Accounts Receivable

ActivityHD Accounts Receivable supports tracking of customer sales and payments and provides the tools you need to effectively manage cash flow.

Initial setup of Accounts Receivable

First Things First

Efficient operation of Accounts Receivable requires that several types of records be set up before you commence regular data entry. The following discussion indicates the records you need to set up in the order you need to set them up. For your convenience, each section contains a link to a topic that describes how to set up the corresponding records.

General Ledger Setup

GL Accounts

Set up the GL accounts your company needs to accurately record receivables, sales, cost of sales, and inventory due to Accounts Receivable activity.

Evaluate your existing accounts to determine whether you need to add accounts for the following categories:

Accounts Receivable
Sales
Cost of Sales
Inventory
Sales Tax Liability
Bank Accounts
Discounts Given
Adjustments (to receipts)

In addition, you may need to consider accounts in the following categories to handle unapplied payments:

Deferred Revenue
Unearned Income

GL Calendars

For each calendar used to control posting to General Ledger, package-specific posting controls can be defined by period. Be sure to consider whether package-specific posting controls are needed to control postings from AR to GL by period.

If recurring invoices will be set up in Accounts Receivable, GL calendars are associated with the recurring invoices to determine how often they are posted/processed. Ensure that you have GL calendars defined to support the frequencies of any recurring invoices that will be created.

Attributes

Attributes provide additional ways to categorize invoices for reporting. Attributes can also supply the GL accounts used during invoice posting. Invoices can be classified with customizable attributes. Attributes can determine segment(s) of GL accounts and they allow revenue tracking in a different way than revenue types.

Bank Reconciliation Setup

Set up the bank account(s) needed to record receipt activity that will be reconciled in Bank Reconciliation. When the receipt journal entry is merged in GL, bank transactions are created in Bank Reconciliation for Accounts Receivable receipt activity that is tied to a bank account.

Accounts Receivable Setup

The following types of records need to be defined in the Accounts Receivable package:

Salespersons

Salespersons can be defined and assigned to invoices to indicate who has primary responsibility for a sale. A default salesperson can be assigned on each customer and customer location to provide a default salesperson at invoice entry time.

Customer Tax Categories

Customer tax categories group customers for taxability and tax reporting. By default, all customers are considered taxable. Define customer tax categories to assign nontaxable status to certain groups of customers. Taxable customer tax categories can be defined to group customers for tax reporting.

Item Tax Categories

Item tax categories group ARCodes for taxability and tax reporting. By default, all ARCodes are considered taxable. Define item tax categories to assign nontaxable status to certain groups of ARCodes. Taxable item tax categories can be defined to group ARCodes for tax reporting.

Tax Entities

Tax entities are used to compute the sales tax your company must remit to the various tax jurisdictions which affect your company's operations.

Tax Rates

Tax rates can be defined for each level in a tax entity's hierarchy. Each tax rate has an effective date and standard rate (defined as a percentage).

Tax Rate Detail

Tax rate detail can be defined to describe exceptions to a tax rate including:

Overrides to the default taxability of customer tax categories and/or item tax categories.
Overrides to the standard tax rate based on customer tax category and/or item tax category.
Designations of report categories for the Tax Liability Report based on customer tax category and/or item tax category.

Customer Locations

Customer locations are locations where a customer conducts business. Locations can be specified for most operations in Accounts Receivable. A customer can have multiple locations. Locations can be designated as primary, invoice, and/or statement location for a given customer. In addition to typical address and phone information, delivery preferences (print or email) can be specified on invoice and statement locations.

Customer Contacts

Customer contacts are the people associated with a customer with whom your company has a specialized contact relationship.

Customer Classes

Customer classes are used to group customers for reporting and/or billing purposes. Each customer can belong to one customer class. To get the most out of reporting capabilities, group your customers into meaningful classes. The following reports can be run for a particular customer class:

Statements
Aged Invoice Analysis
AR Invoice Payment Analysis
AR Invoices Listing
AR Receipts Listing

Customer classes can also be used to specify GL account masks for groups of customers. The following account masks can be specified:

Receivables
Sales
Cost
Inventory

AR Note Types

Notes can be used to record comments about various Accounts Receivables entities. Note types are used to organize notes. A note type is required on every note entered.

Payment Terms

Payment terms are predefined early payment discount and due date rules. Payment terms can be based on the invoice date or on the end-of-month date. Default payment terms can be assigned to customers. When a customer is selected on an invoice, the default payment terms for the customer load on the invoice.

ARCodes

ARCodes are assigned to the detail lines on an AR invoice. ARCodes provide the following functions:

Categorize the detail line for reporting.
Provide GL account masks for deriving GL account numbers for sales, cost, and inventory accounts.
Control whether the detail line is subject to sales tax.
Control whether the detail line is eligible for discount.

Invoice Schemes

Invoice schemes designate the starting number for sequential numbering of invoices as well as the format for invoice numbers. Invoice schemes are assigned to invoice types. Invoice types categorize invoices. If an invoice scheme is not assigned to an invoice type, invoices of that type must be manually numbered.

Invoice Types

Invoice types are used to categorize invoices and perform the following functions:

Categorize invoices for reporting.
Classify invoices as credit, charge, or finance charge.
Control the GL posting financial sign (debit/credit).
Provide default settings for new invoices (Print Invoice flag, GL batch name, AR account number).
Specify that invoices must be cash only.
Specify an invoice scheme for automatic invoice numbering.

Some of the invoice types you may need include: Invoice, Finance Charge, Credit Memo, Debit Memo, Return.

Finance Methods

Finance methods are user-defined calculation rules for assessing finance charges on past due invoices. Finance methods can be based on the invoice date or the due date and a grace period can be applied. A default finance method can be specified on customer records so that when an invoice is created for a customer, the customer's finance method loads by default on the invoice.

Statement Types

Statement types determine the format of a statement (balance forward or open item). Statement types can also be used for grouping customers for statement generation. For instance, you might group customers by the statement format they should receive or by the frequency in which they should receive a statement.

Customers

Customers are the principal entity of the Accounts Receivable package. Each customer record represents your company's relationship with a single customer. From a customer record, you can access the customer's historical invoices, receipts, and statements as well as information about the customer's locations and contacts.

Deposit Types

Deposit types group deposits to facilitate bank reconciliation. A deposit type provides the default GL batch name and bank account that loads on all receipts for its deposits. If you separate cash and check deposits from MasterCard and Visa deposits, you would need to create deposit types for each one so that the appropriate bank transactions are created. Possible deposit types include: Cash/Checks, MC/Visa, AMEX, Lockbox, PayPal.

Receipt Types

Receipt types are assigned to receipts to provide the following functions:

Categorize receipts for reporting.
Classify receipts as cash, check, credit card, collapsed, or other.
Determine valid deposit types.
Determine if a deposit is required.
Specify an optional receipt reference.

Possible receipt types include: cash, check, MC/Visa, AMEX, EFT.

Recurring Invoices

Recurring invoices provide the information that ActivityHD needs for invoices that are generated on a regular basis. Each recurring invoice has a calendar which determines how often an invoice is generated and an effective date range which determines the time frame over which invoice creation is valid.

Summary Types

Summary types are only available if the Summary Invoice interface is enabled. Summary types determine which transactions are summarized, which customer receives the summary invoice, and how summary invoices are numbered.

How Accounts Receivable interfaces with General Ledger

ActivityHD does not have a "Post AR to GL" process. Instead, each invoice and receipt is recognized in GL when it is merged to GL. Journal entries can be left unmerged indefinitely, allowing most GL accounts to be changed on merged invoices and receipts. Once a journal entry is merged to GL, the invoices and receipts referenced on the journal entry are locked to prevent further changes.

Note

The AR account on an invoice cannot be changed once a payment (receipt) against the invoice is merged.

Accounts Receivable affords great flexibility in defining how receivables activity is recorded in General Ledger. You can define GL account masks on objects such as customer, customer class, ARCode, and attributes. Account masks are applied in a predefined order to determine the GL accounts on the journal entry. For users with appropriate security privileges, GL accounts can also be specified at invoice and receipt entry time.

Invoices

As invoices are merged, journal entries are created in General Ledger. How these journal entries are made is controlled by the GL control setting on the invoice type. The following table delineates the entries made based on the GL control setting on the invoice type:

GL control setting	Debit or Credit	Account	Amount
Debit AR, Credit Sales	Debit	Accounts Receivable	Invoice Amount
	Credit	Sales Tax Liability	Invoice Sales Tax Amount
	Credit	Sales	Invoice Detail Amount
	Debit	Cost of Sales	Invoice Detail Cost
	Credit	Inventory	Invoice Detail Cost
Credit AR, Debit Sales	Credit	Accounts Receivable	Invoice Amount
	Debit	Sales Tax Liability	Invoice Sales Tax Amount
	Debit	Sales	Invoice Detail Amount
	Credit	Cost of Sales	Invoice Detail Cost
	Debit	Inventory	Invoice Detail Cost
Positive Amounts	Debit (if amount is positive)/Credit (if amount is negative)	Accounts Receivable	Invoice Amount
	Credit (if amount is positive)/Debit (if amount is negative)	Sales Tax Liability	Invoice Sales Tax Amount
	Credit (if amount is positive)/Debit (if amount is negative)	Sales	Invoice Detail Amount
	Debit (if amount is positive)/Credit (if amount is negative)	Cost of Sales	Invoice Detail Cost
	Credit (if amount is positive)/Debit (if amount is negative)	Inventory	Invoice Detail Cost

Accounts Receivable Account

The entire Accounts Receivable account is derived from the account masks specified at the following levels in the order listed:

Invoice type
Attribute item(s) (in reverse display order)
Customer
Customer class

Sales Tax Liability Account

The entire Sales Tax Liability account is derived from the account masks specified at the following levels in the order listed:

Attribute item(s) (in reverse display order)
Invoice tax entity

Note

You may want to have separate tax liability accounts for each tax jurisdiction. For instance, in Canada you may want to track General Sales Tax (GST) and Provincial Sales Tax (PST) in separate tax liability accounts. In Louisiana, you may want different liability accounts for each parish since taxes are remitted to them individually. On the other hand, you may prefer the simplicity of using a single tax liability account for all tax entities.

Sales Account

The entire Sales account is derived from the account masks specified at the following levels in the order listed:

ARCode
Attribute item(s) (in reverse display order)
Customer
Customer class

Cost of Sales Account

The entire Cost of Sales account is derived from the account masks specified at the following levels in the order listed:

ARCode
Attribute item(s) (in reverse display order)
Customer
Customer class

Inventory Account

The entire Inventory account is derived from the account masks specified at the following levels in the order listed:

ARCode
Attribute item(s) (in reverse display order)
Customer
Customer class

Receipts

As receipts are merged, journal entries are created in General Ledger. The journal entry made as a result of the receipt posting is described in the following table:

Debit or Credit	Account	Amount
Debit	Bank Account	Receipt Amount
Debit	Discount Account	Discount Amount(s) from Receipt Detail
Debit	Adjustment Account	Adjustment Amount(s) from Receipt Detail
Credit	Accounts Receivable Account	Payment Amount from Receipt Detail

Bank Account

The bank account is specified on the receipt at receipt entry time. If the receipt is tied to a deposit, the bank account from the deposit is automatically used. Each deposit inherits the bank account from its deposit type.

If the receipt is not tied to a deposit, one of the following methods is used to determine the bank account:

Use the bank account assigned to the receipt type.
Use the bank account that defaults from the Options dialog box for receipts.
Manually enter a bank account on the receipt (if the user has "Accounts" permission for the Receipts window).

Discount Account

The discount account is specified on the receipt at receipt entry time. The discount account can default from the Options dialog box or can be entered manually on the receipt (if the user has "Accounts" permission for the Receipts window).

Adjustment Account

The adjustment account is specified on the receipt at receipt entry time. The adjustment account can default from the Options dialog box or can be entered manually on the receipt (if the user has "Accounts" permission for the Receipts window).

Accounts Receivable Account

The Accounts Receivable account comes from the invoice associated with the payment on the receipt detail line.

Validate GL function

ActivityHD provides a validation process for invoices and receipts which allows changes to account masks/settings at the various available levels. These changes are subsequently applied to the affected invoices and receipts (where changes are still allowed). The following table shows the account masks/settings that can be changed:

Area	Account Masks/Settings
Invoice type	Receivables account
ARCode	Sales account Cost account Inventory account
Tax entity	Sales tax account
Attribute items	Receivables account Sales account Cost account Inventory account Sales tax account
Customer	Receivables account Sales account Cost account Inventory account
Customer class	Receivables account Sales account Cost account Inventory account
Deposit	Bank account

Note

If accounts on an invoice have been manually overridden, the overridden fields are not affected by the validation process. Manual overrides are designated in purple in the AR Invoice window.