Description

Many time when paying bills in AP, customers will pay multiple bills with one payment to that vendor. In addition, many customers now use payment distribution partners or apps that can pay multiple vendors with one lump sum. In order to properly record this in your general ledger, create a batch payment when selecting which bills to pay in that payment. By matching the flow of cash to the general ledger, this makes for an easier reconciliation process, to be able to compare journal entries from cash payments against that of bank or credit card statements.

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TABLE OF CONTENTS

• Create a Batch Payment
  • Step 1: Create the Batch Clearing Ledger Account and set your Default Accounts for Batches
  • Step 2: Select a Batch Type Payment
  • Step 3: Select which Bills to include in the Batch and their Amount to Pay
  • Step 4: Click Pay and confirm the Batch details
  • Step 5: Approve the Batch Payment
• Reviewing the financial impact

Create a Batch Payment

After you have created two or more bills and approved them so that they are ready for payment, you can create a batch payment from the Cash Management>Pay Bills section. You first enter into a Batch type payment, and then select which Bills and their respective Amount to Pay.

Step 1: Create the Batch Clearing Ledger Account and set your Default Accounts for Batches

If you have not set up a Batch Clearing Account prior to creating the Batch, this will be the first step so that you will have an account that is used to connect the Bills and get to your ultimate total Cash Amount being reduced when paying multiple Bills in a Batch.

Once you have created the Batch Clearing Account, be sure to set the default Cash Account and Batch Clearing Account to create automation and save time or risk for error when creating Batch Payments.

Step 2: Select a Batch Type Payment

Once Bills are Approved and ready for Payment, navigate to Cash Management>Pay Bills and select Type as 'Batch'.

Step 3: Select which Bills to include in the Batch and their Amount to Pay

1. Select the Currency to further filter Bills to be paid in that currency, as all bills in a batch must be same currency
2. Select the Location to further filter Bills to be paid in that location, as all bills in a batch must be same location

Step 4: Click Pay and confirm the Batch details

The default accounts set in Step 1 will autopopulate here, and a prompt will require a Payment and Posted Date for the entire Batch, as well as the option for an overall Memo for more description of this Batch Payment.

Step 5: Approve the Batch Payment

Once you have created the Batch, navigate to the Batch Payments tab and Approve the Payment (note: if you have Auto Approve AP Payments enabled from system settings, this will auto approve).

Reviewing the financial impact

From a batch payment, essentially there are underlying bills that are offset on a 1:1 basis with a single payment that is grouped under a batch payment. The clearing account created and selected when creating the batch is used to offset credit side of each individual payment and the debit side of each batch payment, so that each bill can record it's standard expense, offset the AP Account, and ultimately the cash account is credited at the desired lump sum amount of the batch payment. In this way, auditability is retained, while also being able to match cash movements to something like a bank or credit card statement. To be able to review how payments/batches/journal entires are related, a system generated unique ID is created and available in all places under the field 'Batch Payment'.

In the example from this article, we can see that the three bills being paid each have Journals to debit the AP Account and credit the Batch Clearing Account. We then can see the Journal created from the Batch itself that debits the Batch Clearing Account and credits the Cash Account.

If we look at the example from start to finish, the progression in terms of Journal Entries goes like this (Red Text indicates what is offset, and Green Text indicates what remains as the final outcome).

Bill 1 Creation:

Dr. Expense 10,000

Cr. AP Account 10,000

Bill 2 Creation:

Dr. Expense 10,000

Cr. AP Account 10,000

Bill 3 Creation:

Dr. Expense 10,000

Cr. AP Account 10,000

Payment 1 Creation:

Dr. AP Account 10,000

Cr. Batch Clearing Account 10,000

Payment 2 Creation:

Dr. AP Account 10,000

Cr. Batch Clearing Account 10,000

Payment 3 Creation:

Dr. AP Account 10,000

Cr. Batch Clearing Account 10,000

Batch Payment Creation:

Dr. Batch Clearing Account 30,000

Cr. Cash Account 30,000