Best Practices for

Oracle Receivables

Cathy Cakebread
Consultant
NorCal OAUG Training Day 2009

Copyright © 2009 - Cathy Cakebread 1

Agenda
 Introduction
 Cash Application

◦ Setup
◦ Processing
 Transactions
◦ Setup
◦ Processing
 Adjustments
◦ Setup
◦ Processing
 Close and Reconciliation
 Separation of Duties

Copyright © 2009 - Cathy Cakebread 2

Cash Application - Setup
 Note: Bank Accounts Are Usually Shared
With Accounts Payable
 Ideal To Use A Slightly Different GL Account

(e.g., Subaccount) for Cash Than AP Uses

for Reconciliation Purposes
 Watch Accounts You Use!!

◦ Can Cause Serious Issues

Copyright © 2009 - Cathy Cakebread 3

Receipt Classes
Setup  Receipts  Receipt Classes

Copyright © 2009 - Cathy Cakebread 4

 Receipt Classes –
Payment Methods
 Cash – Should Be The Only Field That Uses
A Real Cash Account
 Receipt Confirmation – For Credit Cards

And Automatic Receipts – Should Be A

Unique Account
 Remittance - For Credit Cards And

Automatic Receipts – Should Be A Unique

Account
 Bank Charges – Should be An Expense

Account

Copyright © 2009 - Cathy Cakebread 5

And…
 Unapplied Receipts – Should Be A Unique
Account (Not AR Or Cash Account!)
 Unidentified Receipts – May By The Same As

The Unapplied Account But Better If Different (Not

AR Or Cash Account!)
 On Account Receipts – Ideally Unique Account =

A “Liability” - (Not AR Or Cash Account!)

 Unearned Discounts – Unique Expense Account

(Receivables Activity)
 Earned Discounts – May Be The Same As

Unearned But Ideally Unique (Receivables Activity)

Copyright © 2009 - Cathy Cakebread 6

 Cash Accounting
Apply Receipt Immediately to An Invoice
Debit Credit
Cash (Receipt Class) Unapplied Cash (Receipt Class)
Unapplied Cash (Receipt Class) AR (Based On The Invoice You
Are Paying)
Note: 4 Sided Entry
Apply Receipt Immediately to An Invoice With A Discount
DEBIT Credit
Cash (Receipt Class) Unapplied Cash (Receipt
Discount (Receipt Class - Class)
Based On Whether Earned Or AR (From The Invoice)
Unearned)
Unapplied Cash (Receipt
Class)

Copyright © 2009 - Cathy Cakebread 7

 And More Cash Accounting
Leave As Unapplied
DEBIT CREDIT
- Cash (Receipt Class) - Unapplied Cash (Receipt Class)

Apply Unapplied Amount

DEBIT CREDIT
- Unapplied Cash - AR (Based on the Invoice(s)
(Receipt Class) You Are Paying)

Unapply and Re-Apply

DEBIT
- AR (From the Original Invoice CREDIT
That You Are Unapplying - Unapplied Cash (Receipt Class)
- Unapplied Cash (Receipt Class) - AR (Based on New the Invoice(s))

Copyright © 2009 - Cathy Cakebread 8

Lockbox
 Ideally:
◦ Include Both Invoice Number AND Amount From Customer
Remittance Advise
 Can Take Months To Establish With Your Bank
 “Auto” Lockbox Is Not “Automatic” Receipts
◦ Considered To Be Manual
 Work With Bank To Improve Quality Of Data
Received
◦ Provide Examples
 Complete Batches Only!
◦ Consistent With Bank Batches
 Allow Payment of Unrelated Invoices? Never!

Copyright © 2009 - Cathy Cakebread 9

Processing Cash
 Closed Batch – Eek!
◦ Meaningless!!!
 Only Use On Account If It Truly Is “Cash In Advance” Or
Prepayment
 Resolve Unapplied And Unidentified ASAP
 Prompt Payment Discounts?? May Be An Issue Again

With Current Economy

 Non-AR Cash (Miscellaneous Cash)

◦ Process All In AR
◦ Predefine As Much As Is Possible
◦ Watch Account Controls
 Re-Enter In New Period (e.g., for Reverse and Re-Enter)
◦ Use Special Day E.G., Sunday

Copyright © 2009 - Cathy Cakebread 10

And…
 Naming Conventions
◦ Batch Names
 Deposit Date – Bank
 01212009-boa
◦ Lockbox Batch Names
 Deposit Date – Bank
 01212009-boa
 Reverse Receipts:
◦ Debit Memo Vs. Re-open Invoice
 Debit Memo Rewards Them For Bouncing A Check
 New Due Date
 Utilize Controls for Cash Received In House

Copyright © 2009 - Cathy Cakebread 11

Credit Card Processing
 Always Protect Customer Credit Card Numbers!
◦ Only Show First 4 or Last 4
 Auto Schedule Processes – Available In 11.5.10+
 Quickly Resolve Items Stuck In Confirm And
Remit Status
 Use Cash Management To Clear Using Actual
Bank Data (If Possible)
 Pre-Authorize? Re-Auth Time Frame?
 Verify That All Transactions Were Actually Passed
from the Service Provider

Copyright © 2009 - Cathy Cakebread 12

Credit Card Accounting Impact
(In AR ONLY)
Activity Debit Credit

Create Receipt Confirmation Account AR (Based on the

(AR Trade Credit Card Invoice)
Clearing?? Use New  
Unique Account!)  

Remit Receipt Remittance Account Confirmation Account

(Use the same (Offsets the
account for Confirmation
Remittance and Account)
Confirmation?)  
Ideally – Use a
Different Account)
Clear Cash Remittance Account
(Offsets the
Remittance Account)
 

Note: The invoice is marked as closed when the receipt is

created, not when the cash is deposited!

Copyright © 2009 - Cathy Cakebread 13

Transactions - Setup
Setup  Transactions  Transaction Types

Copyright © 2009 - Cathy Cakebread 14

Transaction Types
 Natural Application Only!!
 Allow Overapplication – Never!!
 Use Meaningful Names

◦ Especially First 4 Characters

◦ E.G., PIGI –
 Palo Alto International Government Invoices
◦ Selection Tool For Standard Reports
 And – Numbering
◦ Noticeably Different From Sales Order Numbers With Enough
Numbers to Extend Into the Future
 At Least One Transaction Type Per AR Account
 Primary Driver For Accounts Used In AutoAccounting
 Utilize Chargebacks? Deposits?

Copyright © 2009 - Cathy Cakebread 15

AutoAccounting
Setup  Transactions  AutoAccounting

ACCOUNTING AUTO FREIGHT RECEIVABLE REVENUE TAX UNBILLED UNEARNED

FLEXFIELD INVOICE RECEIVABLE REVENUE
SEGMENTS CLEARING
(Possible Default -Salesreps* - Salesreps -Salesreps -Salesreps - Salesreps* -Salesreps* -Salesreps*
Sources) - Standard - Standard -Transaction -Standard - Standard -Standard Lines -Standard Lines
Lines Lines Types Lines Lines* -Transaction -Transaction
-Transaction -Transaction -Transaction - Taxes Types Types
Types Types Types -Transaction
Types

Transaction Transaction Transaction Transaction Transaction Transaction Transaction

Company Types Types Types Types Types Types Types
Transaction Transaction Transaction Standard Taxes Standard Lines Standard Lines
Division Types Types Types Lines
Transaction Transaction Transaction Standard Taxes Standard Lines Standard Lines
Department Types Types Types Lines
Transaction Transaction Transaction Standard Taxes Standard Lines Standard Lines
Account Types Types Types Lines
Transaction Transaction Transaction Standard Taxes Standard Lines Standard Lines
Subaccount Types Types Types Lines

Special use AutoInvoice - - Bill in Arrears - Bill in Advance

where - Guarantees - Guarantees
revenue not = - Deposits
qty * price

Copyright © 2009 - Cathy Cakebread 16

Transaction - Processing
 AutoInvoice Frequency?
◦ Clear Exceptions ASAP – Have Process In Place
◦ Deal With Credits For Closed Invoices?
 Approvals for Imported Credit Memos?
 Manual Items

◦ Debit Memos – Proper Controls?

◦ Credit Memos – Approvals?
 Are the Actual Forms Locked up?
 Have All Interfaced Items Made It?

◦ How do You Know? Who is Responsible?

Copyright © 2009 - Cathy Cakebread 17

Revenue Recognition
 Revenue Recognition
◦ SOP-97, 98 - AICPA – Statement of Position
◦ SAB 101 – SEC - Staff Accounting Bulletin
 Do You Have Items Where Revenue Can’t Be
Recognized Upon Shipment?
 Does the Person Entering the Order Know When the
Revenue Should Be Recognized?
◦ When Do You Know? How?
◦ What Determines When Revenue May Be
Recognized?
 Do You Have Standard Payment Terms?
◦ Do You Ever Have Exceptions?
 Do You Have a Return Policy? e.g., Full Money Back in
30 Days?
Copyright © 2009 - Cathy Cakebread 18
Impacts Revenue Recognition
 Do You Use “Arrangements” With Your Customers
(Where the Revenue for One Invoice May Not Be
Recognized Until the Subsequent Items Ship)?
 How Do You Deal With “Revenue” for Invoices Where
You Don’t Expect to Receive Payment?
 Do You Use Standard Pricing?
◦ How Do You Deal With Variable Pricing and Revenue
Recognition?
 How Do You Handle Discounts With Bundled Products?
 Do You Sell ‘Beta Products’?
◦ Or ‘Future’ Products
 How Does Revenue Recognition Impact Your
Accounting for Cost of Goods Sold?

Copyright © 2009 - Cathy Cakebread 19

Ways to Control Revenue
 Define Applicable Accounting Rules
◦ Cover Your Bases
◦ Create As Many as Are Necessary
◦ Tie to Items Where Possible

Utilize Revenue Recognition Wizard and/or

Release 12 “Revenue Recognition Release”

Copyright © 2009 - Cathy Cakebread 20

Adjustments - Setups
Setup  Receipts  Receivable Activity

Copyright © 2009 - Cathy Cakebread 21

Adjustments – Setup/Process
 Define Proper GL Accounts
◦ Should Never Be Your AR Account (It Is Already Offset
Automatically)
 Adjust
◦ Select Proper Type
 Invoice, Line, Tax, Freight, Charges
 Un-adjust
◦ Use Same Accounts As Used With Original Adjustment
 Use Limits and Approvals!
 Check for Lots of Small Adjustments on Single
Invoice

Copyright © 2009 - Cathy Cakebread 22

Period Close Process
 Close Checklist
 Close Schedule

 Pre-Process As Much As You Can

 Reconcile

◦ AR To Aging
◦ AR To GL Activity
 Insure AR Only Uses “AR Accounts”
 Insure Proper Controls Are in Place
 Create Month End Packet

◦ Retain as Needed

Copyright © 2009 - Cathy Cakebread 23

Reconciliation – AR to Aging
ACTIVITY SOURCE

Starting Balance Aged Trial Balance - Old

Invoices Transaction Register

Debit Memos Transaction Register

Credit Memos ( ) Transaction Register

Transaction Register Subtotal

Applied Payments ( ) Applied Receipts Register (Applied Amount Total)

Discounts Taken ( ) Applied Receipts Register (Earned Discount + Unearned Discount)

Unapplied Activity ( ) Unapplied Receipts Register

(On-Account Amount + Unapplied Amount) * -1
Adjustments Adjustments Register (may be + or -)

Items Not Aged ( ) Invoice Exceptions Report

TOTAL

Ending Balance Aged Trial Balance - New

Difference Should be 0 (Total - Ending Balance)

Copyright © 2009 - Cathy Cakebread 24

Tips – Tie to Aging
 Journal Entries Report – Summary By
Category
◦ Verify That No Illogical Entries (AR Vs. No AR In Category)
 Transaction Register (Split By Company And Currency)
◦ Invoices, Debit Memos, Credit Memos, Commitments
◦ Credit Memo Total Should Be Negative
◦ Watch Bottom Total In 11.5.9 – Includes ALL Currencies
 Applied Receipts Register –
◦
Add Totals And Multiply By -1
◦
Result May Be Negative Or Positive
◦
Note That Total Does Not Include Discounts In 11.5.9
◦
Note: Cash Received Does Not Equal Amount Applied!
 Adjustment Register (May Be Negative Or Positive)
 Invoice Exceptions Report (Items Not Aged)

Copyright © 2009 - Cathy Cakebread 25

Reconciliation – AR to GL
ACTIVITY Balance to Journal Entries AR1 AR2 Cash1 Cash2 Unapplied
Aging Report Totals

Starting Balance

Invoices
Debit Memos
Credit Memos
CM - Application
Applied Payments
Discounts Taken
Unapplied Activity
Adjustments
Items Not Aged

Manual - Journal Entries

Cash-AR
Cash-Misc.
Unapplied Cash

NEW BALANCE
NEW REPORT TOTALS
Difference

Current JE's
JE's To Date
TOTAL
ATB- By Account
Difference

Note - Unapplied activity impacts ATB but is included in the applied receipts total when posted to GL
New Report Totals = The New Aging and The Account Analysis Reports (gray areas are from the Account Analysis Report)
Add NEW BALANCE to JE's (current and to date) - should = ATB by Account totals

Copyright © 2009 - Cathy Cakebread 26

Reconcile to GL Tips
 GL Account Starting Balance
 +/- Current Period Manual Journal Entries
 +/- To Date Manual Journal Entries

 GL Account Ending Balance

 Ending Balance Should Equal:

◦ Ending Aged Trial Balance by Account

 Potential Issues:
◦ Other Applications Using “Our” Accounts
◦ Manual Journal Entries

Copyright © 2009 - Cathy Cakebread 27

Customer Maintenance
 Who Can Add, Change, Inactivate?
 Who Controls Credit Limits?
 Who Can Change Names?
 What Are Your Controls for Adding New
Customers? Addresses? Inactivating?
 Define and Use Order Holds – Leverage!
◦ New Customers
◦ Credit Issues

Copyright © 2009 - Cathy Cakebread 28

General Tips
 Utilize Processes With Best Audit Trails
◦ Tie To Original Activity – Whenever Possible
 Control Customizations
◦ Access
◦ Process Capabilities
 Limit Who Can Perform Which Functions by
User/Role
◦ Reports Too!

Copyright © 2009 - Cathy Cakebread 29

Separation Of Duties
 Use External Lockbox
 Don’t Allow Collectors to Adjust (Either Without

Approvals or Not at All)

 Use Credit Memo Approvals

◦ Restrict Ability to Create CM

 Use Adjustment Approvals
◦ With Manager as Approver
 Check for Multiple Small Adjustments
 Different Folks to:

◦ Apply Cash
◦ Create Invoices
◦ Collect

Copyright © 2009 - Cathy Cakebread 30

 Cathy Cakebread
Consultant

www.cathycakebread.com For More Papers

cathyc@cathycakebread.com

(650) 610-9130

AR List Server

ar-list@yahoogroups.com

Copyright © 2009 - Cathy Cakebread 31