6.1 Payment Options, Payment Methods, Defaulting Rules and Payment Terms

The published payment objectives include Manage Payment Options and Manage Payment Methods. Payment terms belong to the common configurations, but they drive which installments a payment run selects, so they are covered here.

Manage Payment Options

Payment options are set for the payment business unit, the one with the Payables Payment function. Oracle's centralized-processing table assigns Manage Payment Options to the payment business unit. Common Options, Invoice Options and the Tax Reporting and Withholding Tax Options belong to the invoice business unit.

Centralized payment processing

Any business unit with Payables Payment can serve business units with Payables Invoicing. Oracle describes three models:

• Dedicated: the payment BU only serves other BUs.
• Self-service: a BU pays its own invoices.
• Dedicated and self-service: both.

The payment BU groups standard invoices, prepayments and credit memos for the same supplier and site from every invoice BU it serves into a single payment, while still honoring each invoice BU's options. In Oracle's example, US Headquarters pays invoices from US West, where the discount allocation is Single distribution, and US East, where it is All invoice lines. The four invoices go into one payment, but each discount is allocated by its own business unit's method.

Disbursement payment methods

A payment method is how a payee is paid. It can be electronic, such as EFT, bills payable or wire, or printed, such as a check. Oracle predefines general methods such as Check and Electronic. Creating a method has two parts:

1. Usage rules decide where the method is available:

   • for all payees, or only for specific business units, legal entities and payment process transaction types for Payables;
   • for specific business units, legal entities and transaction types for Receivables;
   • for specific transaction types for Cash Management;
   • by domestic or foreign currency or payee location.

   Oracle Expenses has fixed usage rules for its supported methods.

2. Validations check documents payable, payments or payment files. You can assign predefined validations or create your own.

How granular should methods be?

Oracle compares two approaches:

• Few general methods (Check, Electronic) are easy for invoice clerks but push validation errors later in the process.
• Granular methods, for example Italian EFT with an Italy-specific validation, catch errors at invoice entry.

Granular methods mean more choices, so Oracle advises pairing them with payment method defaulting rules.

Payment method defaulting

A defaulting rule sets the payment method on an invoice or customer refund when its conditions match. Conditions can include:

• source product;
• business unit;
• first-party legal entity;
• transaction type;
• domestic or foreign currency or payee location.

Payments evaluates the rules in the priority order you set and stops at the first match.

The payment method default basis option on Manage Disbursement System Options decides how rules and payee defaults interact:

• Based only on payment method defaulting rules setup: the rules decide.
• Override defaulting rules when default method set for payee: a default on the supplier site, address or supplier wins over the rules.

Oracle notes that a default method is set at the supplier level and marked inactive during payment method setup, and you can change it.

Example. The site is blank, the supplier header says Electronic, and the first matching rule says Check. With Override defaulting rules when default method set for payee, the invoice gets Electronic. Under Based only on rules, it gets Check.

Payment terms

A payment term has one or more lines, and each line creates one installment. Lines use percentages or fixed amounts. Each line can have up to three discounts, each with its own discount date. Terms are shared across business units through reference data sets (section 1.3).

Due and discount dates use one of four methods:

Day of month: Oracle's example

The term has Cutoff Day 11, Day of Month 15 and Months Ahead 0.

• Terms date 10 January (before the cutoff): due 15 January.
• Terms date 12 January (after the cutoff): due 15 February.
• With Months Ahead set to 1, a 12 January terms date is due 15 March.

Oracle adds: if Months Ahead is 0 and the terms date is the same as or later than the cutoff day, the installment is due the following month. Enter Day of Month 31 to mean the last day of every month, including shorter months.

Which terms an invoice gets

1. An Identifying PO on the invoice supplies the terms.
2. If there isn't one, the supplier site terms are used.
3. If the site has none, the terms in Manage Invoice Options are used.

You can override them on the invoice. If you change the terms on an invoice, its installments are recalculated, and you must reenter any manual adjustments.