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ManualDoc:SectionFinancial Management(Openbravo Admin)

Contents

Introduction

Openbravo automatically generates an accounting representation of all the transactions within the enterprise that have an economic relevance.
Accounting is the system of tracking the assets, the debts, the income and the expenses of a business.

In Openbravo, most of the accounting entries are automatically created while posting documents such as:

Accounting entries do not directly related to documents managed within a given application area can be created and posted in a G/L Journal. For instance a provision for stock depreciation accounting entry.

There are three ways of accounting in Openbravo:

Accounting activities such as:

are performed within the Financial Management application area.

Finally Openbravo has an integrated accounting system that combines general accounting and analytical accounting:

In other words, Openbravo allows to post transactions to the ledger which can include different dimensions:

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

Period End Close to Financial Report

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

PeriodEndClose ToFinancialReport.png

Configuration

This section details the basic and not that basic accounting configuration needed prior to the execution of the "Period End Close to Financial Report" business flow.

Basic Configuration

There are 3 Openbravo accounting concepts which need to be explained before describing the basic accounting configuration:

A fiscal calendar in Openbravo is the year and the periods, normally months, when financial transactions and journal entries are posted to the ledger.
An account tree is the way Openbravo captures the "Chart of Accounts" (CoA) of an Organization.
The Chart of Accounts is a list of all the accounts used in an organization's general ledger.
Accounts such as balance sheet accounts (assets, liabilities and owner's equity) and income statement accounts (revenues, expenses, gains and losses).
It is important to remark that in Openbravo, the financial reports such as the Balance Sheet and the Income Statement are produced based upon the Chart of Accounts structure.
The general ledger configuration captures the accounting rules to use while posting the organization's financial transactions to the ledger. Accounting rules such as the "Currency" and the "Chart of Accounts" among others.

Having said that, the accounting configuration detailed in this section is the one required for legal entities with accounting, including the business units, because these organization types are the only ones which can have assigned:

Obviously these organization types allows posting transactions to the ledger.

Rest of the Organization types behave as explained in the Initial Organization Setup and in the Organization articles.
Very briefly:

Additionally, some countries such as Spain or France require that a specific "Chart of Accounts" is used in the statutory books, therefore the authorities can see the same list of accounts and the same level of detail in the Income statement and in the Balance Sheet.
For those cases Openbravo provides a "Localization Pack" which includes the Statutory Chart of Accounts such as the Spanish Localization Pack

On the other hand, there are countries such as USA where a specific "Chart of Accounts" is not required.
For those cases Openbravo provides a Generic Chart of Accounts module which includes a sample Chart of Accounts which can be modified as required.
It is recommended to start from a sample chart of accounts like the generic one and evolve it for the organization's needs rather than starting from scratch.

In-country taxes setup is another key element of the basic accounting configuration.
There can be Localization Packs which include the setup of the taxes for the country while there can be others which do not include the setup of the taxes for the country.
The Generic CoA module does not include any taxes setup.

Having said all of that, there are three possible "accounting" scenarios:

  1. Openbravo environments with a Localization Pack installed, for instance the Spanish Localization Pack.
    A localization Pack which also includes the taxes setup for Spain.
  2. Openbravo environments with the Generic Chart of Accounts (CoA) installed, mainly in those countries where statutory CoA are not required.
  3. and Openbravo environments which do not have a Localization Pack installed neither the Generic Chart of Accounts module installed

The basic accounting configuration is practically the same one for the tree scenarios above but the level of defaulted configuration provided by Openbravo. Obviously scenario 3 above requires an additional configuration effort.

Finally, it is important to remark that the basic accounting configuration described here is obviously one part of the overall Business setup flow.

Scenario 1 and 2 - Localization Pack or Generic CoA module installed

These two scenarios can be grouped as the basis of the accounting configuration required for both of them is the same.

The configuration steps to follow are:

It is important to remark that:

Scenario 3 - Localization Pack and Generic CoA do not installed

The enterprise in this scenario should follow below steps which implies an additional configuration effort:

This scenario is covered in the corresponding articles of the User Guide.

Additionally, all of the three scenarios above require anyway below additional accounting configuration:

Advanced Configuration

As already mentioned there is an additional accounting configuration which might be needed regardless of whether a localization pack is installed or not.

As a side note Openbravo contains pre-seeded Document Types:

Execution

Overall the Period End Close to Financial Report business flow can be split into the following steps once the accounting period has been opened:

Opening of the accounting

This very first step implies to initialize the balance of the ledger accounts and the financial accounts or banks. The way to do that in Openbravo is:

To learn more about this topic, please review the How to initialize financial balances in Openbravo article.

Review of the accounting transactions

As already mentioned in Openbravo most of the accounting entries are automatically created while posting documents such as a purchase invoice or a sales invoice.
For instance the accounting of a purchase invoice will take:

Openbravo allows to review and correct if needed the accounting entries of transactional documents such as the Invoices.
Same way Openbravo allows to unpost wrongly posted transactional documents one by one to get them corrected and properly posted once more.
The way to do that is explained in the Document-Post/Unpost article of the Common Concepts and Processes section.

Additionally, the Accounting Transactions Details report shows all the transactions posted in the ledger with all the details and the Not Posted Transactions report shows the transactions which need to be accounted but have not been accounted yet.

Finally Openbravo allows to massively fix accounting errors if any, for instance a vendor liability account wrongly assigned to a vendor or to a set of vendors.
The way to do that is:

Creation of accounting transactions and G/L item payments

As already mentioned accounting entries do not related to documents managed within a given application area can be created and post to the ledger by using a G/L Journal.

A G/L Journal can also be used to make and/or receive payments do not related to orders/invoices but to G/L items.
G/L items payments are also managed within the Payables and Receivables management area.

Printing of the Trial Balance to check that "Debit=Credit

The Trial Balance is a list indicating the balances of every single general ledger account at a given point in time.
The purpose of the trial balance is to check that debits are equal to credits. If debits do not equal credits that means that an erroneous journal entry must have been posted.

Openbravo does not allow to post journal entries which do not balance. A G/L Journal can only be posted if Debit equals Credit, however there could be situations where while posting an invoice rounding differences drive that debit do not exactly equal credit. In this situations the difference is posted in a specific suspense account. Suspense accounts are configured in the General Ledger configuration.

Adjustments required prior to the income calculation

An organization's income statement shows the organization's financial performance over a period of time (usually one year) as the difference between:

An Income Statement can look like:

Income Statement.png

In order to get an accurate income calculation, there are some adjustments required to be done first:

Finally an income statement can separate "Operating Expenses" such as salaries and rent from "Non-Operating Expenses" such as a lawsuit.
Operating Expenses are the expenses related to the normal operation of the business and are likely to be incurred in future periods as well.
This way allows the calculation of the "Operating Income" as the difference between the "Gross Profit" and the "Total Operating Expenses".

Adjustments required prior to the closing of the accounting year

Other adjustments required can be :

The printing of the preliminary Income Statement and Balance Sheet

Once configured, Openbravo allows to get and print the Income Statement and the Balance Sheet whenever it is required as the structure of these reports is based on the chart of accounts tree.

It is very useful to print these financial reports prior to the closing of the year as it allows to get a sense of whether there are some missing adjustments required to be done prior to the closing of the year or not.

During the accounting cycle there are other reports which can also be printed:

The closing of the fiscal year

Openbravo allows to perform below detailed checks prior to the closing of the fiscal year:

Before running the close year process the accounting periods can be closed not to allow any further posting within those periods, but the "13th period".
The "13th period" is an "adjustment period" which can be used to post the adjustments required to the ledger through G/L Journals prior closing the year.

The ”Close Year” process can be executed from the End Year Close window.

The end-year close process can be executed for "Legal with Accounting" organization types as that organization's type have a "Fiscal Calendar" and "General Ledger" configured.

There is a check-box in the General Accounts tab of the "General Ledger Configuration" window which drives how the end-year closing outcome is going to be for the organizations' General Ledger.
That check-box is named "Reverse Permanent Account Balances"

Openbravo uses the adjustment period (i.e. December 31st) for accounting the closing transactions if any, and the next period's first date (i.e. January 1st) for accounting the opening transactions if any.

To learn more about this process, visit the End Year Close window.

The printing of the final "Income Statement" and "Balance Sheet"

Once a year has been closed every financial report contains the corresponding closing and opening transactions:

This balance allows to see how the financial position of the organization has changed over time.

And besides:

Payables and Receivables Management

Payables and Receivables Management addresses customer collections and supplier payments as well as other payments do not related to invoices but to orders (prepayments) or G/L Items.

Payment Workflow.png

Configuration

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

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

Overall the Payables and Receivables Management business process can be split into the following steps:

Creation of the orders/invoices to be paid

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

Creation of payments do not related to orders/invoices

In the Period End Close to Financial Report business process we have seen how a payment can be made or received by using a GL Journal therefore it is not related to an order/invoice but to a G/L Item.

A G/L Item payment created in a G/L Journals implies:

Review of the status of the pending payments

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

Receipt of the customer's payments

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

If collection does not happen on time:

Payment of the supplier's invoices

There are 3 ways to pay vendor bills:

Recording of the financial account transactions

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

Reconciliation of the financial account transactions

Finance Staff receives a bank statement (a paper or electronic bank statement) and reconciles the transactions in the Financial Account marked as Deposited / Withdrawn not Cleared with the actual transactions on the bank statement. This process can be done

Additionally, any transactions (receipts and payments) shown on the bank statement and not reflected in the Financial Account should also be entered into Openbravo to get them reconciled.

Finally Finance Staff prints the Reconciliation reports (Reconciliation Details, Reconciliations Summary) that explain 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.

AssetAcqDispBusinessProcess.png

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.

Application Menu

Please find below detailed description of all windows and reports of the Financial Management application area split into three sub-areas:

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