When a payment proposal is generated, all open invoices being added to the payment proposal as payments, are subjected to rules and algorithms, that aim to automatically determine the payment instructions, which will be applied to each individual invoice.
This document aims to give an overview of these rules and algorithms, that in the end decides how the bank will transfer money from your bank account to e.g. a supplier bank account.
DETERMINING BANK ACCOUNTS AND PAYMENT TYPE
The first thing to decide, is where the money should be withdrawn from, where the money is transferred to and how the transferring of money is to be executed. This is done by a set of related algorithms, that determines the following information (in that order):
1. Third-party bank account (where the money is transferred to)
2. Payment type (how the transferring of money is to be executed)
3. Own bank account (where the money should be withdrawn from)
DETERMINING THIRD PARTY BANK ACCOUNT
Third-party bank account decides where money is transferred to. This can be actively decided at the time of registering the invoice, by using the designated Third-party bank account field in the Invoice journal.
If the third-party bank account has not been actively decided, the system will instead attempt to find one. The system will e.g. consider whether the payee has a primary bank account. A primary bank accounts can be specified by specifying a certain bank account in the Bank account field of the customer/vendor setup.
A bank account is only considered valid if the bank account is active, meaning that the following conditions must apply:
- Payment is done within the bank account’s Active date and Expiry date
- Bank account workflow status is Active (if bank account approval workflow is enabled)
Please note, these conditions will have to be met in all cases; even when bank account has actively been specified in the invoice registering process or manually chosen directly in the payment journal. Failing to meet the conditions will always result in the payment being denied.
Determining payment type
If a third-party bank account can be determined, next step is to determine a payment type. This is done by looping the payment types made available by the executing bank. The order in which to loop and thereby prioritize the payment types differ depending on the individual payment proposal generators. Where a best price proposal generator will attempt to find the cheapest possible payment type, a regular single-bank generator will instead put much more emphasize on determining payment types using “best practices”.
Determining own bank account
Once we know, where to transfer the money and how to do it, the only thing left, is to figure out, where to withdraw the money from. The final payment execution instruction to determine, is your own bank account.
Own bank accounts are looped using Priority, but bank accounts must fit the determined payment type. E.g. a domestic US payment type will only allow money to be withdrawn from US bank accounts.
Determining payment date and payment amount
With the payment execution instructions having been decided, it is time to determine the amount to pay and the date on which to execute the payment.
DETERMINING PAYMENT DATE
As cash discount, and thereby final payment amount, highly depends on the payment date, payment date is determined prior to deciding on amount.
Please note, that if the determined payment date is a holiday, the system will postpone the payment to the next available bank day. This can potentially affect the cash disc possibilities, but if used wisely, grace can be configured as an effective counter measure.
Determining payment amount and cash discount
Finally, based on the payment date decision, we can determine the payment amount, and whether payment is eligible for cash discount. If so, the cash discount is deducted, reducing the payment amount accordingly.
