Configure a letter of credit

  • 10 minutes

Before importing the letters of credit, you must complete the setup for bank facilities, posting profiles, a bank facility agreement, and vendor bank details.

Facility agreements cannot have overlapping dates.

For example, if an agreement extends from January 01, 2019 to August 31, 2019, you cannot create another facility agreement that begins or ends within that period.

The following image shows the facility groups on the Bank facilities page in Cash and bank management > Setup.

Screenshot of the facility groups on the Bank facilities page.

Activate the letter of credit as a bank document

Activate the letter of credit as a bank document before you initiate transactions that involve letters of credit.

  1. Go to Cash and Bank Management > Setup > Cash and Bank Management parameters.
  2. Expand the Bank document FastTab.
  3. Set the Enable import letter of credit option to Yes to activate the letter of credit.
  4. Close the page to save your changes.

When the Bank document type field is set as Letter of credit, the purchase order is displayed in the list of letters of credit in the Cash and bank management module.

Cash and bank management > Setup > Cash and bank management parameters

Screenshot of the Cash and bank management parameters page.

Set up the bank facilities and posting profiles

You can set up bank facility types and bank facility groups on the Bank facilities page. After the bank posting profile is set up, you can create facility agreements.

  1. Select Cash and bank management > Setup > Bank facilities.
  2. On the Facility groups link, select New to create a new bank facility group.
  3. In the Facility group and Description fields, enter the bank facility group name and description.
  4. Select the Facility types link, and then select New to create a new facility type.
  5. Enter a unique code in the Facility type field, and then in the Facility group and Facility nature fields, select the group and nature of the bank facility.
  6. Close the page to save your changes.
  7. Select Cash and bank management > Setup > Bank documents > Bank documents posting profile.
  8. In the Account/Group number field, specify your account/group number.
  9. In the Settle account field, select the main account for settlement. This account is used when you are calculating the cash flow forecast.
  10. In the Charges account field, select the account for expense transactions.
  11. In the Margin account field, select the account for the margin transaction. This account is debited when the opening margin is posted and credited when the payment is posted. A margin is an advance payment to the bank that is adjusted by the bank when the final settlement is made by the buyer.
  12. Close the page to save your changes.

Cash and bank management > Setup > Bank facilities > Facility types

Screenshot of the Facility types on the Bank facilities page.

Create a bank facility agreement

You can create bank facility agreements that record various facilities that are provided by the bank. Bank documents can be used in transactions only after facility agreements are created. The bank assigns a limit for the letter of credit, which is recalculated every time a letter of credit transaction is recorded.

When a facility agreement ends, you can create a new version of the agreement, with new starting and ending dates, by extending the old agreement.

  1. Go to Cash and bank management > Letters of credit > Bank facility agreements.

  2. Select New.

  3. In the Agreement number field, enter the agreement number according to the agreement with the bank.

  4. In the Bank account field, enter the account number at the issuing bank.

  5. In the Start date field, enter a date and time.

  6. In the End date field, enter a date and time.

  7. Expand the General section.

  8. Select Add line.

  9. In the Facility type field, select the drop-down button to open the lookup.

  10. In the list, find and select the desired record. The Amount used field displays the amount that is currently used for the letter of credit.

  11. In the Limit field, enter the facility amount that was negotiated with the bank.

  12. Select Save.

  13. In the Bank facility agreements page, select the facility agreement that is no longer active.

  14. Select Extend to open the drop-down dialog box.

    Cash and bank management > Letters of credit > Bank facility agreements > Extend

    Screenshot of the Extend the bank agreements drop-down dialog box.

  15. In the New agreement number field, type a value.

  16. In the End date field, enter a date and time.

  17. Select Extend.

  18. The value in the Start date field of the extended agreement is the day after the selected agreement’s end date.

  19. The Amount used field is set to zero because this is a newly created agreement.

  20. Close the page to save your changes.

Set up vendor bank accounts

Vendor bank accounts must be specified for vendors to have the letter of credit transactions recorded appropriately.

To learn how to set up vendor accounts, go to Configure Accounts payable in Dynamics 365 Finance .