Understanding the Payment Life Cycle
Purpose: Use this document as a reference for understanding the payment life cycle in ctcLink.
Audience: Accounts Receivable
Understanding the Payment Life Cycle
- The payments that a company receives from its customers may be deposited in its bank account directly by the customers or by the company itself. Generally, multiple payments are grouped together in a single deposit. Before the deposits of payments are updated in Receivables, they go through various stages and processes. These stages and processes are collectively referred to as the Payment Life Cycle.
- The life cycle of a payment begins with its receipt by a company. When you receive the payment for deposit or the deposit information, you enter it in the Receivables system by providing some identifying information. This identifying information can be customer ID, MICR ID, purchase order number, document number, or item ID. The identifying information depends on the method used to enter deposit information in the system.
- Then you balance the deposits.
- After balancing deposits, you apply the payments that are associated with specific items. This involves linking open items with payments. This can be done manually, using the express deposit feature of Receivables on a worksheet or automatically, using Payment Predictor. Payment Predictor is the automated cash application feature in Receivables. It enables you to apply payments to open items and create adjustments or write-offs for overpayments and underpayments.
- If you use a worksheet for each payment, you can make adjustments for each pre-payment, on-account payment, write-off, and deduction. You can then save the worksheet for future review or deliver it at a specific time. If you do not deliver the worksheet or create accounting entries, the worksheet remains accessible so that information can be added, changed, or left for review.
- If a payment is not associated with an item, the payment can be handled as a miscellaneous cash receipt. In such a situation, you can skip the step of applying the payment and move to the next step in the life cycle, which is journaling the payment, by making a regular deposit entry.
- When you journal a payment, you mark it for posting.
- After the payments are posted, accounting entries are created and customer accounts are updated with their respective payments. If payments are directly journalled, you manually create the accounting entries and then use Journal Generator to send them to the General Ledger. These entries are then available for processing by the journal generator process.
- To summarize, the payment life cycle begins when the payment is received and payments proceed from their receipt to the update of their deposits in Receivables.
- Process complete.
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