Creating an Advanced Adjustment

An adjustment transaction adjusts the revenue accounts for an order. This differs from a write-off, which is specifically a transaction that changes a balance in Accounts Receivable for an order line item and records that change against a write-off account.

Adjustments are only made to the sales side of a transaction, so typically they affect the receivable account versus the revenue accounts and possibly the discount accounts.

Adjustments transactions are created only for invoiced line items. If an adjustment is made to an uninvoiced line item (i.e., there is no active sales transaction and just a proforma sales transaction), then the system updates the proforma FAR_TXN.Base_Amount and does not generate any FAR_Txn_Detail records for any distribution.

Transaction Structure

When the receivable balance increases:

DR	Accounts Receivable
CR	(Deferred) Revenue Accounts

When the receivable balance decreases:

DR	(Deferred) Revenue Accounts
CR	Accounts Receivable

Discount accounts may also play into this scenario.

The sign of the adjustment in Far_Txn.Base_Amount indicates whether the AR (the amount owed) is increased or decreased. An adjustment with a positive sign means that you are increasing the price of the product. An adjustment with a negative sign, means that you are decreasing the price of the product.

Source of the Accounts

When the receivable balance increases:

Debit: The AR account is found at the order_detail level (Order_Detail.AR_Account).

Credit: Found in Product_Revenue_Distribution for the product referenced in the order_detail line based on the order_date versus the effective date in Product_Revenue_Distribution.

When the receivable balance decreases:

Debit: Found in Product_Revenue_Distribution for the product referenced in the order_detail line based on the order_date versus the effective date in Product_Revenue_Distribution.

Credit: The AR account is found at the order_detail level (Order_Detail.AR_Account).

Deferred Versus Real Revenue Accounts

If Order_Detail.Recognition_Status_Flag doesn’t = ‘C’, then the system uses the deferred account accounts. Otherwise, the system uses the non-deferred accounts. In this case it is deferred revenue versus revenue.

Distribution of the Amount

It is possible to have multiple revenue or deferred revenue accounts referenced in an adjustment transaction. The amount is then based on the original distribution rules for the product. Rather than trying to determine the rules within the adjustment transaction, the system simply recalculates the distribution based on the revised product price (i.e., the price less the adjustment), use the central distribution routine, compare it to what was already distributed, and record a transaction for the differences.

Things to Consider before Performing an Advanced Adjustment

· If you need to have less money in AR for a cancelled order line, then you should do a write-off.

· If you’re trying to get more money in AR to be available for a refund for a cancelled order line, perform an advanced adjustment. For example, a cancellation fee was charged and shouldn’t have been because you want to refund all the money.

· If the cancellation fee went to the wrong account, perform an advanced adjustment.

· If you have a credit memo scenario, use special receipt type.

· If there is a data integrity issue, do NOT perform an advanced adjustment.

· If there is a balance in deferred revenue and there shouldn’t be, do NOT perform an advanced adjustment.

· Advanced adjustments are typically performed on cancelled order. If the order is not cancelled, then there’s probably another way to make the adjustment. However, an exception would be if a product setup has the wrong deferred account (this includes deferred revenue, deferred discount, deferred agency discount). If so, perform the following:

a. Correct the product setup.

b. Enter a new order line and invoice/activate it.

c. Make sure the deferred account is correct. If it is not correct, go back to step a.

d. Cancel the order line(s) with the wrong deferred account.

e. Perform an auto-adjust to move the money to the correct line.

Another exception is for miscellaneous invoices that recognize revenue on invoice. In this case, you can perform an advanced adjustment to change the revenue account.

· If you wrote off a balance and then receive the money, perform the following:

a. Enter the payment against the order line (even though there’s no balance).

b. The payment will automatically reverse the write-off.

Write-offs created via an advanced adjustment will NOT be automatically reversed by payment. Advanced adjustments can only be manually reversed.

Special Situations with Adjustments

Adjustments to Uninvoiced Orders

Users often want to adjust the price of line items within orders and to record the reason for the adjustment. This is easy to do for invoiced transactions since the system simply creates a standard type=6 transaction. For proforma or uninvoiced orders, the system uses a transaction type that is simply a memo transaction (txn_type=’8’). The reason for the adjustment will be maintained in the FAR_TXN.COMMENTS in the memo transaction. Memo transactions must be ignored in all calculations of balances though the amount of the adjustment should be maintained in the amount column. When the order is invoiced, the adjustment column in order_detail will be factored into the transaction against the revenue accounts.

If the order is uninvoiced, the system automatically creates a Memo (type=8) transaction rather than a type=6.

Space Credits and Trades for Services

These are special adjustment transactions in that they do not affect the revenue accounts but rather affect a special space credit or trades account

The account for space credits is stored in the product_account table. It is an expense or contra-revenue account that offsets accounts receivable. The structure of this is the same thing as a standard adjustment transaction:

DR	Space-Credit
CR	AR

The debit account comes from Product_Account.space_credit_account or Product_Account.Trade_for_Services_Account.

Users will be able to define space credits against a specific show with the option of creating a financial adjustment to that same show. If no financial adjustment is created for the current show that credit can later be transferred to a future show once that order has been created at which time the user will be able to move the credit and create a financial transaction at that time.

Write-offs

The system uses the following logic to calculate the net write-off amount while doing auto write-off reversal on a payment:

1. Take the sum off normal write-off.

2. If it is negative, then calculate sum of advance write-off.

3. If sum of advance write-off is positive, then sum up the two write-offs.

4. If it comes out to be negative, then consider that as the net write-off.

Minimum information needed for the process:

· Order Number and Line Number

· Adjustment Reason

· Amount of Adjustment (Positive increases the price; negative decreases the price.)

· Type (Optional: Adjust (default), Space Credit, Trade)

On the Advanced Adjustments screen, you can define advanced criteria for an order line item price adjustment, such as selecting to adjust a specific revenue or receivable account. A Journal Entry (Type J) transaction is created for adjustments to the revenue account. A Write-Off (Type 5) transaction is created for adjustments to the receivable account.

This functionality should only used by the Finance department. Personify recommends you set up security for this screen.

The advanced adjustments functionality is used if you accidentally charge to the wrong revenue account or to refund a cancellation fee. To refund a cancellation fee, debit the cancellation account and reverse the debit/credit memo (adjust receivable account). If revenue recognition is “On Invoice,” you can change the revenue account.

If revenue can still be recognized (the order is active and not cancelled), then you cannot perform a revenue adjustment.

Advanced adjustments are only needed on cancelled orders because if the order is active, you have more options without using this screen (such as writing off a balance or adjusting a price). Only perform an advanced adjustment when the order has a $0 balance for Accounts Receivable (AR).

To create an advanced adjustment:

1.    On the Customer Financial Analysis screen, select the appropriate line item from the Order and Transaction Analysis tab and click the Advanced Adjustment button.
The system runs the following query:
select F.ACCOUNT_FUNCTION_CODE, T.account, F.[Description]
from    FAR_TXN_DETAIL T, FGL_ACCOUNT_MASTER F
where   T.order_no = '[n]' and T.order_line_no = [n]
and t.org_id = f.org_id and T.account = F.account
and t.txn_function_code not in ( 'AR', 'PPL', 'CASH', 'DUEFROM', 'DUETO')

As of 7.5.0, the system will not prevent the Advanced Adjustments screen from opening if the revenue account has an account class of "Asset".

The Advanced Adjustments screen displays, as shown below.

2. Select the appropriate Adjustment Mode radio button:

· Adjust Revenue Account – If an adjustment is made to this account, Journal Entries for transaction type and registration revenue are created. The credit amount must equal the debit amount for a revenue account adjustment.

· Adjust Receivable Account – If an adjustment is made to this account, a write-off transaction type and a Journal Entry for the registration revenue are created.

3. Click Add.
The GL Account Chooser displays. Please note that if the system contains more than 500 accounts, the following message will display. Click Yes to continue.

4. Search for and select the appropriate account.

5. Click inside the Adjustment table cell and enter the adjustment amount.
The New Balance calculates automatically.

6. Enter Comments related to the adjustment.
Comments are required for this screen.

7. Click Save.