Overview of Automatic Offsets and Invoice Processing
If you enable Automatic Offsets and choose the Balancing method, then Payables automatically allocates an invoice’s liability amount across multiple balancing segments according to the balancing segments on the invoice distributions. This ensures that invoices always balance by balancing segment.If you enable Automatic Offsets and choose the Account method, then Payables automatically allocates an invoice’s liability amount across each unique combination of segments other than the account segment on the invoice distributions.
Payables creates the liability accounting entries when you create accounting entries for an invoice. You can review these accounts in the View Accounting Lines window.
If you do not enable Automatic Offsets, Payables records the invoice liability using the liability account on the invoice, which defaults from the supplier site. When you distribute invoice distributions across multiple balancing segments, the invoice will not balance by balancing segment.
How Payables Builds the Offsetting Liability Accounts
When you use Automatic Offsets and create accounting entries for the invoice, Payables automatically builds the offsetting liability account for each invoice distribution on the basis of the default liability account for the invoice. The liability account for an invoice defaults from the supplier site; however, you can override it during invoice entry. See: Accounting Region of the Suppliers and Supplier Sites windows; Invoices Window Reference.When you enable Automatic Offsets, you choose one of two methods for building your offsetting accounts: Account or Balancing. See: Accounting Methods Payables Options.
If you select Balancing as your Automatic Offset Method, Payables takes the default liability account for the invoice, substitutes the balancing segment from the invoice distribution, and uses that as the distribution’s offsetting liability account.
If you select Account as your Automatic Offset Method, Payables takes the account used for the invoice distribution and substitutes the account segment from the default liability account for the invoice, preserving all other segment values.
Suggestion: Use this option if you want to carry all the detail from your invoice distributions on your offsetting accounts. For example, a manufacturing company that uses a product segment to record sales information may want to capture product segment values in the expense account, liability account, and cash account.
Balancing Segment method:
Example. You enable Automatic Offsets using the Balancing method, and your Accounting Flexfield structure is Balancing Segment-Cost Center-Account. Your default liability account for supplier site ABC is 000-000-2300. You enter an invoice for supplier site ABC and distribute it as follows:DR Expense 101-100-4500 $60
DR Expense 200-201-4610 $40
Payables records the following liability account offsets:
CR Liability 101-000-2300 $60
CR Liability 200-000-2300 $40
Account Segment method:
Example. You enable Automatic Offsets using the Account method, and your Accounting Flexfield structure is Balancing Segment-Cost Center-Account. Your default liability account for supplier site ABC is 000-000-2300. You enter an invoice for supplier site ABC and distribute it as follows:DR Expense 101-100-4500 $60
DR Expense 200-201-4610 $40
Payables records the following liability account offsets automatically when you account for the invoice:
CR Liability 101-100-2300 $60
CR Liability 200-201-2300 $40
Invoice Adjustments and Automatic Offsets
If a distribution has not yet been accounted, you can adjust it. If the distribution has been accounted but no payments have been made, you should reverse existing distributions and create new ones. See: Adjusting Invoice Distributions.If the Allow Adjustments to Paid Invoices Payables option is enabled, you can make changes to paid or partially paid invoices only under certain conditions:
- If the invoice crosses multiple balancing segments and has been accounted, then you can add, delete, reverse, or update distributions.
- If the invoice contains only a single balancing segment, then you can adjust distributions even after the invoice is accounted. However, the adjustments must be within the same balancing segment.
Prorating Tax, Freight, and Miscellaneous Charges with Automatic Offsets
When you enter invoices with tax, freight, or miscellaneous charges, you might want to allocate these charges in the Charge Allocations window of the Invoice Workbench to ensure that the charges are distributed across the other invoice distributions. See: Creating Freight and Miscellaneous Charges By Allocating to Item Distributions; Creating Tax Distributions by Allocating to Invoice Distributions.The Sales Tax and Freight Proration Report can help you identify invoices that you have forgotten to prorate.