Exact Financials (v3)

Finance Manual - Working with cheques and bills of exchange

Working with cheques and bills of exchange

Introduction

A cheque is an instrument of payment initiated by the customer, used to pay an outstanding item.

A cheque is usually guaranteed. The cheque is created by the customer to pay a claim, or by your company to pay a claim made by a supplier. A payment by cheque can be entered in two ways:

1. Directly in a bank account, reconciled once the bank statement is received.
2. In the 'Payment in transit' account, until the payment is shown on a bank statement. It can be entered in the bank account.

A bill of exchange is an instrument of payment, based on securities, initiated by the customer or supplier used to pay outstanding items. There are different types of bills of exchange, each with different rights and guarantees. Examples of bill of exchange types are promissory notes or letters of credit. Outstanding items paid with a bill of exchange go through a number of statuses, for example the status 'Received', 'To be cashed, 'Cashed, 'To be discounted', 'Accepted for discounting', 'Discounted', etc. Each status has a specific predefined financial entry.

Procedure

• Defining cheque and bill of exchange settings: Before using cheque and bills of exchange you should define a number of settings.
• Defining cheque and bill of exchange layouts: You need to define a number of layouts for cheques and bills of exchange.
• Creating reason codes: Reason codes are needed when canceling (or bouncing) a cheque or a bill of exchange.
• Creating cheque and bill of exchange codes: Cheque and bill of exchange codes are used to facilitate working with different types of cheques and bills of exchange.
• Linking cheque and bill of exchange accounts: You can link a general ledger account to each combination of bill of exchange code and status. You only need to do this if you want to use account numbers, which are different to those specified in the settings for a given bill of exchange.
• Creating cheque books: The numbering of cheques for each bank journal is maintained in the chequebook.

Defining cheque and bill of exchange settings

Before using cheques and/or bills of exchange, you need to define a number of settings and create some master data:

• Define package settings, general ledger accounts and journals in [File, Company settings, Cheques & bill of exchange].
• Define layouts.
• Create cheques and bill of exchange codes, and link them to your general ledger accounts.
• If necessary, enter debtor or creditor bill of exchange data. You can impose limits on the amounts per debtor or creditor and define whether or not you want to group outstanding items in [Debtors, Masterdata, Maintenance debtors] in tab 'Payment'.
• Create bill of exchange general ledger accounts in [Ledger, Master data, Maintenance, General ledgers]. These are required to define the package settings.
• Create journals for bill of exchange entries in [Ledger, Master data, Maintenance, Journals]. Select {General} in 'Journal' and enable the setting 'Bill of exchange' to define a journal for use with bills of exchange. It is useful to define one journal for debtors and one journal for creditors.
• Create reason codes in [Tables, Maintenance, Banking, Cheques & Bill of exchange, Reason codes]. Reason codes are required if a cheque or a bill of exchange is cancelled. They are not essential for defining the settings for cheques and bills of exchange.
• Create a chequebook in [Tables, Maintenance, Banking,Cheques & Bill of exchange, Chequebooks]. The numbering of cheques is maintained in the chequebook.

You can use the cheque and bill of exchange functions in [Debtors,Cheques & B/E payment] and [Creditors, Cheques & B/E payment] to enter and journalize payments. See the sections on the relevant functions.

Creating reason codes

The reason codes [Tables, Maintenance, Banking, Cheques & Bill of exchange, Reason codes] are needed when canceling a cheque or a bill of exchange. They are particularly useful for overviews where you can analyze the most important reasons for canceling a cheque or a bill of exchange.

Creating cheque and bill of exchange codes

Cheque and bill of exchange codes [Tables, Maintenance, Banking, Cheques & Bill of exchange, Cheque & B/E codes]  are used to distinguish different types of cheques and bills of exchange. You can use them to adapt Exact Financials to your own situation. Once you have created them, use [Tables, Maintenance, Banking, Cheques & Bill of exchange, Cheque & B/E accounts] to link the codes to general ledger accounts.

Linking cheque and bill of exchange accounts

When you enter bill of exchange transactions (e.g. receipt of a bill of exchange or discounted bills of exchange), the amounts are usually entered in accounts reserved especially for this purpose (e.g. account 'debtor bill of exchange received', account 'debtor bill of exchange discounted'). In Exact Financials this is done automatically using previously defined links to bill of exchange codes in [Tables, Maintenance, Banking, Cheques & Bill of exchange, Cheque & B/E accounts]. You link a general ledger account to each combination of bill of exchange code and status. You can only choose the general ledger accounts for which 'Cheques & B/E account' is enabled in [Ledger, Master data, Maintenance, General ledgers].

If you do not need a status and a link to a general ledger account, you do not define them in [Tables, Maintenance, Banking, Cheques & Bill of exchange, Cheque & B/E accounts]. The setting in [File, Company settings, Cheques & bill of exchange] will then be sufficient.

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