generate payment journal page, set the following fields:
   • Payment type
   • Customer account of vendor account
   • Method of payment
   • Accounting date
   • Bank transaction type
   • Financial dimensions
   • Financial tags
5. Select Generate payment to post the bank statement as a customer or vendor payment journal.
6. Select Settle transactions to further settle this bank statement transaction with open invoices.

Perform cash application by using matching rules

Your next task is to perform cash application by using matching rules. This process involves settling customer invoices, generating vendor payments, and generating customer payments.

Settle customer invoices

Your organization can use matching rules to automatically settle open customer invoices by going to Cash and bank management > Setup > Advanced bank reconciliation setup > Reconciliation matching rules.

To create a matching rule, follow these steps:

1. Select New in the Action Pane.
2. Enter a Matching rule and Name.
3. In the Action field, select Settle customer invoice.
4. Expand the Step 1: Find statements to generate customer payment journals FastTab and then define your required criteria. By adding a statement to generate customer payment journals, you're filtering the relevant bank statement lines to run against the rule.
5. Expand the Step 2: Match open invoices FastTab and then select Add to match open invoices. By doing so, you're matching bank statement lines with the open customer invoices in the legal entity.
6. Expand the Step 3: Customer payment journal parameters FastTab.
7. Select Add and then define the required criteria.
8. Select Financial details and then set the Default method of payment, Default bank transaction type, Accounting date, and Financial dimensions values.
9. Select Save and Activate to activate the reconciliation matching rules.

Generate vendor payments

To generate vendor payments, follow this process:

1. Go to Cash and bank management > Setup > Advanced bank reconciliation setup > Reconciliation matching rules.
2. Select New and then define the Matching rule and Name.
3. In the Action field, select Generate vendor payment.
4. Expand the Step 1: Find statement lines to generate vendor payment FastTab.
5. Select Add and then define the criteria on the line.
6. Expand the Step 2: Vendor payment parameters FastTab and then select Add.
7. Define the criteria on the line and then select Financial details.
8. Define the Vendor account, Accounting date, Method of payment, Bank transaction type, and Financial dimensions values.
9. Select Save and Activate.

Generate customer payments

To generate customer payments, follow these steps.

1. Go to Cash and bank management > Setup > Advanced bank reconciliation setup > Reconciliation matching rules.
2. Select New and then define the Matching rule and Name.
3. In the Action field, select Generate customer payment.
4. Expand the Step 1: Find statements to generate customer payment journals and Step 2 (Optional): Identify customer accounts through invoice matching FastTabs and then define the required criteria.
5. Expand the Step 3: Customer payment journal parameters FastTab and then select Add.
6. After defining the required information on the line, select Financial details.
7. Define the following fields:
   • Automatic customer account matching
   • Customer account
   • Accounting date
   • Default method of payment
   • Default bank transaction type
   • Financial dimensions
8. Select Save and Activate.

Add efficiency with the enhanced Bank reconciliation report

The Advanced bank reconciliation feature in Finance streamlines the reconciliation process by enhancing the Bank reconciliation statement report. The report includes updated header information, such as company and bank ending balances or reconciled and unreconciled amounts. The body of the report displays transactions based on their reconciliation status. Additionally, the system saves a snapshot of the report when the bank reconciliation worksheet is marked as reconciled, allowing cash clerks to retrieve data from the snapshot instead of real-time transaction tables for future reports.