31 July 2007

Basic Concepts in Oracle Cash Management- Part1

Oracle Cash Management System

The Oracle Cash Management system is a financial software program that enables you to manage your company's cash cycle effectively and efficiently. It also enables you to identify surplus cash that can be put to use. Its Bank Reconciliation and Cash Forecasting functions help you to ensure liquidity and improve profitability.

Using the Oracle Cash Management system, you can forecast your company's cash flow and predict situations when adequate cash balances might not be available. As a result, you can take corrective steps in advance and avoid paying finance charges later.

This ReferencePoint explains how to configure the Oracle cash management system by defining bank transaction codes and system parameters. It also explains how to set up and integrate the Oracle Receivables and Oracle Payables modules with the Oracle Cash Management system. In addition, it describes the processes of Bank Reconciliation and Cash Forecasting.

Configuring the Oracle Cash Management System

You should configure the Oracle Cash Management system before you use it. To configure the system, you need to set up various parameters, such as the bank transaction codes and system parameters.

Defining Bank Transaction Codes

To load electronic bank statements or to use the AutoReconciliation feature of Cash Management, you need to define bank transaction codes for each type of transaction. These codes will figure in all transaction statements that you receive from your company's bank.

The AutoReconciliation program enables you to automatically reconcile your company's bank statements with the Oracle Cash Management system. The bank statement file contains the code for each bank statement line, which enables you to identify the type of transaction made with your company. You need to map each transaction used by the bank to its corresponding predefined Cash Management transaction type.

To define a bank transaction code:

  1. Click on Setup->Bank Transaction Codes. The Bank Transactions Codes window opens, as shown below-

The Bank Transaction Codes Window

  1. In the Bank Transaction Codes window, select View->Find. The Find Bank Account Window appears.

  2. Enter the bank account number for which you want to define transaction codes.

  3. Select Setup->Bank Transaction Codes on the main menu of the Find Bank Account Window.

The Bank Transaction Code window provides the following options:

  • Type: Allows you to specify the type of transaction. You can select from the following transaction types:

    • Payment: Generated or recorded checks, payment batches, wire transfers, electronic funds transfer, and payroll checks.

    • Receipt: Received checks, remittance batches, direct debits, and bills of exchange.

    • Miscellaneous Payment: Payments that is not associated with any supplier's invoice.

    • Miscellaneous Receipts: Receipts that is not associated with any customer's invoice.

    • Stopped: Stopped payments that have been entered, generated, or cleared earlier.

    • Rejected: Receipts rejected for reasons other than insufficient funds.

    • Non Sufficient Fund (NSF): Receipts rejected by the bank because the relevant account had insufficient funds.

  • Code: Allows you to specify the code that your bank uses for the selected transaction type.

  • Description: Allows you to specify the description of the transaction.

  • Effective Dates Start and End: Allows you to specify a date range during which the transaction code will remain active and usable. After the end date, the transaction code becomes ineffective.

  • Transaction Source: Allows you to specify a receipt or a payment source for the transaction. From the list of values, you can choose Journal in order to reconcile statement items with the transaction code assigned to General Ledger (GL) journals. Alternatively, you can choose Payments or Receivables Receipts to reconcile statement items with transactions in Oracle Payables or Receivables.

  • Matching Against: Allows you to specify the value that matches the Miscellaneous Receipt or Miscellaneous Payment transaction type. You can enter one of the following values:

    • Misc: Matches against miscellaneous transactions only.

    • Stmt: Identifies the Statement Line as a correcting entry.

    • Misc, Stmt: Matches against miscellaneous transactions. If no match is found, matches against statement lines.

    • Stmt, Misc: Matches against statement lines. If no match is found, matches against miscellaneous transactions.

  • Correction Method: Allows you to specify the correction method that your bank uses. You can choose between Reversal and Adjustment or both. This field is applicable only if the Miscellaneous Receipts or Miscellaneous Payment transaction codes match against correction statement lines.

  • Create check box: Allows you to create transactions for miscellaneous payments or receipts appearing in the bank statement when no transaction number is provided. If the Create option has been enabled, you need to specify the Receivables Activity type and the Payment Method for Miscellaneous Transactions created through Cash Management.

Defining System Parameters

The Oracle Cash Management System allows you to define default options for manual and AutoReconciliation features. System Parameters determine the default options for the manual reconciliation window and the control settings for the AutoReconciliation program.

Before defining the system parameters for Cash Management, you need to:

  1. Define the set of Books using Oracle GL.

  2. Check whether the GL Set of Books Name profile option has been assigned the correct value.

To define the system parameters select Setup->System Parameters in the main menu. The System Parameters dialog box appears. screenshot displays the System Parameters dialog box:

The System Parameters Dialog Box

The System Parameters window provides the following options to define basic system parameters:

  • Set of Books: Displays the value that represents the set of books in which cash management accounting transactions are recorded.

  • Begin Date: Allows you to enter the date when the cash management transactions will begin. The cash management system will not display any transactions prior to this date.

  • Show Cleared Transactions: Enables you to use cleared transactions for reconciliation. If you do not enable this option, only uncleared transactions will be available for reconciliation.

  • Add Lines to Automatic Statements: Enables you to add lines manually to automatically loaded bank statements.

  • Use Reconciliation Open Interface: Enables you to reconcile bank statement lines with transactions originating from external to Oracle Applications.

  • Show Void Payments: Enables you to select voided payments for reconciliation.

The General tab of the System Parameters window provides options to control various aspects of AutoReconciliation. You can also use these options as default parameters for the AutoReconciliation and Manual reconciliation windows. The options and fields on the General tab include:

  • Matching Order: Allows you to define the Receivables and Payables options to determine how the AutoReconciliation program searches for transactions to match lines from the bank statement.

  • Clear Status: Displays the status of the open interface transactions that have been cleared.

  • Float Status: Displays the status of the open interface transactions that are available for reconciliation.

  • Receivable Activity: Displays the difference between the amount cleared and the original amount for remittance batches. The value you define here also appears as the default value in the Miscellaneous Receipts window.

  • Float Handling: The two options available are Ignore and Error. Your selection will specify how the system will handle the reconciliation of bank statement lines where the value date is later than the current date.

  • AutoReconciliation Parameters (AP): The options on the AutoReconciliation tab enable you to set the parameters to control the working of the AutoReconciliation program.

The AutoReconciliation tab contains the following fields:

  • Tolerances: Enables you to enter tolerances for the AutoReconciliation program. For example, if you have entered the tolerance amount as $10 and the bank statement line amounts to $100, the AutoReconciliation program matches this bank statement line with a transaction of an amount ranging from $90 to $110. You can enter the tolerance in percentage and amount.

  • Tolerance Differences: Allows you to configure the difference between the amount cleared by the bank and the actual transaction amount. The two tolerance differences that you can configure are AP and Foreign. AutoReconciliation Parameters option determines whether any difference between the amount cleared by the bank and the transaction amount is charged by Cash Management to the Bank Charges or Bank Errors account. The Foreign option controls how Cash Management handles inconsistencies resulting from exchange rate fluctuations.

  • Archive/Purge: Allows you to purge the AutoReconciliation program of all information from bank statement interface tables after it has successfully transferred the information to bank statement tables. You can also set this option to Archive if you want the AutoReconciliation program to archive all the information in bank interface tables after it has successfully transferred the information to bank statement tables.

  • Lines per Commit: Allows you to set the number of lines that AutoReconciliation will save at a time. You can also set the number of transaction rows the AutoReconciliation program locks at a given time.

Setting Up Oracle Payables and Oracle Receivables for Oracle Cash Management Integration

Oracle Payables are the payments that a company makes for goods or services consumed during the normal course of business. Oracle Receivables are the payments that a company receives for goods and services sold during the normal course of business. You need to integrate Oracle Cash Management with Oracle Payables and Receivables to reconcile Bank statements with your system transactions.

Integrating Cash Management with Oracle Payables

You need to perform the following tasks to integrate Oracle Payables with Cash Management:

  1. Define Set of Books from the Oracle General Ledger. You need to define the chart of accounts, functional currency, and the accounting calendar to create a Set of Books.

  2. Choose a Primary Set of Books for your operating unit in a large company setup or for your installation in a single company environment.

  3. Select Setup->Options->Payables in the Payment Option window to navigate to the Payment Accounting tab. To account for payments that you want to reconcile in cash management, enable either the When Payment is Issued or the When Payment Clears option.

  4. Select the When Payment Clears option in the Account for Payment Region of the Payment Accounting tab.


When you select the When Payment Clears option, Payables automatically selects the When Payment Clears option in the Account for Gain/Loss region of this tab. As a result, the Oracle Cash Management system accounts for the difference between the estimated functional currency payment amount and the actual amount recorded when the bank disbursed funds for payment.

  1. To open your Payables accounting periods, select Accounting->Control Payables Periods. Configuring Oracle Receivables

To integrate Oracle Receivables with Oracle Cash Management:

  1. Choose a Primary Set of Books when you set up Oracle Receivables.

  2. Select Setup->Receipts->Receipt Classes in Oracle Receivables. Use the Receipt Classes window to define a Receipt Class for Miscellaneous Transactions with Creation Method = Manual and Remittance Method = No Remittance.

  3. Select Setup->Receipts->Receivable Activities. In the Receivables Activities window that appears, define a Receivable Activity for Miscellaneous Transactions.

  4. Define Receipt Sources to be assigned to receipts.

Integrating Oracle Cash Management with Oracle Payables and Oracle Receivables

To integrate Oracle Cash Management system with Oracle Payables and Receivables:

  1. Select Setup -> Banks on the main menu.Screenshot displays the Banks window:

The Banks Window

  1. Select View->Find.

  2. Select the bank and click OK.

  3. Click the Bank Accounts button. The Bank Accounts window appears, as shown below-

The Bank Accounts Window

  1. On the Bank Accounts tab, enter the Bank Account name.

  2. Select Internal in the Account Use field.

  3. On the GL Account Tab Enter the GL Account you want the system to use to account for the transactions reconciled in the GL Accounts tab.

Oracle Cash Management Functions

The Oracle Cash Management system performs two business functions, bank reconciliation and cash forecasting.

Bank reconciliation enables you to determine whether the balance in your bank account in the Oracle Financial system matches with the balance in the bank statement generated by the bank. The bank reconciliation process determines the cash position of a company at the end of a specific period.

Using the cash position determined by the bank reconciliation process, you can predict the cash balance for any future period, such as the next week, quarter, or month.

Bank Reconciliation

The Bank Reconciliation function enables you to eliminate errors and control cash outflow. Financial audits require that you should reconcile your bank accounts with bank statements to locate errors and frauds. For this reason, you should reconcile your bank account with the bank statement every time the bank sends you a statement. The Oracle Cash Management system's bank reconciliation function enables you to identify and fix the causes of nonreconciliation of bank balances with bank statements and enables you to maintain accurate cash balances.

The Oracle Cash Management system enables you to review and fix import validation and reconciliation errors. For example, it fixes any incorrect amounts that you may have entered in account statements. Banks adjust these incorrect entries and reflect the errors, along with the adjustments and corrections, in the bank statement.

You can use Oracle Cash Management to perform automatic or manual bank reconciliation. In manual reconciliation, you can reconcile any bank statement, whether imported or entered manually. You can also create new bank statement lines as you reconcile transactions and update the reconciliation information for a previously reconciled statement.

Oracle Cash Management also provides an easy-to-use reconciliation report that compares the balance in your bank statement with the balance in your cash account in the Oracle GL. You can also archive and purge historical bank statements.

The Oracle Cash Management system's bank reconciliation process:

Bank Reconciliation Process

If you receive the bank statement from the bank in an electronic format, such as a flat file, you need to load it into the system using an Sql* Loader script. You can also enter it manually into the system. After loading the bank statement into the system, you can perform the reconciliation manually or automatically and then review the results of the reconciliation.

After reconciling all statement lines with the available transactions, export the accounting information to the GL through Oracle Payables or Receivables. You cannot export accounting information directly from Oracle Cash Management.


You need to load the bank statement before you reconcile it. If your bank provides the statement in flat file format, you can use the Bank Statement Open Interface table to load the file into Oracle Cash Management. The Bank Statement Open Interface table allows Oracle Cash Management to communicate with an external system.

The Bank Statement Open Interface table consists of two tables:

  • The Bank Statement Headers Interface Table: Contains header-level information. The name of the table is CE_STATEMENT_HEADERS_INT_ALL. This table must contain exactly one record for each bank account within a bank statement.

  • The Bank Statement Lines Interface Table: Contains transaction-level information from the bank statement. This table is named CE_STATEMENT_LINES_INTERFACE.

The SQL* Loader script is a program that reads the bank statement file and imports the data into appropriate fields in the interface table.

Run the Bank Statement Import Program, which is a concurrent program, to transfer the information from the interface tables to the bank statement tables in Oracle Cash Management. Similar to other concurrent programs in Oracle Applications, Oracle Cash Management ships with the Bank Statement Import Program.

Automatic Reconciliation

The Oracle Cash Management system provides the AutoReconciliation program to automatically map a bank statement to the respective bank account.

There are three variants of the AutoReconciliation program:

  1. AutoReconciliation: Reconciles any bank statement that has already been imported into Oracle Cash Management.

  2. Bank Statement Import: Imports an electronic bank statement subsequent to loading the bank file using a SQL* Loader script.

  3. Bank Statement Import and AutoReconciliation: Imports a bank statement file and reconciles it with bank accounts, consecutively.

To automatically reconcile a bank statement:

  1. Define the AutoReconciliation options by selecting Setup->System Parameters.

  1. Submit the AutoReconciliation program by selecting Others->Programs->Run.Screenshot below shows the Submit a New Request Window:

Submit a New Request Window

  1. Select the Single Request option and click OK.Screenshot shows the Submit Request window:

The Submit Request Window

  1. Select the AutoReconciliation program in the Name field. The Parameters window appears.

  2. In the Bank Branch Name field, type the name of the bank branch for the statements that you want to reconcile.

  3. In the Bank Account Number field, type the account number for the statement that you want to reconcile.

  4. To define the range of statements that you want to reconcile, type the start and end statement numbers in the Statement Number From and To fields.

  5. To define the range of bank statement period, type the opening and closing dates of the bank statement in the Statement Date From and To fields.

  6. In the GL Date field, type the default date for all GL entries generated by the AutoReconciliation program.

  7. Select a Receivable Activity in the Receivable Activity field.

  8. Select a Payment Method in the Payment Method field.

  9. Specify how you want the AutoReconciliation program to handle any NSF or rejected receipts that are present in the bank statement in the NSF Handling field.

  10. Click the OK button. The Submit Request window reappears.

  11. Execute the program by selecting Submit. The Decision window appears.

  12. Click No if you do not want to submit another request or select Yes to submit another concurrent request.

  13. Select View->Requests from the top menu. The Find Requests window appears. Screenshot below shows the Find Requests window:

The Find Requests Window

  1. Click the Find button. If concurrent requests have been executed, review the AutoReconciliation Execution Report for reconciliation errors. This report enables you to identify errors and take corrective action.

  2. Review the Bank Statement Detail Report for reconciled and unreconciled statement lines.

  3. Manually reconcile any unreconciled lines in the Reconcile Bank Statement Lines Window by selecting Bank Reconciliation->Bank Statements.

  4. After manually reconciling the lines, run the AutoReconciliation program by selecting Tools->AutoReconciliation from the Top menu.

Manual Reconciliation

Oracle Cash Management allows you to manually reconcile bank statements that you can either import using interface tables or enter manually in the system. You can also create new bank statement lines and update reconciliation information for any automatically or manually reconciled statement. In manual reconciliation, you need to match one line at a time with the available transactions, such as receipts, payments, journal entries, and bank statement lines. You can also search for transaction lines specific to customers, suppliers, batch names, or remittance numbers. In addition, you can search for journal entries based on period name, journal entry name, document number, or line number.

To manually reconcile a bank statement:

  1. Import or manually enter the bank statement. If you do not use the Oracle Receivables Automatic Lockbox, and your bank statement includes direct deposits or bank transfers, create the related receipts manually in Receivables before you reconcile them in Cash Management.

  2. Select Bank Reconciliation->Bank Statements from the main menu. The Find Bank Statements window appears.Screenshot shows the Find Bank Statements window:

The Find Bank Statements Window

  1. Execute the query by selecting the Find button. The Reconcile Bank Statements window appearsScreenshot shows the Reconcile Bank Statements window:

The Reconcile Bank Statements Window

  1. Select the bank statement you want to reconcile. To view the bank statement data, select the Review button. The Bank Statement window appears. Screenshot shows the Bank Statement window:

The Bank Statement Window

  1. View the bank statement lines by selecting the Lines button.Screenshot shows the Bank Statement Lines window:

The Bank Statement Lines Window

  1. Select the statement line that you want to reconcile and then click the Available button to search for the data or batch transactions that are available for reconciliation. The Find Transactions window appears. Screenshot shows the Find Transactions window:

The Find Transactions Window

  1. Specify the search criteria and click the Find button.

  2. Reconcile the available transactions that apply to the selected bank statement line. Similarly, reconcile the rest of the bank statement lines, one at a time.

  3. Create miscellaneous transactions for bank statement transactions with no matching Payables, Receivables, or GL activity.

  4. Create payments or receipts for bank statement transactions with no matching Payables or Receivables activity.

  5. Reverse any NSF or rejected bank transactions.

Reviewing Reconciled Transactions

After completing the manual reconciliation of your bank statement with the available transactions, review the result of the reconciliation. To review the reconciliation:

  1. Open the Reconcile Bank Statements window. Navigation: Bank Reconciliation->Bank Statements. The Find Bank Statements window opens.

  2. Click the Find button of Find Bank Statement window. The Reconcile Bank Statements window appears.

  3. Select the appropriate bank statement and click the Review button. The Bank Statement window appears.

  4. Select the Reconciled button. The Reconciled Transactions window appears.Screenshot shows the Reconciled Transaction window:

The Reconciled Transactions Window

The opening screen of Reconciled Transaction Window displays the set of transactions or an individual transaction that has been reconciled with the first statement line.

  1. Click the Next button to review the reconciled transactions for the second statement line.

  2. Using the Transaction tab, review Original Currency, Amount, Bank Account Currency Amount, Amount Cleared, and the GL Date.

  3. Using the Reference tab, review additional descriptive information including the remittance or payment Batch Name, Agent Name, and Deposit Number. For Miscellaneous Transactions, you can review the Reference Type, such as receipt, payment, remittance batch, or payment batch and number.

  4. Select Previous or Next to review reconciled transactions for other statement lines.

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