Cash Pooling for Multifund Accounting

You can use a cash pooling model to record multifund accounting entries on cash receipts.

Cash pooling is a cash management system that notionally consolidates account balances from several accounts without physically moving funds. An organization can combine credit and debit positions from various bank accounts into a pooled account to provide better visibility into the current state of an organization's business and to facilitate ongoing decision-making.

The cash pool accounting model represents a cash account with the Cleared Cash account class. Other offset cash accounts that reflect an interim receipt status, such as Confirmed Cash or Remitted Cash, aren't used in the cash pool accounting model.

You can implement cash pooling for multifund accounting using either of two methods, depending on the fund management requirements and local accounting conventions of your organization. The two methods are:

• Cash Pooling using Source Transaction Fund Allocation: Represent cash receipts as a direct split of cash account entries according to the source transaction allocation. Balancing segments of applied transaction receivable accounts are the basis for cash account split on a regular receipt; balancing segment miscellaneous cash distribution accounts are the basis for cash account split on a miscellaneous receipt.

• Cash Pooling using Intercompany Balancing Entries: Represent cash receipts as offsetting treasurer's equity and cash owed to an affiliate using intercompany balancing entries.

After you set up cash pooling for multifund accounting using either of these methods, you must create an AR_CASHPOOLING lookup code under the AR_FEATURES lookup type.

Note: Cash pooling only applies to a business unit enabled for Multifund Accounting. You must ensure that you have completed the base setup for Multifund Accounting on the applicable business unit before configuring Cash Pool accounting.

Example of Cash Pooling Methods for Multifund Accounting

This example illustrates the accounting entries for both methods of representing cash pooling for Multifund Accounting.

Invoice XYZ contains three transaction lines for a total of $1600. This table represents the three line amounts:

Account Class	Amount
Revenue	$600
Revenue	$250
Revenue	$750

This table represents the accounting entries for Invoice XYZ. The first segments in the account code combinations--B,C,D--are the balancing segments that represent the three funds:

Dr/Cr	Reference	Account Class	Account	Amount
Debit	Header	Receivables	B.000.1200.0	$600
Debit	Header	Receivables	C.000.1200.0	$250
Debit	Header	Receivables	D.000.1200.0	$750
Credit	Revenue	Revenue	B.000.4100.0	$600
Credit	Revenue	Revenue	C.000.4100.0	$250
Credit	Revenue	Revenue	D.000.4100.0	$750

Here the Receivables entry is split according to the fund allocation on each Revenue account.

Receipt PQR in the amount of $1600 is applied to Invoice XYZ. This table represents the receipt:

Receipt Amount	$1600
Receipt Status	Cleared
Applied to	XYZ

The resulting receipt accounting entries will differ depending on the Cash Pooling method used.

Accounting Entries for Cash Pooling using Source Transaction Fund Allocation: This table represents the receipt accounting entries with Cash Pooling enabled on a bank account:

Dr/Cr	Reference	Account Class	Account	Amount
Debit	Receipt	Cash	G.000.1110.0	$1600
Credit	Invoice	Receivable	B.000.1200.0	$600
Credit	Invoice	Receivable	C.000.1200.0	$250
Credit	Invoice	Receivable	D.000.1200.0	$750
Debit	Invoice	Cash	B.000.4100.0	$600
Debit	Invoice	Cash	C.000.4100.0	$250
Debit	Invoice	Cash	D.000.4100.0	$750
Credit	Receipt	Cash	G.000.1110.0	$1600

Here the Cash Account is originally debited to a generic fund according to the setup defined for the receipt method remittance bank account. It is then reversed and debited back into split cash accounts according to the funds allocation used on the invoice closed by the receipt.

Accounting Entries for Cash Pooling using Intercompany Balancing Entries: This table represents the receipt accounting entries using Treasurer's Equity and Cash to Affiliates accounts as Intercompany Balancing Accounts (and without Cash Pooling enabled on a bank account). The Debit Intercompany entries represent Intercompany Cash Equity in the cash pool and the Credit Intercompany entries represent Intercompany Cash from Affiliate:

Dr/Cr	Reference	Account Class	Account	Amount
Debit	Receipt	Cash	T.000.1110.0	$1600
Credit	Invoice	Receivable	B.000.1200.0	$600
Credit	Invoice	Receivable	C.000.1200.0	$250
Credit	Invoice	Receivable	D.000.1200.0	$750
Debit	Invoice	Intercompany	B.000.1750.T	$600
Debit	Invoice	Intercompany	C.000.1750.T	$250
Debit	Invoice	Intercompany	D.000.1750.T	$750
Credit	Receipt	Intercompany	T.000.2125.B	$600
Credit	Receipt	Intercompany	T.000.2125.C	$250
Credit	Receipt	Intercompany	T.000.2125.D	$750

Here the entire Cash account is initially debited to the Treasurer's Pool. It is then split into various accounts representing the cash contributed by each fund/affiliate as credit intercompany entries, with corresponding debit intercompany entries representing the Equity in Pool for each fund.

Cash Pooling using Source Transaction Fund Allocation

Use the Pooled account option on the applicable bank account to enable default cash pooling entries rather than Intercompany entries. If you don't enable this option, balancing entries are used to manage cash pooling, according to the additional setup for Intercompany Balancing Rules.

This option is available by default on the business unit enabled for Multifund Accounting.

Note: The Pooled account option is commonly used by Payables and Receivables to drive the required fund representation. You should analyze the impact on both your Payables and Receivables activities before deciding on the pooling method to use for funds received or funds expensed through the designated bank account.

After you enable cash pooling on a bank account, set up an AR_CASHPOOLING lookup code under the AR_FEATURES lookup type.

To enable cash pooling for multifund accounting using source transaction fund allocation, complete these steps:

1. Navigate to the Manage Bank Accounts page.

2. Search for and select the bank account you want.

3. In the Bank Account page, navigate to the Controls tabbed region.

4. In the Payables and Receivables Controls section, enable the Pooled account option.

   Enabling this option designates this bank account as the bank account to use as the default model for representing the cash pooling.

5. Complete the other fields according to your requirements.

6. Save your work.

7. Navigate to the Manage Standard Lookups page.

8. Search for and select the lookup type AR_FEATURES.

9. In the AR_FEATURES lookup codes section, click the Plus (+) icon.

10. In the Lookup Code field, enter AR_CASHPOOLING.

11. Enter a start date, and a meaning and description for this lookup code.

12. Check the Enabled option to activate the lookup code.

13. Save your work.

Cash Pooling using Intercompany Balancing Entries

Represent multifund accounting cash pooling by using intercompany balancing rules to map the Equity Pool (receivables) and Treasurer's Equity (payables) accounts.

After you configure intercompany balancing rules, set up an AR_CASHPOOLING lookup code under the AR_FEATURES lookup type.

Note: If you use intercompany balancing rules to set up cash pooling, then don't enable the Pooled cash option on a bank account.

To enable cash pooling for multifund accounting using intercompany balancing entries, complete these steps:

1. Navigate to the Manage Intercompany Balancing Rules page.

2. Navigate to the Chart of Accounts Rules tabbed region.

3. Click the Plus (+) icon to open the Create Chart of Accounts Balancing Rules page.

4. In the Source field, select Receivables.

5. In the Category field, select Receipts.

6. In the Chart of Accounts field, select the chart of accounts.

7. In the Receivables Account field, enter the account segments for the Equity Pool natural account.

8. In the Payables Account field, enter the account segments for the Treasurer's Equity natural account.

9. In the Start Date field, enter the date this chart of accounts rule becomes active.

10. Save your work.

    This chart of accounts rule applies to all ledgers that use this chart of accounts.

    Note: If you intend to use more than one balancing segment, use the Additional Intercompany Balancing and Clearing Options page to configure options to balance the second and third balancing segments. These options are used whenever a transaction is balanced by the primary balancing segment, but remains unbalanced by the second or third balancing segment.

11. Navigate to the Manage Standard Lookups page.

12. Search for and select the lookup type AR_FEATURES.

13. In the AR_FEATURES lookup codes section, click the Plus (+) icon.

14. In the Lookup Code field, enter AR_CASHPOOLING.

15. Enter a start date, and a meaning and description for this lookup code.

16. Check the Enabled option to activate the lookup code.

17. Save your work.