Financial Management

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Introduction

In Openbravo most of the accounting transactions are automatically created while posting documents. (Goods Receipts Purchase Invoices as part of Procurement Management
Goods Shipments Sales Invoices as part of Sales Management)

Accounting activities such as:

• creating and opening accounting periods
• entering and posting ledger journals
• managing payables and receivables as well as fixed asset depreciation
• reviewing and submitting financial and tax reports
• and closing accounting periods

are performed in the Financial Management application area.

This application area covers the Payables and Receivables Management business process and Period End Close to Financial Report business flow.

Period End Close to Financial Report

Period End Close to Financial Report business flow manages the open and close of periods.

Configuration

The following setup needs to be need to be performed:

• creation of the Fiscal Calendar and the corresponding accounting periods.
• import of the Organization Account Tree while running either the Initial Client Setup process or the Initial Organization setup process.
  The Chart of Accounts can also be manually created in the Account Tree window.
• The Account Treerefers to the Chart of Accounts used to post transactions in Openbravo. Financial reports such as the Balance Sheet and the Profit and Loss Statement are produced based upon the Account Tree structure.
• An accounting schema is a configuration entity which consists of:
  • the accounting currency
  • the accounting dimensions
  • the Chart of Accounts
• An accounting schema can be created as part of the Initial Client Setup process or the Initial Organization setup process. You can also create an accounting schema manually.

• Account combinations consist of the account dimensions you have set up. Some of the these dimensions are mandatory (account and organization) while others are optional. In the ordinary course of processing documents for accounting, the account combinations are formed by the dimensional characteristics in the document. Ie, there is no need to explicitly create valid account combinations as all dimensions needed for posting are directly obtained from values in the document itself.

• For general ledger postings, however, it is necessary to create or use a valid account combination using at least the mandatory dimensions of account and organization. You may also include optional dimensions.

• A GL Item is an “alias” that allows you to create a user defined name in place of an account number and to map that alias to your accounting schemas. The GL Item can then be used in invoices and in payments in and out. The GL items are used to account for financial obligations that are not ordinarily invoiced and other special procurement items which are invoiced but for which no ordinary master data (such as Product) are maintained.

• Openbravo contains pre-seeded Document Types. You may also define custom ones. The document types allow you to create specific printed formats for business documents and allow you to define sequence numbers for their use.

• Tax Setup
  • Tax Categories are related to products. When you transact with a product, the tax category is used to determine the rate which gets applied.

• • Some business partners are treated differently from others according to established legal provisions. Business Partner Tax Categories are used to identify these business partners and to incorporate these differences into tax calculations.

• • Tax rates are the applicable rates for a tax category within the context of a document and its elements (business partner, product, locations).

Execution

Period End Close to Financial Report business process is executed as follows.

• Finance Team is in charge of opening the accounting period/s of a given Fiscal Year and set the opening balance of the ledger accounts and the financial accounts (or banks) if required.
  • Ledger accounts balance can be initialized by using a GL Journal.
    A journal line can be created for each account and its balance, once done the GL Journal will validate that Debit of all entries equals to Credit.
  • and financial accounts balance can be initialized in the Financial Account, "Initial Balance" field.

• During the life cycle of a given accounting period the finance team can also:
  • review the accounting entries of transactional documents such as Invoices and Payments automatically posted by the Accounting Server Process or manually posted by the users.
  • unpost wrongly posted transactions to get them corrected and properly posted.
  • post the required ledger accounting entries by using the General Ledger Journal or in case of massive posting the GL Posting by DB Tables feature.
  • review the already posted transactions in the Accounting Transactions Details report which also provides accounting dimensions information.
  • fix accounting mistakes if any by following the step by step process described below:
    • run the Reset Accounting process
    • correct the original posting as applicable and post once again
    • or perform a massive posting by using the GL Posting by DB Tables feature
  • verify that all transactions have been properly accounted by launching the Not Posted Transactions report.
  • review financial reports such as the ones listed below, at any point in time:
    • The Balance Sheet report which is a quantitative summary of an organization's financial condition at a specific point in time.
      This report includes all the assets and all the liabilities and shareholders' equity.
    • The P&L report which is an official quarterly or annual report which shows earnings, expenses and net profit.
    • the Trial Balance Report which totalized debit balances and credit balances to confirm that total debits equal total credits.
    • the General Ledger Report which lists every ledger subaccount and its debit and credit ledger entries.
    • and the General Ledger Journal Report which lists every ledger entry of a given accounting schema within a period of time.

• The Finance Team is also in charge of closing both:
  • the accounting periods of a given Fiscal Year:
    • periods can be closed until a given period and for all document types at once or for a given document type such as AP Invoice, for instance
      If a period is closed for a document type that means it will not be possible to post a document of that type within that period.
  • and the Fiscal Year:
    • closing a Fiscal Year closes the open accounting periods of the year
    • closing a Fiscal Year creates the closing transactions of the year and the corresponding opening transactions for the following year.

• Finally, the Finance Team is also in charge of Undoing a Close Year if needed to reopen any of the accounting periods to make the corresponding adjustments.
  This is only possible in case accounting periods are not "Permanently Closed" status.

Payables and Receivables Management

Payables and Receivables Management addresses customer collections and supplier payments.

Configuration

The following setup needs to be done before performing the process:

• Payables and Receivables Document Types.
• Payment Methods.
• Financial Accounts.
• Business Partners to use above configured Payment Methods and a Financial Accounts.

Note: It is not required to perform any additional setup for the Payables and Receivables Management business process if Food & Beverage (F&B) sample client shipped with Openbravo by default is going to be used to explore it. The sample data set already contains the roles, warehouses, business partners, products and prices pre-configured.

Execution

In Financial Management the Payables and Receivables business process is executed as follows.

In the Procure to Pay and Order to Cash business process we have seen how the orders and invoices has been generated. Every time a Purchase or Sales Order is booked or a Purchase or Sales Invoice is completed a Payment Plan is created for that Order / Invoice, which contains payment amount expected for the document and its fulfillment. At the same time Payment Monitor section gets activated that allows to track the invoice payment status directly from the invoice window.

On a periodic basis the Finance Staff reviews the status of the payments pending to be collected / to be paid by looking:

• At the Payment Report and filtering by the status Awaiting Payment. Overdue check-box allows to narrow down the search and to show only overdue payments. Payment Type displays Receivables, Payables or both.
• In addition to this Sales and Purchase Invoice windows in grid view are available to search open invoices by setting Payment Complete field to No.

When Payment is Received Finance staff can register it in different ways:

• With the Payment In window by selecting Sales Invoices and/or Orders payment is received against.
  • Note. Many businesses do not wish to extend credit to specific customers and may therefore have a payment term that requires payment against an order. In effect this is a prepayment of an invoice. Later when an invoice is created from an order that already has a payment received against it the invoice automatically inherits the payment received against the order.
• Using the Add Payment button directly within the corresponding Sales Invoice. It can be when the user has received a single payment for a particular invoice and prefers to browse for that invoice in order to allocate the payment to it.
• It is also possible to automate receiving of a payment on completion of a Sales Invoice through the configuration of the Payment Method.

If collection does not happen on time (details TBD):

• Finance Staff can agree with a customer on a new payment schedule and modify Sales Invoice Payment Plan accordingly.
• The outstanding balance for a customer is reclassified as bad debt using TBD.
• The balance is written off using TBD.

Make Payment. There are 3 ways to pay vendor bills:

• With the Payment Proposal. This process supports the automatic payment of a large number of invoices based on the due dates of the lines of the Payment Plan associated with open Purchase Invoices. Finance staff can request a proposal of all invoices to be paid based on a number of criteria, review that proposal, and then automatically make payment.
• Using the Payment Out window by selecting Purchase Invoices and/or Orders payment is made against.
  • Note. Many businesses do not have credit extended to them and may therefore be required to make payment against a purchase order. In effect this is a prepayment of a purchase invoice. Later when an invoice is created from an order that already has a payment made against it the invoice automatically inherits the payment made against the order.
• With the Add Payment button directly within the corresponding Purchase Invoice. It can be when the user needs to make a single payment for a particular invoice and prefers to browse for that invoice in order to allocate the payment to it.
• It is also possible to automate making of a payment on completion of a Purchase Invoice through the configuration of the Payment Method.

Finance Staff records Withdrawals and Deposits in the Financial Account window by pressing Add Transaction button and selecting received/made payments. This step in the process can also be completely automated through the configuration of the Payment Method so that payments are automatically withdrawn or deposited when they are completed.

Reconciliation.

• Finance Staff receives a bank statement (paper or electronic).
• And reconciles (marks as Cleared) transactions in the Financial Account marked as Deposited / Withdrawn not Cleared with the actual transactions on the bank statement. This process can be done
  • Manually (one by one relating transactions in the Openbravo Financial Account and in the bank statement) by using the Reconcile button of the Financial Account window.
  • Automatically by Importing Statement first and then Matching Statement using a matching algorithm.
  • Additionally, any transactions (receipts and payments) shown on the bank statement and not reflected in the Financial Account should also be entered into Openbravo.
• Finally Finance Staff prints Reconciliation reports (Reconciliation Details, Reconciliations Summary) that explain (reconcile) any difference in the end balance shown for the Financial Account in Openbravo and the end balance shown on the bank statement.

Asset Acquisition to Dispose

Manages global assets life cycle from acquisition to disposition, including depreciation and other write-downs.

Note: This business flow is not yet documented in the new User Guide. Meanwhile we progress on it please use following Asset_Acquisition_to_Dispose document.

Relationship with other areas

Financial Management has a connection with other application areas, as there are documents or transactions in those areas which can be posted and therefore be part of a ledger journal to be finally managed within the Financial Management application area.

• Procurement Management as Purchase Invoices are posted there and Goods Shipments as well as Supplier's Payments or Payments Out can be posted there.
• Sales Management as Sales Invoices are posted there and Goods Shipment as well as customers's Payments or Payments In can be posted there.
• Warehouse Management as Physical Inventory is posted there.
• Production Management as for the processing of the Work Effort raw materials are consumed and posted there at cost price as well as Products manufactured.

Application Menu

Please find below detailed description of all windows and reports of the Financial Management application area split into three sub-areas: Receivables and Payables, Accounting and Assets.

Receivables and Payables

Transactions

• Payment Out
• Payment Proposal
• Payment In
• Financial Account
• Payment Execution
• Tax Payment

Analysis Tools

• Invoice Taxes Report
• Payment Report
• Payment Run

Setup

• Tax Register Type
• Payment Method

Accounting

Transactions

• Open/Close Period Control
• G/L Journal
• Reset Accounting
• GL Posting by DB Tables
• Budget
• Create Budget Reports in Excel

Analysis Tools

• Balance sheet and P&L structure
• Trial Balance Report
• General Ledger Report
• General Ledger Journal
• Not Posted Transaction Report
• Balance sheet and P&L structure Setup
• Accounting Transaction Details

Setup

• Fiscal Calendar
• Account Tree
• Accounting Schema
• Accounting Dimension
• Account Combination
• G/L Item
• G/L Category
• Document Type
• Document Sequence
• Tax Category
• Business Partner Tax Category
• Tax Rate
• ABC Activity

Assets

• Assets
• Asset Group
• Amortization

Analysis Tools

• Asset report for depreciation schedule

Advanced

• Matching Algorithm
• Bank File Format
• Execution Process
• User Defined Accounting Report
• Create Tax Report
• User Defined Accounting Report Setup
• Tax Report Setup
• Accounting Process
• Accounting templates

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