Understanding External, Internal, and Netting Accounts

In PeopleSoft, you can create and maintain the following types of bank accounts, depending on your organizational needs:

• Settlement Instructions: You first create "stand alone" settlement instructions which will later be associated with specific accounts or counterparties when you define your internal, external, and netting accounts.

• External accounts: External accounts in PeopleSoft represent physical (or "brick and mortar") financial institutions. You must define external accounts for each physical bank with which you maintain a banking relationship. PeopleSoft defines maintaining a banking relationship as involving any of the following (or any combination) of the following banking activities:

  • Submit checks through Payables Pay Cycle Manager.

  • Create wires and electronic funds transfer (EFTs) that are then settled through Cash Management Payment Dispatch or Payables PayCycle Manager.

  • Send direct debits and EFTs that are then settled through Cash Management Payment Dispatch or Payables PayCycle Manager.

  • Transfer funds between bank accounts.

• Internal accounts: Internal accounts are accounts that exist solely within your organization and that are used to transfer funds between business units.

• Netting accounts: Netting accounts are virtual accounts that exist only within your organization.

  You create netting accounts to net the cash flow between Payables and Receivables items. There are functional restrictions as to what external account cash flow can be netted.

  A net is associated with two accounts: a netting account and a designated disbursement external account. After netting a cash flow, the system transfers the netted payment to the designated netting account. Any remaining balance is transferred to the disbursement account for settlement. (Note that the disbursement account is a different external account than the netting account defined for the netting bank.)