Reason Codes FICO

What are “reason codes” used for in the Accounts Receivable module and what are the factors to be considered in their configuration?

A: Reason codes are tags which can be assigned to explain

under/overpayments during the allocation of incoming

customer payments. They should not be confused with

‘void reason codes’ used when outgoing checks are

generated.

During configuration the following are determined

· Whether the items booked with these reason codes are

to be flagged as disputed items for the purposes of

credit management (disputed items do not increase a

customer credit exposure)

· The type of correspondence (if any) to be generated for

this reason code as a result of the under/over payment

· Whether a separate line item should be created to

charge off the payment differences to a separate G/L

account.

Reason Codes 

Use

To use the clearing document to find out why a difference existed, you can assign reason codes to the line items. Reason codes are indicated by keys that you define in Customizing.
You can assign reason codes for the following:

• Partial payments made for open items.
• Residual items created for an open item. Here you can assign one or more reason codes. In this case, you divide the difference amount into a corresponding number of partial amounts.
• Differences posted on account without reference to an open item.
• For each line item you enter in the clearing procedure, if the reason code field for the account is ready for input.

IntegrationWhen you process residual items, the reason code also controls how the remaining amount is posted. The remaining amount can be posted as follows:

• To a G/L account that is assigned to the reason code you enter.
• As a new customer or vendor open item if you do not enter a reason code, or if the reason code you enter is not indicated as described.

Features

Properties of Reason Codes

• For incoming payments, you can send a payment notification to the customer. This process can run automatically if differences arise during clearing. In the tolerance group set up for the customer, you can define what type of notice to create for partial payments, residual items, and payments on account.
• The system can use the specified reason code to determine the type of notice to create as long as only one reason code is specified in the entire clearing transaction.
• In order to check a customer's credit limit, the total of open items is taken into account. If certain contentious items should not be considered, you can define a separate reason code for these items.

Reason codes control:

• How the difference is posted (as a new open item or to a predefined G/L account)
• What type of payment notice is created
• Whether an item is included in credit limit checks

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