UNLOCKING THE SECRETS OF LOCKBOX

Cathy Cakebread , Consultant 


ABSTRACT

This paper will provide tips for how to utilize Oracle's automated Lockbox feature. Included is: working with your bank, defining your data to Oracle, Lockbox processing flows, deciding whether the automated Lockbox is right for you, and highlighting what is new in Release 11.


INTRODUCTION

Lockbox is a service provided by banks and other service bureaus wherein your customers send payments directly to a lockbox and the receipts are immediately deposited into your account. If you have an "Automated Lockbox" (Auto Lockbox) the bank records the information that you request such as check number, check amount, numbers and amount for the invoices to be paid. Your company receives the results of the banks keying -- usually by transmission to your PC.

Oracle provides you with the tools to:

A typical Lockbox transmission contains various different records, each with relevant data. Controls are provided at each level to ensure that the transmission was successful and to verify that the count and dollar amounts are consistent with what the bank indicated. These controls are at the transmission, Lockbox, batch and receipt levels. The records also contain information such as your bank account (by Lockbox) and the details for the receipts the bank received. The Lockbox may be used for checks, wires and any other receipts that you receive. You define what the data from the bank will look like and how you will use it.

Note: Auto Lockbox may not be useable for wire transfers due to the format of the data usually sent by banks for these transactions. 

 
LOCKBOX DATA

The data from the bank includes a field for "record type" that indicates the type of data to expect on this record. Oracle provides default set ups for records that comply with the BAI standards, but you may modify the layouts to meet your requirements.

Typical records and record types:

Transmission Header (1)

Service Header (2 - Optional)

Batch Header (5)

Receipt (6)

Overflow Receipt (4)

Overflow Receipt (4)

Receipt (6)

Receipt (6)

Overflow Receipt (4)

Batch Trailer (7)

Lockbox Trailer (8)

Transmission Trailer (9)

The header and trailer records provide the control counts and amounts and are used to verify the contents of your transmission. The receipt and overflow receipt records include the details of the receipts you are receiving and how they are to be applied (reflecting the information on the remittance advice). A receipt may have as many overflow receipt records as are necessary to provide you with all of the remittance information.

 
LOCKBOX PROCESSING

When the Lockbox data is received from the bank, you need to move it to the computer where you are running Oracle (work out a procedure with your technical support staff). Use the Submit Lockbox Processing form to "import" the data (move the data to a table within Oracle). Validation checks the data for relevance and compliance with your rules. PostQuickCash creates real receipts and applies them to the invoices.

In the Submit Lockbox Processing form:

The Lockbox Execution Report will indicate if the data was imported and how the data fared in the validation. It also lists the possible exceptions and what they mean. If the data fails the import, the entire transmission fails and will need to be run again.

There are different types of errors that you may encounter. If the control counts and dollar amounts are not consistent with the actual counts and amounts, you will get an error. These errors can occur at the transmission, Lockbox, batch and/or check levels. Errors at the transmission and Lockbox levels may indicate a problem with your download and should be investigated as soon as is possible.

If there is no check number, or if an invoice number provided is invalid or for a closed invoice, you will also get an error.

You have different tools to investigate and correct these errors. You may use the Maintain Lockbox Transmission form (this is generally the first form you will use to correct errors). Select the "Transmission Name" of the transmission you wish to fix and start your query. You will see all of the records that make up the transmission, along with the status for each record. Position the cursor on the record you wish to correct and Click on the Button for the data with the error. Correct the error on the appropriate page, and return to the first form. Move to the next record to fix and continue until you have corrected every error.

 Return to the Submit Lockbox Processing form to re-run the validation:

Continue the cycle of correcting and validating the data until all records have been "transferred" as indicated on the Lockbox Execution Report.

When all records are "transferred," they have been moved from the Lockbox tables to the tables used by QuickCash (the Interim Cash Receipt tables). If you have additional corrections to make, you may make them using the QuickCash form or wait and correct them in the Receipts form (the usual method). Since you Checked Complete Batches Only, you have not created lots of small batches. Instead you have retained the batches as provided by the bank.

To actually apply the receipts, use the Submit Lockbox Processing form. Select the "Transmission Name" and Check Submit PostQuickCash. You get the Post QuickCash Posting Execution Report that details how the receipts were applied and if not, why not.

Return to the Submit Lockbox Processing form:

If additional corrections are needed, you may Query the batch using Receipt Batches and make the appropriate changes using the Receipts form.

Non-Accounts Receivable receipts that are received through the Lockbox will need to be changed to Type of "Misc" and the additional information added in the Receipts form.

 
DIFFERENCES BETWEEN RELEASE 10 AND RELEASE 11

Release 10 Lockbox process cannot handle receipts for currencies other than invoice currency.

 
CUSTOMER DEDUCTIONS

If your remittance advice includes customer deductions, you will need to handle them as follows:

If the deduction is valid and refers to an existing credit memo, Auto Lockbox can process the credit (if the amount is provided as indicated above).

If the deductions are not valid:

 
PREPARING TO USE LOCKBOX

There are several tasks you will need to perform before you can start using Lockbox. First, you need to work with your bank to define what data you would like to receive and how it will appear on each record. The model provided by Oracle is fairly standard and is generally a good starting point for working with the bank (see $AR_TOP/bin/ardeft.ctl). Remember, you pay for EVERY piece of information that the bank keys but Oracle has certain minimal requirements for each record type (see the Open Interfaces Manual for Oracle's required fields). Ask the bank for a copy of your current layout.

One optional field is the amount to be applied to each invoice. Though this is optional, it may provide you with better control of what is actually being applied.

Tip: I recommend that you have the bank provide both the invoice numbers and the amounts to be applied from the remittance advice. With this information, the application will be done exactly as the customer intended and will require less re-work on your part.

Tip: If the customer is passing credit memo numbers and amounts, the amount is usually negative but it must be provided with "leading zeros." For instance, -100.00 in a 12 digit field must be provided as "-00000010000." Ask your bank to provide the information accordingly.

Tip: If you have a large number of invoices being paid with one check (more than 298), you may exceed the standard overflow sequence field which is only 2 characters long. You will need to work with your bank to expand this field.

You will also need to decide if you want real or implied decimal points (100.00 or 10000 for $100). Certain fields will be right justified (aligned to the right of the field -- usually numbers). Some will be left justified (aligned to the left of the field -- usually alphanumeric data). Watch out for items such as bank accounts and invoice numbers that are left justified, even though they are all numbers.

Note: If all of your items continue to be created as "unidentified," or you have problems with Auto Lockbox, check to be sure that you have the justification properly defined.

Prior to actually going live with Auto Lockbox, you will also want your bank to provide sample files to ensure that the data you are receiving is the data you expect.

Banks often take 4 - 6 weeks to provide you with the data or with the changes that you requested, so start this step EARLY!

Once you have decided your layouts and banks, you need to define them for Oracle. Use the Banks form to set up your banks. Use the Lockboxes form to describe your Lockboxes, including:

See the Oracle Receivables Reference Manual for more details on the possible record types and field types.

Caution: If you have entered the information and realize that you need to change the starting and ending columns, you must revise in a certain way. Change the descriptions for the fields at the end of the record first, and then work your way toward the beginning of the record, saving as you change each field. This is necessary because the form has edits to ensure that you do not define overlapping fields.

You need to be sure that the overflow indicator you specify is consistent with the indicator value provided by the bank. Also, the first invoice number on the overflow receipt record will be "Invoice 1" even though you may have also indicated a "Invoice 1" on the receipt record. Note that you cannot put invoice numbers and related amounts on separate records, they must be on the same record.

Note: You will also need to define your layout in the SQL*LOADER control file (Oracle uses this in the import). Use a technical text editor (e.g., VI or EDIT) to create and/or change the file. Oracle provides a sample in $AR_TOP/bin/ardeft.ctl. You may use this layout or make a copy and modify as needed. This layout MUST be consistent with the layout you defined in the Transmission Formats form. You may have as many control files as you need to define your different Lockboxes. Note the actual name that you used and if any of the letters are capitals.

 
CUSTOMER MICR NUMBERS

Customer MICR numbers are the customer bank account numbers (the funny looking numbers at the bottom of your checks). They contain two pieces: the transit routing number (the bank) and the account number. MICR numbers are used by Oracle Receivables to match receipts to customers even when no invoice number is provided. Oracle Receivables learns which MICR numbers belong to which customers as it does the processing. When a new MICR number is encountered, Oracle Receivables creates a record in the customer/micr number table with no customer. When a receipt is applied to an invoice, the system updates the customer/micr record with the customer id. When the MICR number is encountered again, the system already knows the customer from this record.

You may speed this process by using the Customers: Banks Alternate Region to manually add the MICR numbers for your more active customers. Note that one MICR number may only be used for ONE customer. If you want the Auto Lockbox process to take advantage of your customer relationships, you need to use this region to add the MICR numbers for the parents before starting to use Auto Lockbox. Otherwise the system will assign them to the first "child" with an invoice number that matches.

 
AUTO ASSOCIATE AND AUTOCASH

Auto Associate means you want the Lockbox process to use the invoice or debit memo numbers provided to match a receipt to a customer. If the invoice number is used by more than one customer or is invalid, the receipt will be transferred as "unidentified" and you will need to correct it in the Receipts form. You indicate if you will take advantage of Auto Associate when you set up your Lockboxes (Lockboxes form); thus, you have the option of whether or not to use Auto Associate for different Lockboxes.

AutoCash is the ability to define cash application rules for use in automatically matching receipts to invoices in Lockbox. You indicate if you will use AutoCash on the Define System Parameters form. You also indicate the default AutoCash Hierarchy (the sequence in which the rules will be used) on that form. You may override the default AutoCash Hierarchy by customer, using the Maintain Credit Profiles form. Describe your AutoCash rules using the Define AutoCash Rules form. You indicate which discounts (earned and unearned) are to be used, specify whether or not you want to include accrued finance charges, and determine if you want disputed items used in the open balance calculation. You indicate what to do with remaining amounts and whether you want automatic receipt of partial amounts. The standard AutoCash rules are:

You define the sequence in which you want the system to use these rules.

Tip: I usually only use "Match Receipt with Invoice." Otherwise, you may have Auto Lockbox applying the receipts in ways other than as intended by the customer.

 
ADDITIONAL LOCKBOX TIPS

1) Data that is moved from a PC may contain "^Z" at the end (this is the end of file marker and it will cause strange results in your Lockbox data. Write a script to strip off the ^Z before you do the import into Oracle.

2) If you have multiple customers whose invoices may be paid by a central location, but you have no separate customer set up as the "parent," you may want to set up a "dummy" customer as the parent. Assign the children to the parent using the Customers: Relationships Alternate Region and create the customer MICR record for the parent (using the Customers: Bank Accounts Alternate Region). Then the "parent" can pay the "children's" invoices within Lockbox and the other cash application forms.

3) The majority of the detailed documentation regarding Lockbox is in the Open Interface Manual. Be sure to use this documentation in addition to the standard form and set up documentation found in the Oracle Receivables Reference Manual.

 
DATA CONVERSION

Even if you do not use the Auto Lockbox for processing your daily receipts, you should use it to convert your historic receipts when you go live Oracle Receivables. Oracle provides a default SQL*LOADER control file called arconv.ctl (in $AR_TOP/bin) and a Transmission definition called CONVERT for you to use when you do this. The layouts are very basic and you do not need to create control records for the totals. By doing this you take advantage of the Oracle edits and can ensure that all of the associated tables are properly populated. NOTE however that the GL date will be used as the apply date, so group your data accordingly.

Tip: I usually convert all data in the period prior to the period when we are going live. I then run the General Ledger Transfer program to mark all items as having been posted. But, I have someone in GL delete the batch before it actually posts since it would impact the starting GL balances. Optionally, you may create a script to update the records with the actual GL dates.

 
SHOULD YOU USE AUTO LOCKBOX?

Given the limitations listed above, Lockbox may not be for everyone. Questions you should ask before implementing Lockbox include:

 

About the Author

I am an independent consultant specializing in Oracle Financials. I have over twenty years experience in designing, developing and implementing financial software and I was one of the original designers of Oracle Receivables and Revenue Accounting. I have assisted over 60 customers in implementing, upgrading and daily use of Oracle Receivables. You can contact me at cathyc@compuserve.com, www.cathycakebread.com or at (650) 562-1167.

Copyright (c) 1999 by Cathy Cakebread