Configuring Bank Section for Payment Program

We have a new house bank that we want to use in our payment program, and we want it to be at the top of our bank selection ranking order. Now, we will learn how to make this adjustment. Let's look at additional customizing settings in the Bank Determination area.

The Treasury Department has emailed to inform Jackson that there is a new house bank and a new house bank account. The customization settings for the automatic payment program must be adjusted accordingly.

The "Set Up Bank Determination for Payment Transactions" process involves configuring settings that guide the payment program in selecting the banks or bank accounts from which payment should be issued. Here, you can determine the priority of house banks by creating a ranking list, where a lower number signifies a higher priority, with 0 having the highest priority. This setup process involves the following steps:

• Ranking of house banks based on payment method and currency and entering the house bank ID.

• Specifying the accounts and sub-accounts for house banks. You can choose between the two folders bank accounts or enhanced bank accounts.

You can specify bank accounts defined in the Bank Accounts view and the Bank Accounts (Enhanced) view. For each house bank and payment method, we specify which bank account to use for payments. In the classic Bank Accounts view, you can only enter one bank account with its account determination for each combination of house bank, payment method, and currency. In the following cases, the settings for classic bank account determination are insufficient:

• When posting the open items, you already define which bank account to use, for example in Real Estate.

• You can define the unused house bank accounts in the classic view in the Bank Accounts (Enhanced) view.

• To define a ranking of multiple accounts for the same house bank, do not configure any settings in the classic view. Instead, define the account determination in the Bank Accounts (Enhanced)) view. Note that the payment program initially employs the classic bank account determination, utilizing enhanced settings only if an account cannot be determined through classic means.

When the following conditions are met, the Bank Subaccount field for a bank account is grayed out and cannot be specified as its value is automatically derived:

• The bank subaccount is linked to a bank reconciliation account in the Manage G/L Account Master Data app.

• The payment method is enabled for payment processing using the bank reconciliation account.

To use the classic bank account configuration method, we can reverse the previous configuration and enter a bank subaccount in the Bank Accounts or Bank Accounts (enhanced) folder. To use the bank reconciliation account, we must complete two customization steps. The first step involves assigning a bank subaccount to an account symbol, executed in the electronic bank statement customization. The second step is to assign the account symbol to the payment method.

Finally, the "Value Date" allows you to specify the duration between the posting date of the payment run and the value date at the bank. If you choose to employ expenses and charges, you can define these to print on the bill of exchange forms. With a charge indicator, you can define who will manage the expenses or charges related to the banking transaction. Use the fields Charges 1 and Charges 2 to handle the fees associated with the transaction. Charge 1 often reflects the local bank charges, while Charge 2 usually amounts to the correspondent or intermediate bank charges.

In this video, we will look at identifying bank determination settings for the automatic payment run. We will cover:

• Setting up and configuring house bank selection.
• Managing bank determination for payment transactions.
• Defining value dates and managing bank charges.

In this video, you receive an email about a new house bank for Bike Company. To set it up, define the ranking order, assign bank and subaccount details, and set amount limits and value dates.

You can navigate to these settings through the Implementation Activities app under Payables and Receivables Management → Payment Processing → Company Initiated Payment and Clearing → You use automatic payments and payment media formats → Bank Determination for Payment Transactions and set priorities and permitted currencies for the new house bank T-B10 for SEPA credit transfers in Euros for company code 1010.

In "Bank Accounts," do not assign a bank subaccount to the bank account, as we have the bank reconciliation account solution in place. Define a 2-day value date for T-B10 with SEPA credit transfers up to 3 million. In "Expenses/Charges," set limits for bank charges, noting accounts aren't set in Customizing.

When using classic bank configuration with balance sheet accounts, we assign a bank subaccount in the bank determination customization. However, if we choose the bank reconciliation account approach, we can't enter an account in the bank subaccount field in the Bank Accounts or Bank Accounts (Enhanced) folder.

To use the Bank Reconciliation Ledger, account symbols are created in the electronic statement and marked as "Self Initiated Payment". Subaccounts are assigned to respective account symbols in the electronic bank statement customization. In the Payables Management customization for the automatic payment program, the account symbols must be assigned to corresponding payment methods for clearing accounts.

If a new bank account is created in the system, it will also be assigned to a general ledger account for a complete balance sheet. If the Bank Reconciliation Ledger approach is used, it will be marked in the House Bank Connectivity tab for the bank account. Now, let's compare the traditional approach, and the approach using the Bank Reconciliation Account.

When maintaining the House Bank Connectivity for a bank account, data such as the ID category of the account, Company Code, House Bank ID, House Bank Account ID, and G/L account are specified. The objective is to associate the bank account with our house bank and at the same time create a link with our general ledger by assigning a G/L account.

Depending on the type of G/L account we want to assign to your house bank account, refer to either of the following procedures to assign a G/L account to the house bank account.

Balance Sheet Accounts: Create the required reconciliation account, and clearing accounts, with balance sheet accounts as their G/L account types. Using this approach, create a new set of G/L accounts each time you set up a new house bank account connection.

Bank Reconciliation Accounts: Simplify payment processes by creating new house bank accounts and connecting them to a new type of G/L account - a bank reconciliation account. This can reduce the number of G/L accounts needed by creating just one bank reconciliation account and assigning it to several house bank accounts.

The Bank Account Reconciliation approach offers customers an additional option for managing their business, without switching from the traditional Balance Sheet Approach. It allows for a gradual transition for each House Bank Account. However, there may be differences in customization, such as the configuration of the automatic payment program, and bank subaccounts are no longer entered in customizing in bank determination.

When setting up the automatic payment program to work with the Bank Reconciliation Ledger logic, it's important to assign account symbols to Payment Methods along with the appropriate country key. These symbols are created in the customization settings for the electronic bank statement. To configure the payment run, go to the "Assign Account Symbol to Payment Methods" path.

When assigning an account symbol to payment methods, several fields must be defined. These fields ensure the payment method is properly mapped to the correct accounts within an organization’s financial system:

Country / Region Key: It contains information that the system uses to check entries such as the length of the postal code or bank account number.

Payment Method: A unique identifier for the type of payment method (for example Wire Transfer, ACH, Check, Credit Card).

Account Symbol: This identifier represents the account to which this payment method will be mapped. The account symbol might correspond to a specific general ledger account.

In "Assign Payment Method to Bank Transaction," specific payment methods are linked to certain bank transactions to ensure accurate and smooth payments. This setup automates the process and reduces errors. To specify a payment method for each house bank-related transaction, set it up in the customer and vendor records. Access these settings by entering the Company Code.

Define the following information for each house bank and each account:

Payment method: The payment method determines how payments are to be made, for example by check, bank transfer, or bill of exchange.

Transaction Type: The bank-specific transaction type is determined by the payment method used. It may be necessary to define the specific type of transaction. For instance, bills of exchange posted using the same payment method can be presented for discount or collection, resulting in various transaction types for the same payment method.

Bank group of the business partner: The transaction type is determined by the business partner's house bank and bank group. One bank group must be chosen for allocation. A placeholder entry (bank group 'Blank') is allowed under the usual rule. Enter a placeholder entry if transactions may occur without identifying the business partner's bank or if the banks do not have bank groups. This could happen if bills of exchange have no bank details for the drawee or if a bank group has not been specified for the bank in the bill of exchange.

Transaction type for determining bank terms: Transaction types can depend on the house and partner bank.