Improving Common Party Accounting

[vorasmit]

Current Design:

• If Party is linked (e.g., primary customer), it automatically creates a Journal Entry when a Supplier Purchase Invoice is booked as a set-off entry against the customer.

Issues:

1. Multiple customers or suppliers can be linked with each other, which could result in errors.
2. On cancelling a Purchase Invoice, the Journal Entry stays, causing inconsistency in the system.
3. Current implementation is only on Purchase Invoice or Sales Invoice. No effect on Journal Entry or Payment Entry or any other similar accounting doctype.
4. Reporting functionality is currently not available for common-party accounting.

Proposed Workflow:

To address the above issues and enhance the common party accounting feature, the following improvements are suggested:

Party Link Enhancement:

1. Allow only one party link to be created per party. This ensures a clear association between parties and prevents potential errors.
2. While creating a link, if say a supplier is not available, an option to create the same from the Customer would be a treat where all existing addresses and contacts can be linked automatically.

Improved Party Visibility:

1. After linking a party, make the party link more explicit and visible. Currently, it is not prominently displayed in the Customer or Supplier doctype, which can cause confusion. Enhance the user interface to clearly indicate the linked party.
2. For making changes to the party link or to remove the link, options can be added in Customer and Supplier Doctype.

Manual Trigger for Journal Entries:

1. Do not auto-create Journal Entries for set-off transactions. Instead, implement a manual trigger for creating Journal Entries. This allows users to control the creation of accounting entries based on specific requirements.
2. Often, there are multiple accounting effects associated with parties, and automatically generating Journal Entries for all these effects could be unnecessary. For instance, Payment Entries or Journal Entries against a party may occur at a later date. Implementing cron jobs at monthly, quarterly, or yearly intervals for auto-creating such entries can be considered. However, providing a manual trigger option is still desirable (as say accounting up to 31-03-2023 would close somewhere on 10-04-2023).
3. Manual triggers can be offered in Accounts Settings for bulk set-off or in Customer or Supplier for individual set-off.
4. Implement logic that determines the set-off entry based on the lower balance between linked customer and supplier accounts.

Common Party Ledger:

1. Extend the existing General Ledger functionality to include accounting entries of linked parties when a common party is selected.
2. Enable the display of all sales and purchase entries for linked parties in one place within General Ledger. This consolidated view simplifies tracking and analysis.
3. Exclude set-off Journal Entries from the common party ledger to avoid confusion for customers or suppliers.
4. Provide an option to disable the common party ledger display using a checkbox in the report filters.

Account Settings for Payment Reconciliation:

1. Introduce account settings to facilitate payment reconciliation based on the First-In-First-Out (FIFO) method when a set-off entry is booked.

By implementing these proposed changes, ERPNext can significantly enhance the common-party accounting feature, offering more control, clarity, and streamlined reporting capabilities to users.