Centralized payments for Accounts payable

Organizations that include multiple legal entities can create and manage payments by using a single legal entity that handles all payments. Therefore, the same payments don't have to be entered in multiple legal entities. This article provides examples that show how posting for centralized payments is handled in various scenarios.

Organizations that include multiple legal entities can create and manage payments by using a legal entity that handles all payments. Therefore, the same payments don't have to be entered in multiple legal entities. Additionally, the organization saves time, because the payment process is streamlined.

In a centralized payments organization, there are many legal entities for operations, and each operating legal entity manages its own vendor invoices. Payments for all the operating legal entities are generated from a single legal entity, which is known as the legal entity of the payment. During the settlement process, the applicable due-to and due-from transactions are generated. You can specify which legal entity in the organization receives the realized gain or realized loss transactions, and how cash discount transactions that are related to a cross-company payment are handled.

The following examples illustrate how posting is handled in various scenarios. The following configuration is assumed for all these examples:

  • The legal entities are Fabrikam, Fabrikam East, and Fabrikam West. Payments are made from Fabrikam.
  • The Post cash discount field on the Intercompany accounting page is set to Legal entity of the invoice.
  • The Post currency exchange gain or loss field on the Intercompany accounting page is set to Legal entity of the payment.
  • The vendor Fourth Coffee is set up as a vendor in each legal entity. The vendors from the various legal entities are identified as the same vendor because they share the same global address book ID.
Directory ID Vendor account Name Legal entity
1050 3004 Fourth Coffee Fabrikam
1050 100 Fourth Coffee Fabrikam East
1050 3004 Fourth Coffee Fabrikam West

Fabrikam East has an open invoice for vendor account 100, Fourth Coffee. Fabrikam enters and posts a payment to Fabrikam vendor account 3004, Fourth Coffee. The payment is settled with the open invoice.

Invoice is posted in Fabrikam East for vendor 100

Account Debit amount Credit amount
Expense (Fabrikam East) 600.00
Accounts payable (Fabrikam East) 600.00

Payment is generated and posted in Fabrikam for vendor 3004

Account Debit amount Credit amount
Accounts payable (Fabrikam) 600.00
Cash (Fabrikam) 600.00

Fabrikam payment is settled with Fabrikam East invoice

Fabrikam posting

Account Debit amount Credit amount
Due from Fabrikam East (Fabrikam) 600.00
Accounts payable (Fabrikam) 600.00

Fabrikam East posting

Account Debit amount Credit amount
Accounts payable (Fabrikam East) 600.00
Due to Fabrikam (Fabrikam East) 600.00

Fabrikam East has an open invoice for vendor 100, Fourth Coffee. The invoice has a 20.00 cash discount available. Fabrikam enters and posts a payment of 580.00 for Fabrikam vendor 3004, Fourth Coffee. The payment is settled with the open Fabrikam East invoices. The cash discount is posted to the legal entity of the invoice, Fabrikam East.

Invoice is posted in Fabrikam East for Fabrikam East vendor 100

Account Debit amount Credit amount
Expense (Fabrikam East) 600.00
Accounts payable (Fabrikam East) 600.00

Payment is generated and posted in Fabrikam for Fabrikam vendor 3004

Account Debit amount Credit amount
Accounts payable (Fabrikam) 580.00
Cash (Fabrikam) 580.00

Fabrikam payment is settled with Fabrikam East invoice

Fabrikam posting

Account Debit amount Credit amount
Due from Fabrikam East (Fabrikam) 580.00
Accounts payable (Fabrikam) 580.00

Fabrikam East posting

Account Debit amount Credit amount
Accounts payable (Fabrikam East) 580.00
Due to Fabrikam (Fabrikam East) 580.00
Accounts payable (Fabrikam East) 20.00
Cash discount (Fabrikam East) 20.00

Fabrikam East has an open invoice for vendor 100, Fourth Coffee. Fabrikam enters and posts a payment for Fabrikam vendor 3004, Fourth Coffee. The payment is settled with the open Fabrikam East invoice. A currency exchange loss transaction is generated during the settlement process.

  • Exchange rate for euros (EUR) to U.S. dollars (USD) as of the invoice date: 1.2062
  • Exchange rate for EUR to USD as of the payment date: 1.2277

Invoice is posted in Fabrikam East for Fabrikam East vendor 100

Account Debit amount Credit amount
Expense (Fabrikam East) 600.00 EUR / 723.72 USD
Accounts payable (Fabrikam East) 600.00 EUR / 723.72 USD

Payment is generated and posted in Fabrikam for Fabrikam vendor 3004

Account Debit amount Credit amount
Accounts payable (Fabrikam) 600.00 EUR / 736.62 USD
Cash (Fabrikam) 600.00 EUR / 736.62 USD

Fabrikam payment is settled with Fabrikam East invoice

Fabrikam posting

Account Debit amount Credit amount
Due from Fabrikam East (Fabrikam) 600.00 EUR / 736.62 USD
Accounts payable (Fabrikam) 600.00 EUR / 736.62 USD
Realized loss (Fabrikam) 0.00 EUR / 12.90 USD
Due from Fabrikam East (Fabrikam) 0.00 EUR / 12.90 USD

Fabrikam East posting

Account Debit amount Credit amount
Accounts payable (Fabrikam East) 600.00 EUR / 736.62 USD
Due to Fabrikam (Fabrikam East) 600.00 EUR / 736.62 USD
Due to Fabrikam (Fabrikam East) 0.00 EUR / 12.90 USD
Accounts payable (Fabrikam East) 0.00 EUR / 12.90 USD

Fabrikam East has an open invoice for vendor 100, Fourth Coffee. The invoice has a cash discount available, and a sales tax transaction is generated. Fabrikam posts a payment for Fabrikam vendor 3004, Fourth Coffee. The payment is settled with the open Fabrikam East invoice. A currency exchange loss transaction is generated during the settlement process. The cash discount is posted to the legal entity of the invoice (Fabrikam East), and the currency exchange loss is posted to the legal entity of the payment (Fabrikam).

  • Exchange rate for EUR to USD as of the invoice date: 1.2062
  • Exchange rate for EUR to USD as of the payment date: 1.2277

Invoice is posted and a tax transaction is generated in Fabrikam East for vendor 100

Account Debit amount Credit amount
Expense (Fabrikam East) 564.07 EUR / 680.38 USD
Sales tax (Fabrikam East) 35.93 EUR / 43.34 USD
Accounts payable (Fabrikam East) 600.00 EUR / 723.72 USD

Payment is generated and posted in Fabrikam for vendor 3004

Account Debit amount Credit amount
Accounts payable (Fabrikam) 588.72 EUR / 722.77 USD
Cash (Fabrikam East) 588.72 EUR / 722.77 USD

Fabrikam payment is settled with Fabrikam East invoice

Fabrikam posting

Account Debit amount Credit amount
Due from Fabrikam East (Fabrikam) 588.72 EUR / 722.77 USD
Accounts payable (Fabrikam) 588.72 EUR / 722.77 USD
Realized loss (Fabrikam) 0.00 EUR / 12.66 USD
Due from Fabrikam East (Fabrikam) 0.00 EUR / 12.66 USD

Fabrikam East posting

Account Debit amount Credit amount
Accounts payable (Fabrikam East) 588.72 EUR / 722.77 USD
Due to Fabrikam (Fabrikam East) 588.72 EUR / 722.77 USD
Due to Fabrikam (Fabrikam East 0.00 EUR / 12.66 USD
Accounts payable (Fabrikam East) 0.00 EUR / 12.66 USD
Accounts payable (Fabrikam East) 11.28 EUR / 13.61 USD
Cash discount (Fabrikam East) 11.28 EUR / 13.61 USD

Example 5: Vendor credit note with primary payment

Fabrikam generates a payment of 75.00 for vendor 3004, Fourth Coffee. The payment is settled with an open invoice for Fabrikam West vendor 3004 and an open credit note for Fabrikam East vendor 100. The payment is selected as the primary payment on the Settle transactions page.

Invoice is posted to Fabrikam West for vendor 3004

Account Debit amount Credit amount
Expense (Fabrikam West) 100.00
Accounts payable (Fabrikam West) 100.00

Credit note is posted to Fabrikam East for vendor 100

Account Debit amount Credit amount
Accounts payable (Fabrikam East) 25.00
Purchase returns (Fabrikam East) 25.00

Payment is posted to Fabrikam for vendor 3004

Account Debit amount Credit amount
Accounts payable (Fabrikam) 75.00
Cash (Fabrikam) 75.00

Fabrikam payment is settled with Fabrikam West invoice and Fabrikam East credit note

Fabrikam posting

Account Debit amount Credit amount
Accounts payable (Fabrikam) 25.00
Due to Fabrikam East (Fabrikam) 25.00
Due from Fabrikam West (Fabrikam) 100.00
Accounts payable (Fabrikam) 100.00

Fabrikam East posting

Account Debit amount Credit amount
Due from Fabrikam (Fabrikam East) 25.00
Accounts payable (Fabrikam East) 25.00

Fabrikam West posting

Account Debit amount Credit amount
Accounts payable (Fabrikam West) 100.00
Due to Fabrikam (Fabrikam West) 100.00

Example 6: Vendor credit note without primary payment

Fabrikam generates a payment of 75.00 for vendor 3004, Fourth Coffee. The payment is settled with an open invoice for Fabrikam West vendor 3004 and an open credit note for Fabrikam East vendor 100. The payment isn't selected as the primary payment on the Settle transactions page.

Invoice is posted to Fabrikam West for vendor 3004

Account Debit amount Credit amount
Expense (Fabrikam West) 100.00
Accounts payable (Fabrikam West) 100.00

Credit note is posted to Fabrikam East for vendor 100

Account Debit amount Credit amount
Accounts payable (Fabrikam East) 25.00
Purchase returns (Fabrikam East) 25.00

Payment is posted to Fabrikam for vendor 3004

Account Debit amount Credit amount
Accounts payable (Fabrikam) 75.00
Cash (Fabrikam) 75.00

Fabrikam payment is settled with Fabrikam West invoice and Fabrikam East credit note

Fabrikam posting

Account Debit amount Credit amount
Due from Fabrikam West (Fabrikam) 75.00
Accounts payable (Fabrikam) 75.00

Fabrikam East posting

Account Debit amount Credit amount
Due from Fabrikam West (Fabrikam East) 25.00
Accounts payable (Fabrikam East) 25.00

Fabrikam West posting

Account Debit amount Credit amount
Accounts payable (Fabrikam West) 75.00
Due to Fabrikam (Fabrikam West) 75.00
Accounts payable (Fabrikam West) 25.00
Due to Fabrikam East (Fabrikam West) 25.00