When you receive a payment from a customer that includes one or more deductions that are not tied to specific invoices and that do not refer to existing credit memos, use the following manual procedure to create the appropriate items in Oracle Receivables.

Prior to applying or completing the application of the payment:

1) Determine the total amount of ‘unauthorized’ deductions that the customer took, the related reference numbers and the amount and reference number for each deduction that made up this total.

2) Create ONE credit memo using the Enter Credit Memos or the Quick Transaction Entry screen for the total amount the customer deducted:

\Navigate Memo Standard (Enter Credit Memos) or

\Navigate Invoice Quick (Quick Transaction Entry)

Memo Number = CM(and the check number)

Type = Customer Deduction Credit Memo (Class = Credit Memo)

Amount = total of the deductions (negative)

Reference = CK(and the check number)

Line Type/Description = Customer Deduction

Line Amount = total of the deductions (negative)

3) Create one Debit Memo for EACH deduction that the customer took using the Enter Invoices screen or the Quick Transaction Entry screen:

\Navigate Invoice Standard (Enter Invoices) or

\Navigate Invoice Quick (Quick Transaction Entry)

Number = DM (and the customer’s reference number)

Type = Customer Deduction Debit Memo (Class = Debit Memo)

Amount = the amount of the deduction (positive)

Reference = CK(and the check number)

Line Type/Description = Customer Deduction (note that this uses the same GL account that you used for the credit memo - so this is a wash entry)

Reason = use QuickPick to select the appropriate reason

Line Amount = the amount of the deduction (positive)

4) Apply the credit you created (along with the payment received) to the invoices as indicated by the customer on the remittance advice. Use the Enter Receipts screen:

\Navigate Receipt Manual Standard

Enter or query the payment

Move to the Receipt Applications or Mass Receipt Applications zone

Select the credit memo you created in step 2

(this will increase the amount you have available in your unapplied amount)

apply the receipt and the credit as indicated on the remittance advice

What you have done is:

a) created items with a zero net effect on the customer balance

b) created offsetting GL entries (provided that you use the same GL accounts for the debits and the credits)

c) created separate debit memos for each deduction so you can individually research and resolve them

d) created documents (debit memos) that you can print and send to the customer to notify them that the deduction(s) were not allowed

e) paid the open invoices as indicated on the remittance advice

It is often easier to perform this process prior to starting your cash application. That way the credit will be available for use when applying the payments according to the remittance advice.

Transaction Types (\Navigate Setup Invoice Type)

for: "Customer Deduction - Credit Memo" and

"Customer Deduction - Debit Memo" - use the appropriate Receivables Accounting Flexfield (note that this generally will be the same account for the debit memo and for the credit memo)

Standard Lines (\Navigate Setup Memo Line)

for: "Customer Deduction" - use the appropriate Clearing Accounting Flexfield (note that this is generally the same account for the debit memo and the credit memo). It is helpful to define a special account which will only be used for this type of activity. If you find an open balance for the special account -- you know that you have a problem

Reasons (\Navigate Setup System QuickCodes Receivables)

Type = Credit Memo Reason and Invoicing Reason

verify that you have defined appropriate reasons for the customer deductions

NOTE: if the customer deduction relates to a single, specific invoice - you can utilize the Chargeback feature in the Enter Receipts screen to more easily accomplish this.

You can ONLY use the Quick Transaction Entry screen IF you do not need to override any of the default segments for the Receivables or clearing Accounting Flexfields, as defaulted using your AutoAccounting rules.