Understanding Direct Debit Processing
Direct debits are a contractual method for collecting payment and receipts. The supplier and customer set up a contract that enables the supplier to collect an amount due for specific goods or services directly from the customer's bank through electronic funds transfer (EFT). Some banks require a cover letter for the EFT files they receive.
You can set up the direct debit data to require the creation, transmission, and confirmation of a direct debit prenote, which is a zero dollar electronic payment that is sent to the customer's bank to confirm the accuracy of customer's bank information. Prenotes help to eliminate additional processing or handling fees due to the transmission of incorrect customer account information to the customer's bank, and reduce any delays in receivable collections based on direct debit transactions. The Create Direct Debit process (AR_DIRDEBIT) must process and confirm the prenote before it can process any associated direct debit transactions.
This topic discusses the following:
Direct debit process flow.
PeopleSoft Receivables provides two processes to remit direct debits to the bank.
You can generate an EFT file in PeopleSoft Receivables and send it to the bank manually or by using a third-party integration.
You can use the PeopleSoft Cash Management Financial Gateway option to create an EFT file and send it to the bank.
When you create the bank account into which the funds should be deposited, you specify the EFT format layouts to use if the payment method is Direct Debit on the Collection Methods page. You can assign multiple layouts to the bank account, but you must specify the default layout. You specify the remittance method for each layout: Financial Gateway or EFT file (Format EFT). When you create a direct debit profile, the system populates the EFT Layout field with the default layout for the bank that you selected for the profile. You can override the layout with any other layout assigned to the bank account. You can also override the layout when you run the Create Direct Debits Application Engine process (AR_DIRDEBIT) with any layout assigned to the bank. The Create Direct Debit process assigns the remittance method to each direct debit based on the remittance method associated with the EFT file layout on the run control page.
Perform the following tasks to create direct debits and send them to the bank for collection:
Run the Create Direct Debits process (AR_DIRDEBIT) to create direct debits and build a worksheet.
If direct debits are set up to require the creation, transmission, and reception of direct debit prenotes, the Create Direct Debit process creates prenotes. These prenotes must be sent to the customers bank and confirmed before the direct debit transactions associated with the prenotes can be processed.
Approve, reject, or hold the direct debits using the direct debit worksheet.
Change the direct debit's status to Remitted on the direct debit worksheet.
Run the Receivables Update process (ARUPDATE) to post the direct debit groups, update the item and customer balances, update item activity, and generate accounting entries.
Warning! When running the Receivables Update process after the Create Direct Debits process, if the Direct Debit Group field is Direct Debit, on the Create Direct Debits page, then the calculation of the direct debit due date must be less than, or equal to, the Receivables Update process run date to close the direct debit. The calculation of the direct debit due date results from the option selected in the Due Date Option field of the Create Direct Debits run control page. If the calculation of the direct debit due date is greater than the Receivables Update process run date, then the direct debit is not closed.
(Optional) Cancel direct debits that have a Remitted status, but have not been submitted to the bank.
If you remit direct debits using the PeopleSoft Cash Management Financial Gateway option, you can cancel the direct debit after you send it to Financial Gateway if the dispatch status is Awaiting Dispatch, Hold, or Error.
Note: You must run the Receivables Update process after you cancel a direct debit. Running this process reverses the accounting entries that the Receivables Update process created for the direct debit and reopens the items in the direct debit.
Remit the direct debit to the bank by running either the Create EFT through FG System Application Engine process (AR_FG_PROC) or the Format EFT Files SQR process (FIN2025).
Note: If you want to automatically run Receivables Update and generate the EFT files when you run the Create Direct Debit process, you can create a job definition to combine the four processes: AR_DIRDEBIT, ARUPDATE, AR_FG_PROC, and FIN2025. You can also run just three processes in one job and omit either the AR_FG_PROC or FIN2025 processes. You must also select the Auto-Remit Direct Debits option on the Create Direct Debits page. The multiprocess job runs all three or four processes for all direct debits to which the Create Direct Debits process assigns the Accepted status.
(Optional) Reconcile the direct debit with the bank statement using the PS_BNK_RCN_DEBIT reconciliation rule.