From invoice to payment

• Accounting workflow and the automatic generation of invoices
  • Draft Invoices
  • Open or Pro-Forma Invoices
  • Reconciling invoice entries and payments
  • A records-based system
• Invoicing
  • Entering a customer invoice
  • Managing taxes
  • Cancelling an invoice
  • Creating a supplier invoice
  • Credit Notes
  • Invoice payment
• Accounting entries
  • Managing bank statements
  • Cash Management
  • Manual entry in a journal
  • Process of reconciliation
    • Automatic reconciliation
    • Manual reconciliation
• Management of payments
  • Process for managing payment orders
  • Preparation and execution of orders

*This chapter traces the basic accounting workflow in Open ERP, from entering an invoice to registering payment. The various operations are described, from the entry of accounting receipts and the treatment of the reconciliation process, including payment orders.*

Accounting is at the heart of managing a company: all the company’s operations have an impact here. It has an informational role (how much cash is there? what debts need to be repaid? what’s the stock valuation?) and, because of the information it provides, a reliable and detailed accounting system can and should have a major decision-making role.

In most real companies, accounting is limited to producing statutory reports and satisfying the directors’ curiosity about certain strategic decisions, and to printing the balance sheet and the income statement several times a year. Even then there’s often several weeks of delay between reality and the report.

Note

Valuing your accounting function

In many small companies, the accounting function is poorly treated.

Not only do you see the data for documents being entered into the system twice, but also the results are often just used to produce legal documentation and regular printouts of the balance sheet and income statements some weeks after the closing dates.

By contrast, integrating your accounts with your management system means that you can:

• reduce data entry effort – you only need do it once,
• run your processes with the benefit of financial vision: for example in managing projects, negotiating contracts, and forecasting cash flow,
• easily get hold of useful information when you need it, such as a customer’s credit position.

So accounting is too often underused. The information it brings makes it a very effective tool for running the company if it’s integrated into the management system. Accounting information really is necessary in all of your company’s processes for you to be effective, for example:

• for preparing quotations it’s important to know the precise financial position of the client, and to see a history of any delays in payment,
• if a given customer has exceeded their credit limit, accounting can automatically stop further deliveries to the customer,
• if a project budget is 80% consumed but the project is only 20% complete you could renegotiate with the client, or review and rein in the objectives of the project,
• if you need to improve your company’s cash flow then you could plan your services projects on the basis of billing rates and payment terms of the various projects, and not just delivery dates – you could work on short-term client projects in preference to R&D projects, for example.

Open ERP’s general accounting and analytic accounting handle these needs well because of the close integration between all of the application modules. Furthermore, the transactions, the actions and the financial analyses happen in real time, so that you can not only monitor the situation but also manage it effectively.

The account module in Open ERP covers general accounting, analytic accounting, and auxiliary and budgetary accounting. It’s double-entry, multi-currency and multi-company.

Note

Accounting

• General accounting (or financial accounting) is for identifying the assets and liabilities of the business. It’s managed using double-entry accounting which ensures that each transaction is credited to one account and debited from another.
• Analytical accounting (or management accounting, or cost accounting) is an independent accounting system which reflects the general accounts but is structured along axes that represent the company’s management needs.
• Auxiliary accounting reflects the accounts of customers and/or suppliers.
• Budgetary accounts predefine the expected allocation of resources, usually at the start of a financial year.

Tip

Multi-company

There is a choice of methods for integrating Open ERP in a multi-company environment:

• if the companies hold few documents in common (such as products, or partners - any Open ERP resource), you should install separate databases,
• if the companies share many documents, you can register them in the same database and install Open ERP’s multi-company documents to finely manage access rights,

• you can synchronize specified document types in several databases using the base_synchro module, which is a shared-funding module rather than in the standard open repositories.

One of the great advantages of integrating accounts with all of the other modules is in avoiding the double entry of data into accounting documents. So in Open ERP an Order automatically generates an Invoice, and the Invoice automatically generates the accounting entries. These in turn generate tax submissions, customer reminders, and so on. Such strong integration enables you to:

• reduce data entry work,
• greatly reduce the number of data entry errors,
• get information in real time and enable very fast reaction times (for bill reminders, for example),
• exert timely control over all areas of company management.

Tip

For accountants

When you create a database you can elect to install only the accounting modules by choosing the Accounting only profile profile_accounting.

You should then install the web portal portal_account. With appropriate rights management, this allows trustees to provide customers with real-time access to their data. It also gives them the opportunity to work on certain documents that have no direct accounting impact, such as budgets.

This can provide an added-value service that greatly improves the interaction between trustees and their clients.

All the accounts are held in the default currency (which is specified in the company definition), but each account and/or transaction can also have a secondary currency (which is defined in the account). The value of multi-currency transactions is then tracked in both currencies.

For this chapter you should start with a fresh database that includes demo data, with sale and its dependencies installed and no particular chart of accounts configured.