This chapter contains these topics:
Section 27.2, "Processing Encashments Using the Parent/Child Method,"
Section 27.3, "Processing Encashments Using the Factoring Method."
Encashment is a common business practice in Germany. Encashment is a process by which a third party receives payments from the customers of a business and then disburses the payment to the business. You can use J.D. Edwards software to process the following types of encashment methods:
| Method | Explanation |
|---|---|
| Parent/child | The parent business processes customer invoices and cash receipts for all of its subsidiary businesses. |
| Factoring | The business forwards its customer invoices to an encashment company. |
Working with encashments consists of the following tasks:
Processing encashments using the parent/child method
Processing encashments using the factoring method
When you use the parent/child method to process encashments, a parent company processes all the receipts for its children companies. To use the parent/child encashment method, you must specify the number of the parent company or the special payee for each customer that you set up.
Process parent/child encashment invoices as you would normal cash receipts. You can use the Parent Number or Factor/Special Payee fields on the Customer Ledger Inquiry screen to select only the invoices that the parent company is going to pay.
When you use the factoring method to process encashments, your customers remit the payment for their invoices to an encashment company that processes the payments and invoices. You receive the payment for the invoices, less a predetermined commission, from the encashment company.
To process encashments using the factoring method, you write off the receipts that you know will be paid by the encashment company using the Receipts Entry programs in J.D. Edwards base software.
You must set up a reason code (user defined code 03/AR) and a general ledger account for the receipts that you plan to write off for encashment. The reason code that you associate with the receipts determines which general ledger account the system debits when you post the receipts.
You set up the reason codes in the automatic accounting instructions (AAIs). For example, you set up AAI item RAxx (where xx is the 2-character reason code) to associate the reason codes to the general ledger accounts.