Receivables Application Rule Sets
Application Rule Sets determine the steps Receivables uses to apply partial payments to your customer’s open debit items and how discounts affect the open balance for each type of associated charges.
Transactions usually consist of line items, tax, freight, and finance charges, or a combination of these. Depending on your business needs, you can reduce each associated charge proportionately, close the outstanding tax amount first, or apply a payment to the line and tax amounts and use any remaining portion to reduce the freight and finance charges.
Application Rule Sets let you specify how Receivables reduces the balance of your open debit items when you:
- Apply a receipt to an invoice or debit memo
- Run Post QuickCash
You can assign a rule set to each of your transaction types and enter a default rule set in the System Options window. Receivables uses the following hierarchy to determine which application rule set to use, stopping when one is found:
- Transaction Type
- System Options
Note: Receivables Application Rule Sets always apply payments and discounts to the gross line amount (the net line amount plus any associated tax amount). For more
information, see: Tax Inclusive in the Oracle Receivables Tax Manual.
You can view these rule sets and create your own rule sets in the Application Rule Sets window.
This rule set first applies the payment to the open line amount, and then applies the remaining amount to the associated tax. If the payment is greater than the sum of the line and tax, Receivables attempts to close each open item by applying the remaining amount in the following order, stopping when the payment has been fully applied:
1. Freight
2. Finance charges
Any remaining receipt amount is applied using the Overapplication Rule. This is the default application rule set in the System Options window.
This rule set applies a proportionate amount of the payment to the open line and tax amount for each line. If the payment is greater than the sum of the open line and tax amounts, Receivables attempts to close each open item by applying the remaining amount in the following order, stopping when the payment has been fully applied:
1. Freight
2. Finance charges
Any remaining receipt amount is applied using the Overapplication Rule.
Prorate All
This rule set applies a proportionate amount of the payment to each open amount associated with a debit item (for example, any line, tax, freight, and finance charge amounts for this item).
Receivables uses the following formula to determine the applied amount:
Overapplication Rule
Each application rule set includes an Overapplication Rule by default.
This rule applies any remaining receipt amount after the balance due for all charges has been reduced to zero. If the transaction type for the debit item has the Allow Overapplication check box set to Yes, Receivables applies the remaining amount to the lines, making the balance due negative. If the item’s transaction type has Allow Overapplication set to No, you can either place the remaining amount on–account or leave it ’Unapplied’.
When using AutoLockbox, Receivables uses your AutoCash Rule Set to determine how to apply the remaining amount.
An additional consideration is the situation in which you apply a payment to a transaction that has mixed sign balances. ’Mixed sign balances’ indicates that not all of the charges that make up a transaction have the same sign (positive or negative). In this case, the procedure Receivables uses to apply a payment is different than when applying to transaction amounts that are all positive or all negative (i.e. ”same sign” balance).
When you apply a payment to a transaction that has mixed sign balances, Receivables applies the payment only to those amounts that have the same sign as the payment. For example, if the payment is for a positive amount (i.e. not a credit memo), Receivables only reduces the charges that have a positive balance; any negative balances are not affected.
As with transactions having a same sign balance, Receivables will apply any remaining amounts according to the verapplication rule assigned to your Application Rule Set.
Notes:
AutoCash rule sets decide which rules are applied to select the transactions to be applied for the receipt. Once that is done Application rule set decides how the open balances of the customer are applied i.e the sequence in which the line amount/tax/fright are deducted from open balance.
Example : You create a receipt of $1000 for a customer which has 4 different invoices open. AutoCash rule ‘ll decide the sequences of the invoice in which the payment ‘ll be applied i.e INV1, INV3, INV4 and INV2.
Now when INV1 is selected, the application rule set‘ll decide which amount (Line, Tax or Freight) ‘ll be applied first and next.
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