Many of us still wonder why ledger settlements functionality is used and the valid business scenario? What is newly introduced advance ledger settlement functionality? And wonder why Microsoft has been investing in enhancing the ledger settlement feature and what’s coming next?
Have a read through the below article to witness the answers for all the above questions.
Sometimes when a payment is received you cannot identify which invoice the customer wants paid or which customer made the payment, in such situations the payment will be kept on hold to debit the cash/bank account and credit the suspense account until the customer is identified. When the customer is identified who made the payment, the suspense account will debit and Account Receivable customer account will credit. This closes out the suspense account and the payments are posted to the correct customer account.
Similarly, there is many such use cases where suspense and temporary accounts are used in daily business transactions.
Why ledger settlements:
Ledger settlements is used to settle such suspense debit and credit entries in the system of a ledger account. This activity is generally performed by accountants periodically to reconcile and analyze temporary accounts to verify if there are still open-ended transaction which needs to reclassed and rectified.
In case a suspense or temporary accounts are not closed at the end of an accounting period, the balance in suspense account is shown on the balance sheet which may result in inaccurate financial reporting and hence it is important to identify and correct the transactions periodically in the system.
From the above business scenario, let’s say payment is recorded to suspense account during start of the month and the customer was not identified until the month end. The ledger settlements will help find all such transactions to perform research and close open-ended transactions in the system.
Traditional ledger settlements:
Since AX 2009, traditional ledger settlements have very basic functionality to settle ledger transactions manually through ‘Ledger settlement’ form in general ledger
Where you mark two transactions manually and include them in the lower grid and click on accept to settle the entries from the action pane.
Advance ledger settlements:
Advance ledger settlement now provides additional capabilities for filtering transactions which make it easier to find transactions to be settled with reversal functionality on the same form.
To enable advance ledger settlements, follow the steps below
General ledger > Ledger setup > General ledger parameters
On the Ledger settlements tab, Set Advance ledger settlement option to ‘Yes’
Also, the list of accounts used for ledger settlements should be configured in this form and the list will be used to filter transaction in ledger settlement page.
Once the advanced ledger settlement feature is enabled in general ledger parameters, we will now see the advanced layout of ledger settlement form with additional capabilities to filter and search transactions for settlement
General ledger > Periodic > Ledger settlements
This form provides an ability to filter transactions by date range, date intervals, posting layer and, financial dimension set.
Then clicking the display transactions will show all transactions based on the filter criteria and ledger accounts configured for ledger settlements
Select the ledger transactions to be settled and mark them, as more number of transactions are marked for settlement it can be further filtered to Show all, marked and unmarked
Once all the transactions are marked, it can be settled using ‘Settle marked transactions’ button in the action pane. Then enter the date of settlement to be considered for settlement.
Note : The sum of marked transactions should always be zero to settle the transaction
Now the Status filter can be used to view all the settled transactions
The advance ledger settlement also has the capability to reverse the settled transaction from the same form
Mark all the settled transactions to be reversed, then click on the ‘Reverse marked transactions’ button in the action pane.
Note: Once the reversal of settled transactions is successfully completed, the status of the transaction will be reverted back to ‘Not settled’
If additional ledger accounts need to be added for ledger settlement no need to go back to general ledger parameters, the same form has an ability to add more ledger accounts.
Finally, there is a standard report which provides list of all ledger transactions which are not settled for business team to verify/analyze and take the corrective actions where required.
General ledger > Periodic > Unsettled transactions report
I would like to end this post saying there is definitely scope for automating on this process with pre-defined settlement rules and I hope Microsoft will consider doing it in the future.
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