Meeting your accounting needs through Adempiere – Account Payables


As part of ERP implementation, we have come across a lot of simple as well as complicated demands from the customer. While Walking Tree has been successfully customizing Adempiere for its client, we intend to share some of our experience over here to enable the customer as well as development community to make effective use of Adempiere.

As part of this article, we will explain how Adempiere can be used to manage account payable (which will be suitable for Indian businesses) for a typical business organization. Well, when we talk about account payable, often we think about following terms

  1. Miscellaneous payment option against invoice without POs
  2. Capability to define payment schedules of invoice
  3. Multiple modes of payment
  4. Tracking over invoicing, return of products etc. through debit and Credit Notes
  5. Capability of putting invoice/payment to specific vendors on hold
  6. Accounting for over-payments, refund, claims etc
  7. Accounting of service contract payments e.g. transport canteen, casuals hostels ,utility bill payments for water, electricity, etc
  8. Printing of cheques
  9. Adjustment of dues from suppliers against past supplies on account of rejection etc.
  10. Statutory tax statements and payments (India-specific)
  11. Two/Three/Four-way invoice matching within AP as well as AR

Now let’s look at them one-by-one and see how Adempiere can be used to meet these needs.

Miscellaneous payment option against invoice without POs
The question is – can we have an invoice without a PO and can we make a payment against such invoice. The answer is Yes to both these questions.

While the typical purchase process includes following steps

  1. Requesting for quotation from the vendor (Requisition-to-invoice -> RFQ)
  2. Receiving response to the quotation from vendor (Requisition-to-invoice -> RFQ Response)
  3. Raising PO (Requisition-to-invoice -> Purchase Order)
  4. Receiving Material (Requisition-to-invoice -> Material Receipt)
  5. Creating Invoice (received from vendor) – account payable! (Requisition-to-invoice -> Invoice (Vendor) )
  6. Making Payment to the payable (Open Items -> Payment)

The Adempiere provides you flexible ways of handling this situation. You can either decide to follow each step (strictly if you wish – through minor configuration changes) or you can decide to skip some of the upstream processes (e.g. quotation, PO).

Capability to define payment schedules of invoice
Using the window Quote-to-Invoice -> Sales Invoice -> Invoice Payment Schedule, you can define the payment schedule for a given (unpaid) invoice. Payment Schedules allow to have multiple due dates and associated discounts / deductions and due amount.

Multiple modes of payment
Adempiere provides in-built support for following payment modes

  1. Cheque
  2. Credit Card
  3. Direct Debit
  4. Direct Deposit

These payment mode (also known as Tender Type) has associated attributes (e.g. cheque details for cheque payment), which user can capture at the time of actual transactions.

Tracking over invoicing, return of products etc. through debit and Credit Notes
In nutshell, all the customer has a need for being able to return material to its vendor and if they are into trade then accept return from the customer. Adempiere provides you capability to create invoice of type AR CreditMemo and AR CreditMemo to handle this need. However, what is puzzling me is that the Invoice (Vendor) screen contains “AP CreditMemo” as choice in the Target Document Type drop down. Ideally – I should be able to create a receivable against the vendor. Looks like a potential gap!

Capability of putting invoice/payment to specific vendors on hold
Currently Adempiere does allow you to put an invoice in Disputed status. However it doesn’t allow you to put the invoice on Hold or put all the invoice of a given vendor on hold.

Accounting for over-payments, refund, claims etc
Adempiere allows you to manage overpayment in two ways. Say you have an invoice worth INR 100 and you make a payment of INR 150.

  1. You can either write-off 50 or
  2. Consider INR 50 as overpayment, which can be assigned to some other invoice.

Well the next question is how do we assign over payment to a different invoice? Adempiere provides you Payment Allocation window (inside Open Items) to achieve this!

There is no direct way to manage refund and claims. However, the system allows creation of invoice of type AP Credit Memo and AR Debit Memo. This can be used to define the concept of Refund and Claims.

Accounting of service contract payments e.g. transport canteen, casuals hostels ,utility bill payments for water, electricity, etc
Above need can be managed through the concept of Charges. You need to create invoice for charge instead of product. Adempiere allows you to define Revenue and Expense account for charges and accordingly account posting will happen.

Further, Expense Report and Expense AP Invoice concept can be used to manage some of the bills like utility bill, travel bill, etc. Adempiere further allows you to invoice these bills to your customer / vendor.

Printing of Cheques
This is one thing which I don’t see anywhere in Adempiere. Also there is a need to come up with detailed requirement for this. Some of the things that I can see are

  1. Creation of Cheque Book and leaf details
  2. Updates of cheque book leafs to capture cheque issue details (including handling of payment reversal)
  3. Reconcilliation with bank statement
  4. Printing of Cheques

Statutory tax statements and payments (India-specific)
Currently system allows you to define associated taxes through tax category and tax rates. Also, system allows you to define if the tax is included in the product’s listed price or we need to apply on top of the listed price.

However, the Government expect business to deduct certain percentage from the invoice (or expense). Hence the net payable should not include TDS amount and there should be separate payable of equivalent tax amount created in favor of Government (TDS). These TDS should be linked with the invoicing business partner so that system can generate Form 16 A on quarterly basis and send across the same to the business partner.

Two/Three/Four-way invoice matching within AP as well as AR
Adempiere allows you to match invoice with PO and Receipts.

Above requirement is the summary of some of the commonly asked features by our customers. If you have any specific requirement. I encourage you to put your query / response related to this topic to further strengthen Adempiere.

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Posted in ADempiere, EagleRP
10 comments on “Meeting your accounting needs through Adempiere – Account Payables
  1. Dear Alok
    If the customer requires interest calculation etc. I think we can acheive thru a minor customisation. I feel we make a separate voucher for ‘TR payment’ instead of the normal ‘AP Payment’

    Copy ‘AP payment module’ and name it as ‘TR payment’, add extra fields like interest, due date, Ref No., L/C no. TR realisation date etc.
    Based on this we can build further.

    I hope this will meet the requirment.

    Johnson

  2. I would like to share the following for public

    If a company has TR (trust receipt) facility with their bank and would like to pay to their vendors from this loan account, I suggest the following method.

    Step1
    open a loan a/c called ‘Loan against TR – SCB’ in Bank as follows
    Go to ‘Bank’ Program, choose the bank from ‘bank’ tab
    Go to ‘Account’ tab, add a new record. Enter the TR account no. given by bank, SCB. enter the limit if required
    Go to ‘Account Element’, create a GL account under ‘Liability’. Give name as ‘Loan against TR – SCB’. Put tick as ‘bank account’. Select the bank a/c from the drop down list.

    step2
    Go to ‘Payment Selection’ program. Select the above TR loan a/c.
    Select the supplier, invoice etc. complete the doc

    This will debit party a/c and credit ‘Loan against TR’ a/c

    step3
    Now on due date or whenever the company is ready to pay to bank , do the following entries
    Go to ‘Bank Transfer’ program and transfer the amount due from the current a/c to the TR loan a/c. This will credit the bank current a/c and debit the TR loan a/c

    Pls give your comments

    • Walking Tree says:

      Hey Johnson,
      This is definitely an interesting point that you have brought-up. One of our customer, who owns Power Plant, had similar kind of need. Did you also have a need to manage credit loan repayment and overall interest tracking and interest settlement stuffs?

      Regards
      Alok

  3. Walking Tree says:

    Based on my experience and after going through commonly used accounting solutions, I have tried to summarize overall TDS related need of the business.

    What is TDS?

    If a specified type of income arises to any one and it crosses certain limit amount, the Income-tax Act enjoins on the payer of such income to deduct a stipulated percentage of such income by way of Income-tax and pay only the balance amount to the recipient of such income – this is called Tax Deducted at Source (TDS). Some of the examples of such income (expense for payer) include
    • Salary
    • Rent
    • Professional Fee
    • Commission Payment
    • Payment to Contractor
    • Advertisement Expense

    Business Need

    As part of TDS management, typically business has following need:
    • To manage TDS on salary as per the investment plan / declaration and proof submitted by the employee
    • Automatic computation of Tax Deductible at Source for Non-Salaried deductees
    • Ability to deduct TDS

    1. at the time of Booking expenses
    2. advance payments

    • Ability to compute TDS with/without considering Surcharge Exemption Limits for parties
    • Ability to compute TDS at higher or lower (including zero) rate than the rate applicable for the deductee
    • Creation of Challan (ITNS 281 Challan) for TDS payment
    • Recording TDS payment to the government
    • Calculation of interest on late TDS payment and including that in TDS Challan
    • Calculation of Penalty on TDS
    • TDS Payment allocations
    • TDS Related Reports

    1. TDS Computation Reports
    2. TDS Certificate
    3. TDS Outstanding
    4. Annual Returns for statutory and tax audit purpose (e.g. reports like Form 16A, Form 26Q, Annexure to 26Q, Form 27Q, Annexure to 27Q, Form 26, Annexure to 26, Form 27, Annexure to 27)
    5. Bill Wise Detail of TDS
  4. Anand Sharma says:

    Thank you for nice article.

    But I have one query regarding : Statutory tax statements and payments (India-specific).
    I was trying to find out how TDS functionality mapped in ADempiere. Your article gives very good explanation about tax deductions while making payments, But did not talk clearly about how this is done in ADempiere.

    Do we need some customization? or it can be achieved with some existing functionality. Can you please answer this.

    • Walking Tree says:

      Hi Anand,
      The answer to your question is yes, you do need customization in existing Adempiere schema to be able to achieve TDS related functionality.

      You need an option on invoice to apply TDS. Depending on the nature of payment (e.g. Rent, Professional Fee, Commission Payment, etc.) and details of business partner, the system shall calculate appropriate TDS amount to be deducted. Once the authorized user confirms TDS deduction the system shall automatically create adjustment against the invoice and also create an entry against correct TDS type.

      There shall be a report which should allow you to generate TDS challan to make correct payment for the period. Once you have made the payment, the system shall allow you to allocate payment to the TDS entries.

      In case you choose not to pay a particular TDS, and later on you decide that you should make a payment for this then the system shall apply corresponding government tax (e.g. 1% per month) and let you know the net challan amount.

      There shall also be a Tax Liability Report – which shall show you the pending tax and their ages.

      Regards
      Alok

  5. Your articles related to AD are interesting to the public.

  6. terrywickers says:

    Had been reading your article and seems very interesting. I would like to share this to my friends. And anyway, good luck with the business and i am pretty sure you will have a progress.

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