Accounting module

bron: openerp.com

HOW TO KEEP TRACK OF YOUR INVOICING & PAYMENTS

1.1 Invoicing Workflow

In OpenERP, the Invoicing Workflow is very simple. You can see it in the following figure.

Invoicing workflow

An invoice can be generated form various other documents like a Sales Order, a Purchase Order and also at the
time of confirmation of a shipment.

The Invoicing system in OpenERP allows you to keep track of your accounting, even when you are not an
accountant. It provides an easy way to follow up your suppliers and customers.

# So the systematic treatment of Invoicing Workflow is very important. Whenever an # invoice is generated, it
will be created in Draft state with no impact on your # Accounting System. For instance, an invoice status can be
changed to Open by an accountant after review or to Pro-forma status by any other user. The next step in the
workflow will be the Paid status for the invoice. An invoice can be cancelled if it is not paid.

1.1.1  Customer Receipts / Supplier Vouchers

When you sell products to a customer, you can give him an invoice or a Sales Receipt which is also called
Customer Receipt. Sales Receipts are merely a kind of sales ticket and not a real invoice.

When the sales receipt is confirmed, it creates journal items automatically and you can record the customer
payment related to this sales receipt.

You can create and modify the sales receipt using the menu Accounting → Customers → Sales Receipt.

Defining a Customer Receipt

When you create a new Sales Receipt you have to enter the Customer for which you want to create a voucher.
You can also define Sales lines in the Sales Information tab. Here you have to define Account, Amount and
Description. At the bottom of the form you can have two options for Payment: one is Pay Directly and another is
Pay Later or Group Funds. You have to enter Account in the case of the Pay Directly option. The Total amount
displays automatically with calculation of tax when you click the Compute Tax button.

After validating the sales receipt, you can print the voucher by clicking the Voucher Print action at the upper
right side. The voucher will be printed as follows.

Sales Voucher

When you purchase products from a supplier, a Supplier Voucher (a ticket) is given to you which is also called
Notes Payable in accounting terminology. When a supplier voucher is confirmed, it creates journal items
automatically and you can record the supplier payment related to this purchase receipt.

You can create and modify the supplier voucher through the menu Accounting → Suppliers → Supplier
Vouchers.

Definition of Supplier Voucher

The Supplier Voucher form looks like the Sales Receipt form. In this form carefully select the journal. After
validating the Supplier Voucher you can print it using the Voucher Print action.

Supplier Voucher

1.1.2  Keep Track of your Payments

You should efficiently keep track of payments of your customers and suppliers.

Sales  Payment allows you to register the payments you receive from your customers. In order to record a
payment, you have enter the customer, the payment method (= the journal) and the payment amount. OpenERP
will propose to you automatically the reconciliation of this payment with the open invoices or sales receipts.

You can do this in OpenERP using the menu Accounting → Customers → Customer Payment.

Customer Payment Form

To create a new Customer Payment, select the customer and Payment Method. You can add invoices and other
transactions in the Payment Information tab. Now select the proper Payment Difference, i.e. Keep Open and
Reconcile with Write-Off. In the case of Reconcile with Write-Off the write-off amount will come automatically
but you have to enter the Write-Off account so that accounting entries can be generated by OpenERP.

The supplier payment form allows you to track the payment you do to your suppliers. When you select a
supplier, the payment method and an amount for the payment, OpenERP will propose to reconcile your payment
with the open supplier invoices or bills.

Through the menu Accounting → Suppliers → Supplier Payment, click the New button to create a new Supplier
Payment.

Supplier Payment Form

To create a new Supplier Payment, select the supplier and Payment Method. You can create the Supplier Invoices
and Outstanding transactions lines by selecting the invoice lines as well outstanding expenses. Now select the
proper Payment Difference, i.e. Keep Open and Reconcile with Write-Off.

OpenERP provides various features to keep track of your invoicing and payment. The simple workflow of
invoicing with efficient encoding of the payment process of your customer and supplier makes OpenERP more
adoptable. In this section we discuss Customer Receipt and Supplier Voucher as well Customer Payment and
Supplier Payment process.

FROM INVOICE TO PAYMENT

2.1  Accounting Workflow and Automatic Invoice Creation

The chart Accounting workflow for invoicing and payment shows the financial workflow followed by each

Accounting workflow for invoicing and payment

In general, when you use all of OpenERP’s functionality, invoices do not need to be entered manually. Draft
invoices are generated automatically from other documents such as Purchase Orders.

2.1.1  Draft Invoices

The system generates invoice proposals which are initially set to the Draft state. While these invoices remain
unconfirmed they have no accounting impact within the system. There is nothing to stop users creating their own
draft invoices if they want to.

You can create draft customer invoice manually using the menu Accounting → Customers → Customer Invoices.

The information that is needed for invoicing is automatically taken from the Partner form (such as payment
conditions and the invoice address) or from the Product (such as the account to be used) or from a combination of
the two (such as applicable Taxes and the Price of the product).

2.1.2  Open or Pro Forma Invoices

You can approve (or validate) an invoice in the Open or Pro  Forma state. A Pro Forma invoice does not yet
have an invoice number, but the accounting entries on the invoice that is created correspond to the amounts that
OpenERP will record as the customer’s payables.

An open invoice has a unique invoice number. The invoice is sent to the customer and is marked on the system as
awaiting payment.

2.1.3  Reconciliation and Payments

In OpenERP an invoice is considered to be paid when its accounting entries have been reconciled with the
payment entries. If there has not been a reconciliation an invoice can remain in the open state until you have
entered the payment.

Without the reconciliation process, OpenERP would be incapable of marking invoices that have been paid.
Suppose that you have got the following situation for the Smith and Offspring customer:

• Invoice 145: 50,
• Invoice 167: 120,
• Invoice 184: 70.

If you receive a payment of 120, OpenERP will delay reconciliation because there is a choice of invoices to pay.
It could either reconcile the payment against invoices 145 and 184 or against invoice 167.
You can cancel an invoice if the Allow Cancelling Entries function has been activated in the journal and the
entries have not yet been reconciled. You could then move it from Canceled , through the Draft state to
modify it and regenerate it.

At regular intervals, and independently of the invoices, an automatic import procedure or a manual accounts
procedure can be used to bring in bank statements. These comprise all of the payments of suppliers and
customers and general transactions, such as between accounts.

When an account is validated, the corresponding accounting entries are automatically generated by OpenERP.

Invoices are marked as paid when accounting entries on the invoice have been reconciled with accounting entries
about their payment.

This reconciliation transaction can be carried out at various places in the process, depending on your preference:

• at data entry for the accounting statement,
• manually from the account records,
• automatically using OpenERP’s intelligent reconciliation.

You can create the accounting records directly, without using the invoice and account statements. To do this, use
the rapid data entry form in a journal. Some accountants prefer this approach because they are used to thinking in
terms of accounting records rather than in terms of invoices and payments.

You should really use the forms designed for invoices and bank statements rather than manual data entry records,
however. These are simpler and are managed within an error-controlling system.

2.1.4  Records-based accounting system

All the accounting transactions in OpenERP are based on records, whether they are created by an invoice or
created directly.

So customer reminders are generated quickly from the list of unreconciled entries in the trade receivables account
for that partner. In a single reminder you will find the whole set of unpaid invoices as well as unreconciled
payments, such as advance payments.

Similarly, financial statements such as the general ledger, account balance, aged balance (or chronological
balance) and the various journals are all based on accounting entries. It does not matter if you generated the entry
from an invoice form or directly in the invoice journal. It is the same for the tax declaration and other statutory
financial statements.

When using integrated accounting, you should still go through the standard billing process because some
modules are directly dependent on invoice documents. For example, a sales order can be configured to wait for
payment of the invoice before triggering a delivery. In such a case, OpenERP automatically generates a draft
invoice to send to the client.

13.2  Invoices

In OpenERP, the concept of “invoice” includes the following documents:

• The Customer Invoice
• The Supplier Invoice
• A Customer Credit Note or Customer Refund
• A Supplier Credit Note or Supplier Refund

Only the invoice type and the representation mode differ for each of the four documents. But they are all stored
in the same object type in the system.

You get the correct form for each of the four types of invoice from the menu you use to open it. The name of the
tab enables you to tell the invoice types apart when you are working on them.

To access customer invoices in OpenERP, use the submenus of Accounting → Customers → Customer Invoices
and for supplier invoice use the submenu of Accounting → Suppliers → Supplier Invoices.

Most of the time, invoices are generated automatically by OpenERP as they are generated from other processes
in the system. So it is not usually necessary to create them manually, but simply approve or validate them.
OpenERP uses the following different ways of generating invoices:

• from Supplier or Customer Orders,
• from receipt or dispatch of goods,
• from work carried out (timesheets, see Lead & Inspire your People),
• from closed tasks (see Drive your Projects),
• from fee charges or other rechargeable expenses (see Deliver Quality Services).

The different processes generate Draft invoices. These must then be approved by a suitable system user and
sent to the customer. The different invoicing methods are detailed in the following sections and chapters.

It is also possible to enter invoices manually. This is usually done for invoices that are not associated with an
order (usually purchase orders) or Credit Notes. Also if the system has not been configured correctly you might
need to edit the invoice before sending it to the customer.

For example, if you have not realized that the customer is tax-exempt, the invoice you generate from an order will
contain tax at the normal rates. It is then possible to edit this out of the invoice before validating it.

2.2.1  Entering a Customer Invoice

The principle of entering data for invoices in OpenERP is very simple, as it enables non- accountant users to
create their own invoices. This means that your accounting information can be kept up to date all the time as
orders are placed and received, and their taxes are calculated.

At the same time it allows people who have more accounting knowledge to keep full control over the accounting
entries that are being generated. Each value proposed by OpenERP can be modified later if needed.

Start by manually entering a customer invoice. Use Accounting → Customers → Customer Invoices and click on
New button for this.

A new invoice form opens for entering information.

Entering a New Invoice

The document is composed of three parts:

• the top of the invoice, with customer information,
• the main body of the invoice, with detailed invoice lines,
• the bottom of the page, with detail about the taxes, and the totals.

To enter a document in OpenERP you should always fill in fields in the order they appear on screen. Doing it this
way means that some of the later fields are filled in automatically from the selections made in earlier fields. So
select the Customer, and the following fields are completed automatically:

• the invoice address corresponds to the customer contact that was given the address type of Invoice in the
  partner form (or otherwise the address type of Default),
• the partner account corresponds to the account given in the Accounting which is found in a tab of the
  partner form.
• a specific or a default payment condition can be defined for this partner in the Accounting tab of the partner
  form. Payment conditions are generated by rules for the payment of the invoice. For example: 50% in 21
  days and 50% in 60 days from the end of the month.

You can add more detailed additional information to the invoice and select the currency that you want to invoice
in.

Once the invoice heading is saved you must enter the different invoice lines. You could use either of two
techniques:

• enter the whole field manually,
• use a product to complete the different fields automatically.

So select the product Basic  PCin the product field in an invoice line. The following fields are then completed
automatically:

• Description : this comes from the product, in the language of the partner,
• Account : determined by the purchase or sales account defined in the product properties. If no account is
  specified in the product form, OpenERP uses the properties of the category that the product is associated
  with.
• Unit of Measure : this is defined by default in the product form,
• Unit Price : this is given by the sales price in the product form and is expressed without taxes,
• Taxes : provided by the product form and the partner form.

You can enter several invoice lines and modify the values that are automatically completed by OpenERP.

Once the invoice lines have been entered, you can click Compute Taxes on the invoice to get the following
information:

• details of tax calculated,
• tax rate,
• total taxes,
• total price.

In the Taxes area at the bottom left of the invoice you will find the details of the totals calculated for different tax
rates used in the invoice.

Detail of tax charges on an invoice

Before approving the invoice you can modify the date and the accounting period, which are entered by default as
today’s date. These fields are found on the second tab Other Info.

Click Validate when you want to approve the invoice. It moves from the Draftstate to the Open state.

When you have validated an invoice, OpenERP gives it a unique number from a defined sequence. By default it
takes the form Journal  Code/Year/Sequence  Number for example SAJ/2010/005 . You cannot
modify an invoice number, but instead you should modify the sequence numbers through the menu
Administration → Configuration → Sequences → Sequences.

Accounting entries corresponding to this invoice are automatically generated when you approve the invoice. You
see the details by clicking the entry in the Journal Entry field and searching there for the account moves
generated by that invoice number.

2.2.2  Tax Management

Details on the product form determine the selection of applicable taxes for an invoice line. By default OpenERP
takes account of all the taxes defined in the product form.

Take the case of the following product

• Applicable taxes:
  –  TVA: 19.6% type TVA
  –  DEEE: 5.5, type DEEE

If you trade with a company in your own country, and your country has a DEEE-type tax, the applicable taxes for
this invoice could be:

• DEEE: 5.5,
• TVA: 19.6%.

If you sell to a customer in another company in the community (intracommunity), instead, then tax is not
charged. In the partner form the tab Accounting the field Fiscal Position maintain the information whether the
customer is within the region or not. When you create an invoice for this customer, OpenERP will calculate the
following taxes on the product:

• DEEE: 5.5,
• TVA intracommunity: 0%.

If you have not entered the parameters in the customer form correctly, OpenERP will suggest incorrect taxes in
the invoice. That is not a real issue, because you can always modify the information directly in the invoice before
approving it.

2.2.3  Cancelling an Invoice

By default OpenERP will not allow you to cancel an invoice once it has been approved. Since accounting entries
have been created, you theoretically cannot go back and delete them. However, in some cases it is more
convenient to cancel an invoice when there is an error than to produce a credit note and reconcile the two entries.
Your attitude to this will be influenced by current legislation in your accounting jurisdiction and your adherence
to accounting purity.

OpenERP accommodates either approach. Install the account_cancel module. Then allow cancelling an invoice
by checking the box Allow Cancelling Entries in the Journal corresponding to this invoice. You will then be
allowed to cancel the invoice if the following two conditions are met:

• 1.  The accounting entries have not been reconciled or paid: if they have, then you will have to cancel the
  reconciliation first.
• 2.  The accounting period or the fiscal year has not already been closed: if it is closed then no modification is
  possible.

Cancelling an invoice has the effect of automatically modifying the corresponding accounting entries.

When the invoice has been cancelled you could then put it back into the Draftstate. So you could modify it and
approve it again later.

Cancelling an invoice will cause a break in the number sequence of your invoices. You are strongly advised to
recreate this invoice and re-approve it to fill the hole in the numbering if you can.

2.2.4  Creating a Supplier Invoice

The form that manages supplier invoices is very similar to the one for customer invoices. However, it is been
adapted to simplify rapid data entry and monitoring of the amounts recorded.

To enter a new supplier invoice, use the menu Accounting → Suppliers → Supplier Invoices.

Everything is similar to the customer invoice, starting with the Journal unless the default is acceptable, and then
the Supplier, which will automatically complete the following fields

• Invoice Address,
• Partner Account.

Unlike the customer invoice you do not have to enter payment conditions – simply a Due Date if you want one. If
you do not give a due date, OpenERP assumes that this invoice will be paid in cash. If you want to enter more
complete payment conditions than just the due date, you can use the Payment Term field which you can find on
the second tab Other Info.

You must also enter the invoice Total with taxes included. OpenERP uses this amount to check whether all
invoice lines have been entered correctly before it will let you validate the invoice.

Indicate the Currency if the invoice is not going to use the default currency, then you can enter the Invoice lines.

Just like the customer invoice you have the choice of entering all the information manually or use a product to
complete many of the fields automatically. When you enter a product, all of the following values are completed
automatically:

• the product Account is completed from the properties of the product form or the Category of the product if
  nothing is defined on the product itself,
• the Taxes come from the product form and/or the partner form, based on the same principles as the
  customer invoice,
• the Quantity is set at 1 by default but can be changed manually,
• set the Unit Price from the total price you are quoted after deducting all the different applicable taxes,

Click Compute Taxes to ensure that the totals correspond to those indicated on the paper invoice from the
supplier. When you approve the invoice, Open ERP verifies that the total amount indicated in the header
correspond to the sum of the amounts without tax on the invoice lines and the different applicable taxes.

OpenERP automatically completes the Date Invoiced and the accounting period.

The two pieces of information do not have to have the same date. If, for example, you receive an invoice dated
5th January which relates to goods or services supplied before 31st December, the invoice may be coded into the
December accounting period and thus be recognized in that period for the tax declaration, while the invoice can
remain 5th January which remains the basis of the due date for payment.

You can find that the amounts do not correspond with what your supplier has given you on paper for reasons that
can include:

• the supplier made a calculation error,
• the amounts have been rounded differently.

In this case you can modify a value in the lines that the total’s based on, or the total amount of taxes at the bottom
left of the form: both are editable so that you can modify them to adjust the total.

When the totals tally you can validate the invoice. OpenERP then generates the corresponding accounting
entries. You can manage those entries using the Account fields on the invoice and on each of the invoice lines.

2.2.5  Credit Notes / Refunds

Entering a customer credit note is almost identical to entering a customer invoice. You just start from the menu
Accounting → Customers → Customer Refunds.

Similarly, entering a supplier credit note is the same as that of the supplier invoice and so you use the menu
Accounting → Suppliers → Supplier Refunds.

It is easy to generate a credit note quickly from an existing invoice. To do this, select a customer or supplier
invoice which is in Open or Paid state and click Refund button. OpenERP opens a new payment invoice form for
you in the Draft state so that you can modify it before approval.

2.2.6  Payments

The invoice is automatically marked as paid by OpenERP once invoice entries have been reconciled with
payment entries. You yourself do not have to mark the invoices as paid: OpenERP manages that when you
reconcile your payments.

You have seen the Payment button in the invoice form which is in Open state. This lets you enter payments and
get entries reconciled very quickly.

You can also manage the payment of invoices when you are entering bank statements and cash transactions.
These allow better control of financial transactions and permit greater flexibility in areas such as:

• advance and partial payments of invoices,
• payment of several invoices by several payments,
• fine-grained management of different due dates on the same invoices,
• management of adjustments if there are different amounts to those on the invoice.

2.3  Accounting Entries

Various methods can be used to create accounting entries. You have already seen how an invoice creates its own
entries, for example.

This section deals with

• managing bank statements,
• managing cash,
• manual journal entries,

Here we will show you how to enter financial transactions. In OpenERP you can handle bank statements and also
a cash register. Use different journals for these two kinds of transaction. According to the journal type selected,
you will have a different screen.

2.3.1  Managing Bank Statements

OpenERP provides a visual tool for managing bank statements that simplifies data entry into accounts. As soon
as a statement is validated, the corresponding accounting entries are automatically generated by OpenERP. So
non-accounting people can enter financial transactions without having to worry about things such as credit, debit
and counterparts.

To enter a bank statement, go to the menu Accounting → Bank and Cash → Bank Statements. A data entry form
for bank statements then opens as shown in figure Data Entry Form for a Bank Statement.

Data Entry Form for a Bank Statement

The statement reference Name and the Date are automatically suggested by OpenERP. The Name will be filled
with the statement number at confirmation of the bank statement. You can configure your own reference by
managing sequences in the Administration → Configuration → Sequences menu.

Then select the correct Journal. Ideally, when you are configuring your company you would create at least one
journal for each bank account and one journal for petty cash in your company. So select the journal
corresponding to the bank account whose statement you are handling.

The currency that you are using for the statement line is that of the selected journal. If you are entering statement
lines for an account in American Dollars (USD), the amounts must be entered in USD. The currency is
automatically converted into the company’s main currency when you confirm the entry, using the rates in effect at
the date of entry. (This means that you would need valid currency conversion rates to be created first. Go to
Accounting → Configuration → Miscellaneous → Currencies menu.)

OpenERP automatically completes the initial balance based on the closing balance of the preceding statement.
You can modify this value and force another value. This lets you enter statements in the order of your choice.
Also if you have lost a page of your statement you can enter the following ones immediately and you are not
forced to wait for a duplicate from the bank.

So, complete the closing balance which corresponds to the new value in the account displayed on your bank
statement. This amount will be used to control the operations before approving the statement.

Then you must enter all the lines on the statement. Each line corresponds to a banking transaction.

Enter the transaction line. You have two ways of entering financial transactions: manually or through the Import
Invoices button.

2.3.2  Manual entry

When you type the Partner name, OpenERP automatically proposes the corresponding centralisation account.
The total amount due for the customer or supplier is pre-completed (Amount). This gives you a simple indication
of the effective payment. You must then enter the amount that appears on your statement line: a negative sign for
a withdrawal and a positive sign for a cash payment or deposit.

In the Payment press F1 to reconcile your payment directly with the corresponding accounting entry or entries to
be paid.

2.3.3  Import Invoices

Click the Import Invoices button, then click Add to select the invoices for which your payment will have to be
reconciled. Click OK to confirm your selection; the statement line will automatically be added with the
corresponding reconciliation.

Reconciliation from Data Entry of the Bank Statement

If you see a difference between the payment and the invoices to reconcile, you can enter the difference in the
second part of the form Write-off. You have to set an account for the adjustment. The main reasons explaining the
difference are usually:
profit or loss,
exchange differences,
discounts given for fast payment.

When the reconciliation is complete - that is the payment is equal to the sum of the due payments and the
adjustments - you can close the reconciliation form.

The reconciliation operation is optional – you could very well do it later or not do it at all. However,
reconciliation has got two significant effects:
marking that the invoices have been paid,
preventing the payment and invoice amounts from appearing on customer reminder letters. Unless you
have reconciled them, a customer will see the invoice and payment amounts on his reminder letter (which
will not alter the balance due since they will just cancel each other out).

Finally, once you have entered the complete bank statement, you can validate it. OpenERP then automatically
generates the corresponding accounting entries if the calculated balance equals the final balance indicated in the
Closing Balance field. The reconciled invoices are marked as paid at that point.

You can also enter general accounting entries for e.g. banking costs. In such cases, you can enter the amounts
directly in the corresponding general accounts.

A user with advanced accounting skills can enter accounting entries directly into the bank journal from
Accounting → Journal Entries -> Journal Items. The result is the same, but the operation is more complex
because you must know the accounts to use and must have mastered the ideas of credit and debit.

2.3.4  Cash Management

To manage cash, you can use the menu Accounting → Bank and Cash → Cash Registers. At the start of the day
you set the opening amount of cash in the entry (Opening Balance). Then Open the Cash journal to start making
entries from the Cash  Transactions tab.

All the transactions throughout the day are then entered in this statement. When you close the cash box, generally
at the end of the day, enter the amounts on the Cashbox tab, in the Closing Balance section. Then confirm the
statement to close the day’s cash statement and automatically generate the corresponding accounting entries.
Note that the Calculated balance and the Cashbox balance need to be equal before you can close the cashbox.

2.3.5  Manual Entry in a Journal

Invoices and statements produce accounting entries in different journals. But you could also create entries
directly in a journal (line by line) without using the dedicated journal views. This functionality is often used for
miscellaneous entries.

To make manual entries, go to the following menu Accounting → Journal Entries → Journal Items. In the
Journal field from the filter, select the journal in which you want to post, then click Find. When you select a
journal in this filter, you do not have to fill in the journal when posting new entries.

Let’s give the example of a purchase invoice. Note however that these entries are usually generated automatically
by OpenERP.

Click the New button. Fill these fields manually in the following order:

• Journal Entry: leave this field empty so that OpenERP can fill it in automatically from the next sequence
  number (first draft, then validated) for the journal,
• Ref.: reference from the invoice or entry,
• Date: effective date of the entry, will be preset with today’s date
• Period: financial period, will be preset with the current period
• Partner: partner concerned,
• Account: general account (e.g. purchase account Products  Purchase ),
• Name: description of the invoice line (e.g. PC2 ),
• Debit: here you type the debit amount.
• Journal: here you select the journal in which you want to post.
• Credit: here you type the credit amount, e.g. 1196 .

Press the Enter key on your keyboard to validate the first line. The next draft move number is assigned to your
accounting entry. Your line is then colored red and takes the Unbalanced state. When a line is in the draft
state, it is not yet reflected in the accounts. OpenERP will not validate that line until the balancing entry is made
(so the credit amounts must balance the debit amounts for that set of entries).

OpenERP now proposes the balancing accounting line to be filled in. If the account used (in this case account
600000 ) includes taxes by default OpenERP automatically proposes taxes associated with the amount entered.
At this stage you can modify and validate this second line of the account, or replace it with other information
such as a second purchase line.

When you have entered all of the data from your lines, OpenERP automatically proposes counterpart entries to
you, based on the credit entries.

2.3.6  Reconciliation Process

The reconciliation operation consists of matching entries in different accounts to indicate that they are related.
Generally reconciliation is used for:

• matching invoice entries to payments so that invoices are marked as paid and customers do not get
  payment reminder letters for those entries (reconciliation in a customer account),
• matching deposits and cheque withdrawals with their respective payments,
• matching invoices and credit notes to cancel them out.

A reconciliation must be carried out on a list of accounting entries by an accountant, so that the sum of credits
equals the sum of the debits for the matched entries.

Reconciliation in OpenERP can only be carried out in accounts that have been configured as reconcilable (the
Reconcile field).

# .. todo:: # .. tip:: Do not confuse: account reconciliation and bank statement reconciliation

# It is important not to confuse the reconciliation of accounting entries with bank statement # reconciliation. #
Account reconciliation consists of linking account entries with each other, while statement reconciliation consists
of # verifying that your bank statement corresponds to the entries of that account in your accounting system. #
You can perform statement reconciliation using the menu Accounting → Periodical Processing → Statements →
# Statements Reconciliation.

There are different methods of reconciling entries. You have already seen the reconciliation of entries while
doing data entry in an account. Automatic and manual reconciliations are described here.

Automatic Reconciliation

For automatic reconciliation, you will be asking OpenERP to search for entries to reconcile in a series of
accounts. OpenERP tries to find entries for each partner where the amounts correspond.

Depending on the level of complexity that you choose (= power) when you start running the tool, the software
could reconcile from two to nine entries at the same time. For example, if you select level 5, OpenERP will
reconcile for instance three invoices and two payments if the total amounts correspond. Note that you can also
choose a maximum write-off amount, if you allow payment differences to be posted.

Form for Automatic Reconciliation

To start the reconciliation tool, click Accounting → Periodical Processing → Reconciliation → Automatic
Reconciliation.

A form opens, asking you for the following information:

• Accounts to Reconcile : you can select one, several or all reconcilable accounts,
• the dates to take into consideration (Starting Date / Ending Date),
• the Reconciliation Power (from 2 to 9 ),
• checkbox Allow write off to determine whether you will allow for payment differences.
• information needed for the adjustment (details for the Write-Off Move).

The write-off option enables you to reconcile entries even if their amounts are not exactly equivalent. For
example, OpenERP permits foreign customers whose accounts are in different currencies to have a difference of
up to, say, 0.50 units of currency and put the difference in a write- off account.


Manual Reconciliation

For manual reconciliation, open the entries for reconciling an account through the menu Accounting →
Periodical Processing → Reconciliation → Manual Reconciliation.

# You can also call up manual reconciliation from any screen that shows accounting entries.

Select entries that you want to reconcile. OpenERP indicates the sum of debits and credits for the selected
entries. When these are equal you can click the Reconcile Entries button to reconcile the entries.

For example, if you want to reconcile the following entries:

Entries for reconciliation

On reconciliation, OpenERP shows a difference of 0.50. At this stage you have two possibilities:

• do not reconcile, and the customer receives a request for 0.50,
• reconcile and accept an adjustment of 0.50 that you will take from the P&L account.

OpenERP generates the following entry automatically:

Write-off account

The two invoices and the payment will be reconciled in the first adjustment line. The two invoices will then be
automatically marked as paid.

2.4  Payment Management

OpenERP gives you forms to prepare, validate and execute payment orders. This enables you to manage issues
such as:

1.  Payment provided on several due dates.
2.  Automatic payment dates.
3.  Separating payment preparation and payment approval in your company.
4.  Preparing an order during the week containing several payments, then creating a payment file at the end of
     the week.
5.  Creating a file for electronic payment which can be sent to a bank for execution.
6.  Splitting payments depending on the balances available in your various bank accounts.

2.4.1  How to Manage your Payment Orders?

To use the tool for managing payments you must first install the module account_payment, or install
Supplier  Payments from the Configuration Wizard. It is part of the core OpenERP system.

The system lets you enter a series of payments to be carried out from your various bank accounts. Once the
different payments have been registered you can validate the payment orders. During validation you can modify
and approve the payment orders, sending the order to the bank for electronic funds transfer.

For example if you have to pay a supplier’s invoice for a large amount you can split the payments amongst
several bank accounts according to their available balance. To do this you can prepare several Draft orders and
validate them once you are satisfied that the split is correct.

This process can also be regularly scheduled. In some companies, a payment order is kept in Draft state and
payments are added to the draft list each day. At the end of the week the accountant reviews and confirms all the
waiting payment orders.

Once the payment order is confirmed there is still a validation step for an accountant to carry out. You could
imagine that these orders would be prepared by an accounts clerk, and then approved by a manager to go ahead
with payment.

Payment Workflow

In small businesses it is usually the same person who enters the payment orders and who validates them. In this
case you should just click the two buttons, one after the other, to confirm the payment.

2.4.2  Prepare and Transfer Orders

To enter a payment order, use the menu Accounting → Payment → Payment Orders.

Entering a Payment Order

OpenERP then proposes a reference number for your payment order.

You then have to choose a payment mode from the various methods available to your company. These have to be
configured when you set the accounting system up using menu Accounting → Configuration → Miscellaneous
→ Payment Mode. Some examples are:

• Cheques
• Bank transfer,
• Visa card on a bank account,
• Petty cash.

Then you set the Preferred date for payment:

• Due date : each operation will be effected at the invoice deadline date,
• Directly : the operations will be effected when the orders are validated,
• Fixed date : you must specify an effective payment date in the Scheduled date if fixed field that follows.

The date is particularly important for the preparation of electronic transfers because banking interfaces enable
you to select a future execution date for each operation. So to configure your OpenERP most simply you can
choose to pay all invoices automatically by their deadline.

You must then select the invoices to pay. They can be entered manually in the field Payment Line, but it is easier
to add them automatically. For that, click Select Invoices to Pay and OpenERP will then propose lines with
payment deadlines. For each deadline you can see:

• the invoice Effective date,
• the reference Ref. and description of the invoice, Name,
• the deadline for the invoice,
• the amount to be paid in the company’s default currency,
• the amount to be paid in the currency of the invoice.

You can then accept the payment proposed by OpenERP or select the entries that you will pay or not pay on that
order. OpenERP gives you all the necessary information to make a payment decision for each line item:

• account,
• supplier’s bank account,
• amount that will be paid,
• amount to pay,
• the supplier,
• total amount owed to the supplier,
• due date,
• date of creation.

You can modify the first three fields on each line: the account, the supplier’s bank account and the amount that
will be paid. This arrangement is very practical because it gives you complete visibility of all the company’s
trade payables. You can pay only a part of an invoice, for example, and in preparing your next payment order
OpenERP automatically suggests payment of the remainder owed.

When the payment has been prepared correctly, click Confirm Payments. The payment then changes to the
Confirmed state and a new button appears that can be used to start the payment process. .. Depending on the
chosen payment method, OpenERP provides a file containing all of the payment .. orders. You can send this to
the bank to make the payment transfers.

In future versions of OpenERP it is expected that the system will be able to prepare and print cheques.

As usual, you can change the start point for the payment workflow from the Administration → Customization →
Workflow menus.

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 is 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 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 is often several weeks of delay between reality and the report.

So accounting is too often underused. The information it brings makes it a very effective tool for running the
company if it is 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 is 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 its 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 service 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.

OpenERP’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 OpenERP covers general accounting, analytic accounting, and auxiliary and budgetary accounting. It
is double-entry, multi-currency and multi-company.

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 OpenERP 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.

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 Sales Management installed
and a generic chart of accounts.

FINANCIAL ANALYSIS

This chapter is dedicated to statutory taxation and financial reporting from OpenERP. Whether you
need reports about customers and suppliers, or statements for various statutory purposes, OpenERP
enables you to carry out a whole range of parametric analyses regarding the financial health of your
company.

Whether you want to analyze the general health of your company or review the status of an Account Receivable
in detail, your company’s accounts are the place to define your various business indicators.

To show you the most accurate picture of your business, OpenERP’s accounting reports are flexible, and the
results are calculated in real time. This enables you to automate recurring actions and to change your operations
quickly when a company-wide problem (such as cash reserves dropping too low or receivables climbing too
high) or a local problem (a customer that has not paid, or a project budget overspend) occurs.

This chapter describes the various reports and financial statements supplied by OpenERP’s accounting modules.
It also describes how OpenERP handles purchase and sales taxation, and the related tax reporting.

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.

3.1  Reporting

Open ERP provides many tools for managing customer and supplier accounts. You will see here:

• financial analysis of partners, to understand the reports that enable you to carry out an analysis of all of
  your partners,
• multi-level reminders, which is an automatic system for preparing reminder letters or emails when invoices
  remain unpaid,
• detailed analysis of individual partners.

3.1.1  Financial Analysis of Partners

When members of your accounts department sign on to the Open ERP system, they can immediately be
presented with the Accounting Dashboard. By default it contains a useful graph for analyzing Receivables. Then
look at it using the menu Accounting → Reporting → Dashboard → Accounting Dashboard.

Accounting dashboard

In the dashboard, the graph at the right entitled Aged Receivables represents your receivables week by week.
That shows you at a glance the cumulative amount of your customer debtors by week.

All of Open ERP’s graphs are dynamic. So you can, for example, filter the data by clicking Zoom and then Filter
on the Search form. Or just click on Zoom to open in a larger window for a graph, then click Search to display
this in a list view.

To obtain a more detailed report of the aged balance (or order by past date) use the menu Accounting →
Reporting → Generic Reporting → Partners → Aged Partner Balance.

Aged balance using a 30 day period

When opening that report, Open ERP asks for the name of the company, the fiscal period and the size of the
interval to be analyzed (in days). Open ERP then calculates a table of credit balance by period. So if you request
an interval of 30 days Open ERP generates an analysis of creditors for the past month, past two months, and so
on.

For an analysis by partner you can use the partner balance that you get through the menu Accounting →
Reporting → Generic Reporting → Partners → Partner Balance. The system then supplies you with a PDF
report containing one line per partner representing the cumulative credit balance.

Partner balances

If you want detailed information about a partner you can use the partner ledgers that you reach through the menu
Accounting → Reporting → Generic Reporting → Partners → Partner Ledger.

Partner ledger

Finally you can look up individual account entries by searching for useful information. To search for account
entries:

You can use the menu Accounting → Reporting → Statistic Reports → Entries Analysis.

3.1.2  Multi-step Reminders

To automate the management of followups (reminders) you must install the module account_followup.

Once the module is installed configure your levels of followup using the menu Accounting → Configuration →
Miscellaneous → Follow-Ups.

The levels of follow-up are relative to the date of creation of an invoice and not the due date. This enables you to
put payment conditions such as ‘payable in 21 days’ and send a reminder in 30 days, or the converse.

For each level you should define the number of days and create a note which will automatically be added into the
reminder letter. The sequence determines the order of the level in ascending order.

Example of configuring followup levels

You can send your reminders by mail and/or email with the menu Accounting → Periodical Processing →
Billing → Send followups.

Form for preparing follow-up letters

Open ERP presents you with a list of partners who are due reminders, which you can modify before starting the
procedure. On the second tab of the form you can supply the information you will send in the email reminder.

The system then gives you a PDF report with all of the reminder letters for each partner. Each letter is produced
in the language of the partner (if that is available) and you can therefore get letters in several languages in the
same PDF on several pages.

You should check the due date of customers and/or suppliers before starting the reminder procedure. You get a
list of unreconciled entries accounts. You can then modify the date and the last follow-up and the level of
reminder for each entry.

To obtain a detailed statastical report of dent follow-ups use the menus in Accounting → Reporting → Generic
Reporting → Partners → Follow-ups Sent.

The different reports are standard Open ERP screens, so you can filter them and explore the elements in detail.

Summary screen for follow-ups

3.1.3  Partner Information

In daily use of Open ERP a manager will often need to search quickly for financial information amongst partner
data. For this she can use the buttons to the right of form when she opens a partner form, to go directly to:

• a follow-up letter from the Overdue payments Report button,
• the list of open Invoices,
• a shortcut to Journal Items,
• the unclosed CRM requests from Open cases,
• a shortcut to the unreconciled Receivables and Payables.

The exact links depend on the modules that are installed in Open ERP.

These links are also available to her using the navigation features such as right-clicking partner fields in the GTK
client.

The Overdue payments report produces a PDF document which is used for follow-up but it does not modify any
of the partner’s accounting entries. Its use does not increase the follow-up level so you can run this report
repeatedly without any problem.

In Open ERP you can search for a partner on the basis of the value of its trade receivables. So search for partners
with a credit amount between 1 and 99999999 and you will get a list of partners that owe you payment. You can
then select the whole list and print follow-up letters for them all.

To the right of the partner form there is a shortcut to Invoices. This link includes all of the invoices defined in the
systems, namely:

• customer invoices,
• supplier invoices,
• credit notes,
• supplier credit notes.

In the links appearing on the partner form, two buttons enable the opening of partner accounting entries:

• Journal Items,
• Receivables & Payables.

The first button is useful for obtaining a historical analysis of the customer or supplier. You can get information
about such significant items as sales volume and payment delays. The second button is a filter which shows only
the open trade credits and debits for the partner.

3.2  Statutory Taxes and Chart of accounts

This section deals with statutory taxes and accounts which are legally required from the company:

• the taxation structure provided by Open ERP,
• the accounts ledgers,
• account balance (used to produce the income statement and balance sheet),
• the different journals (general, centralized and detailed),
• the tax declaration.

3.2.1  Taxation

You can attach taxes to financial transactions so that you can

• add taxes to the amount that you pay or get paid,
• report on the taxes in various categories that you should pay the tax authorities,
• track taxes in your general accounts,
• manage the payment and refund of taxes using the same mechanisms that Open ERP uses for other
  monetary transactions.

Since the detailed tax structure is a mechanism for carrying out governments’ policies, and the collecting of taxes
so critical to their authorities, tax requirements and reporting can be complex. Open ERP has a flexible
mechanism for handling taxation that can be configured through its GUI or through data import mechanisms to
meet the requirements of many various tax jurisdictions.

The taxation mechanism can also be used to handle other tax-like financial transactions, such as royalties to
authors based on the value of transactions through an account.

Setting up a Tax Structure

Setup Taxation using Accounting → Configuration → Financial Accounting → Taxes → Taxes.

Three main objects are involved in the tax system in Open ERP:

• a Tax Case (or Tax Code), used for tax reporting, that can be set up in a hierarchical structure so that
  multiple codes can be formed into trees in the same way as a Chart of Accounts.
• a Tax, the basic tax object that contains the rules for calculating tax on the financial transaction it is
  attached to, and is linked to the General Accounts and to the Tax Cases. A tax can contain multiple child
  taxes and base its calculation on those taxes rather than the base transaction, providing considerable
  flexibility. Each tax belongs to a Tax Group (currently just VAT or Other ).
• the General Accounts, that record the taxes owing and paid. Since the general accounts are discussed
  elsewhere in this part of the book and are not tax-specific, they will not be detailed in this section.

You can attach zero or more Supplier Tax and Customer Tax items to products, so that you can account separately
for purchase and sales taxes (or Input and Output VAT – where VAT is Value Added Tax). Because you can
attach more than one tax, you can handle a VAT or Sales Tax separately from an Eco Tax on the same product.

Your Tax Declaration

Tax Cases are also known in Open ERP as Tax Codes. They are used for tax reporting, and can be set up in a
hierarchical structure to form trees in the same way as a Chart of Accounts.

To create a new Tax Case, use the menu Accounting → Configuration → Financial Accounting → Taxes → Tax
Codes. You define the following fields:

Definition of Tax Code

• Tax Case Name : a unique name required to identify the Case,
• Company : a required link that attaches the Case to a specific company, such as the Main Company,
• Case Code : an optional short code for the case,
• Parent Code : a link to a parent Tax Case that forms the basis of the tree structure like a Chart of Accounts,
• Coefficent for parent : choose 1.00 to add the total to the parent account or -1.00 to subtract it,
• Description : a free text field for documentation purposes.

You can also see two read-only fields:

• Year Sum : a single figure showing the total accumulated on this case for the financial year.
• Period Sum : a single figure showing the total accumulated on this case for the current financial period
  (perhaps 1 month or 3 months).

You will probably need to create two tax cases for each different tax rate that you have to define, one for the tax
itself and one for the invoice amount that the tax is based on. And you will create tax cases that you will not link
to Tax objects (similar to General Account View types) just to organize the tree structure.

To view the structure that you have constructed you can use the menu Accounting → Charts → Chart of Taxes.
This tree view reflects the structure of the Tax Cases and shows the current tax situation.

Define Taxes

Tax objects calculate tax on the financial transactions that they are attached to, and are linked to the General
Accounts and to the Tax Cases.

To create a new Tax Case, use the menu Accounting → Configuration → Financial Accounting → Taxes →
Taxes.

Definition of tax

You define the following fields:

• Tax Name : a unique name required for this tax (such as 12%  Sales  VAT ),
• Company : a required link to a company associated with the tax, such as the Main Company,
• Tax Type : a required field directing how to calculate the tax: Percent , ‘‘Fixed‘‘ , None or Python
  Code , (the latter is found in the Compute Code field in the Special Computation tab),
• Applicable Type : a required field that indicates whether the base amount should be used unchanged (when
  the value is Always ) or whether it should be processed by Python Code in the Applicable Code field in
  the Special Computation tab when the value is Given  by  Python  Code ),
• Amount : a required field whose meaning depends on the Tax Type, being a multiplier on the base amount
  when the Tax Type is Percent , and a fixed amount added to the base amount when the Tax Type is
  Fixed ,
• Include in base amount : when checked, the tax is added to the base amount and not shown separately,
• Domain : is only used in special developments, not in the core Open ERP system,
• Invoice Tax Account :a General Account used to record invoiced tax amounts, which may be the same for
  several taxes or split so that one tax is allocated to one account,
• Refund Tax Account : a General Account used to record invoiced tax refunds, which may be the same as
  the Invoice Tax Account or, in some tax jurisdictions, must be separated,
• Tax on Children : when checked, the tax calculation is applied to the output from other tax calculations
  specified in the Childs Tax Account field (so you can have taxes on taxes), otherwise the calculation is
  applied to the base amount on the transaction,
• Tax included in Price : when checked, the total value shown includes this tax,
• Tax Application : selects whether the tax is applicable to Sale, Purchase or All transactions,
• Child Tax Accounts : other tax accounts that can be used to supply the figure for taxation.

The fields above apply the taxes that you specify and record them in the general accounts but do not provide you
with the documentation that your tax authorities might need. For this use the Tax Definition tab to define which
Tax Cases should be used for this tax:

• Account Base Code : tax case to record the invoiced amount that the tax is based on,
• Account Tax Code : tax case to record the invoiced tax amount
• Refund Base Code : tax case to record the refund invoice amount that the tax is based on,
• Refund Tax Code : tax case to record the refund invoice tax amount.

Taxes on Products and Accounts

When you have created a tax structure consisting of Tax Cases and Tax objects, you can use the taxes in your
various business objects so that financial transactions can be associated with taxes and tax-like charges.

You can assign multiple taxes to a Product. Assuming you have set up the appropriate taxes, you would use the
menu Sales → Products → Products to open and edit a Product definition, then:

• select one or more Sale Taxes for any products that you might sell, which may include a Sales  Tax or
  Output  VAT , and a Sales  Eco  Tax ,
• select one or more Purchase Taxes for any products that you might purchase, which may include a
  Purchase  Tax or Input  VAT , and a Purchase  Eco  Tax .

Generally,
when you make a purchase or sale, the taxes assigned to the product are used to calculate the taxes owing or owed.

And you can assign multiple taxes to an account so that when you transfer money through the account you attract
a tax amount. In such a case, this ‘tax’ may not be legally-required taxation but something tax-like, for example
authors’ royalties or sales commission.

3.2.2  General Ledger and Trial Balance

To print the General Ledger you can use the menu Accounting → Reporting → Legal Reports → Accounting
Reports → General Ledger. You will find the following wizard which is used to filter the resulting report.

Wizard for selecting the specific entries in report

Select the proper option and journal from the above wizard to print the General Ledger

General Ledger

To print the Trial Balance you can use this menu Accounting → Reporting → Legal Reports → Accounting
Reports → Trial Balance. This report allows you to print or generate a pdf of your trial balance allowing you to
quickly check the balance of each of your accounts in a single report.

Trial balance

You can print the General Ledger and Trial Balance report directly from the Account form also.

3.2.3  The Accounting Journals

To configure the different journals use the menu Accounting → Configuration → Financial Accounting →
Journals → Journals.

Definition of the journal

OpenERP provide three main reports regarding the journals:

• To print Journals using menu Accounting → Reporting → Legal Reports → Journals → Journals.

Printing a journal

• To print General Journals using menu Accounting → Reporting → Legal Reports → Journals → General
  Journals.
• To print Centralizing Journal using menu Accounting → Reporting → Legal Reports → Journals →
  Centralizing Journal.

3.2.4  Tax Declaration

Information required for a tax declaration is automatically generated by Open ERP from invoices. In the section
on invoicing you will have seen that you can get details of tax information from the area at the bottom left of an
invoice.

You can also get the information from the accounting entries in the columns to the right.

Open ERP keeps a tax chart that you can reach from the menu Accounting → Charts → Chart of Accounts. The
structure of the chart is for calculating the tax declaration but also all the other taxes can be calculated (such as
the French DEEE).

Example of a Belgian TVA (VAT) declaration

The tax chart represents the amount of each area of the tax declaration for your country. It is presented in a
hierarchical structure which lets you see the detail only of what interests you and hides the less interesting
subtotals. This structure can be altered as you wish to fit your needs.

You can create several tax charts if your company is subject to different types of tax or tax-like accounts, such as:

• authors’ rights,
• ecotaxes such as the French DEEE for recycling electrical equipment.

Each accounting entry can then be linked to one of the tax accounts. This association is done automatically by
the taxes which had previously been configured in the invoice lines.

At any time you can check your chart of taxes for a given period using the report Accounting → Reporting →
Generic Reporting → Taxes → Taxes Reports.

This data is updated in real time. That is very useful because it enables you to preview at any time the tax that
you owe at the start and end of the month or quarter.

Furthermore, for your tax declaration you can click on one of the tax accounts to investigate the detailed entries
that make up the full amount. This helps you search for errors such as when you have entered an invoice at full
tax rate when it should have been zero-rated for an inter-community trade or for a charity.

In some countries, tax can be calculated on the basis of payments received rather than invoices sent. In this
instance choose Base on Payments instead of Base on Invoices in the Select period field. Even if you make
your declaration on the basis of invoices sent and received it can be helpful to compare the two reports to see the
amount of tax that you pay but haven’t yet received from your customers.

3.3  Company Financial Analysis

You will see here the analysis tools for your company’s financial situation, in particular:

• Management Indicators
• Budgets
• The Accounting Dashboard

3.3.1  Management Indicators

To define financial indicators in Open ERP you should install the module account_report. When installing
the module the usual financial indicators are registered in Open ERP.

You can consult your indicators, calculated in real time, from the menu Financial Management → Reporting →
Custom Reports.

Indicators defined by default in Open ERP are the following:

• Indicators of Working Capital : determines if the company can pay its short term debts in normal
  conditions. It is calculated from (Stocks  +  Cash  +  Current  Assets)  /  Current
  Liabilities .
• Financial Ratios : enables you to calculate the company’s liquidity. It is defined as follows: (  Current
  Assets  -  Stocks)  /  Current  Liabilities .
• Fixed Assets : in a going concern, the value of fixed assets are covered in the first place by owners’ capital
  and in the second place by all of the long term liabilities. Ideally this indicator will be greater than 1.

Time analysis of indicators

You can analyze the financial indicators along two axes. You must have a figure calculated at a particular instant
of time when you compare accounts, balances and the ratios between them. But you can also calculate a time
series to follow the change of a given indicator throughout the life of the company. To do a temporal analysis of
your indicators, you must install the module account_report from the set of modules in addons-extra.

Once this module is installed, you can click on a financial indicator to get a graph of its evolution in time.

History of an accounting indicator

Defining your own indicators

You can define your own indicators in Open ERP using the menu Accounting → Reporting → Generic Reporting
→ Reporting → Custom reporting.

Defining a new indicator

You should make sure that the accounts that you base indicators on are given unique account codes, because
codes are used in the creation of formulae. Create a formula using the syntax indicated in the instructions at the
bottom of the form:

• Sum of debits in a general account: debit(’12345’) ,
• Sum of credits in a general account: credit(’12345’) ,
• Balance of a general account: balance(’12345’) ,
• Value of another indicator: report  (’IND’).

where:

• 12345 represents the code of a general account,
• IND represents the code of another indicator.

So, using this notation, the cash ratio is defined by balance(’4’,  ’5’)  /  balance(’1’) – that is the
balance in accounts 4 and 5 divided by the balance in account 1.

3.3.2  Good Management Budgeting

Open ERP manages its budgets using both General and Analytic Accounts. You will see how to do this here for
General Accounts and then in Analytic Accounts for Analytical Accounts. Install account_budget to be able
to do this.

Use the menu Accounting → Budgets → Budgets to define a new budget by clicking on New button.

Budget form

Begin data entry by entering a Name, a Code, and a Start Date and an End Date in your new budget. Then you
can define the budgeted amounts within that period, one by one. For each, you define:

• an Analytic Account
• a Budgetary Position : for example Sales or Purchases,
• a Start Date and End Date for the use of the budget,
• a Planned Amount in the default currency of the chart of accounts.

Once it is completed you can save your budget.

To print a budget and make calculations of expenditure to budget use the menu Accounting → Budgets →
Budgets Open ERP then gives you a list of available budgets. Select one or more budgets and then click Print
Budgets to create the report for each in a date range of your choosing. The figure Printing a budget gives an
example of a budget produced by Open ERP.

Printing a budget

You could also use the menu Accounting → Reporting → Generic Reporting → Budgets → Budget Lines. This
gives a budgetary analysis report for each budget line.

3.3.3  The Accounting Dashboard

You can open the Accounting Dashboard using the menu Accounting → Reporting → Dashboard → Accounting
dashboard.

Accounting Dashboard

Open ERP gives you an accounting dashboard that can be presented to your accounting staff as they sign into the
system (if you have set it as their Home Page). This dashboard provides an analysis of the company’s financial
health at a glance.

The description of the different parts of the dashboard, from top to bottom then from left to right is as follows:

• Customer Invoices to Approve : gives the list of invoices waiting to be approved by an accountant.
• Company Analysis : gives the credit,debit and balance of all account type.
• Treasury : shows balance per Account
• Aged receivables : gives a weekly graph of the receivables that haven’t yet been reconciled.

In each panel of the Accounting Dashboard you can click the Zoom button at the top right to investigate the detail
of your financial indicators.

The Accounting Dashboard is dynamically integrated, which means that you can navigate easily through the data
if you want more detail about certain factors, and edit the entries if necessary.

CONFIGURING ACCOUNTS FROM A TO Z

Accounts must be configured to meet your company’s needs. This chapter explains how to modify
your chart of accounts, journals, access rights, initial account balances, and default values for the
initial configuration of your Open ERP accounts.

Assuming that it calculates sufficiently accurately, the best accounting software would be marked out by its
usability and simplicity of data entry, and flexibility in configuring its different components. You would be able
to easily modify the accounting module to meet your own needs so that you could optimize it for the way you
want to use it.

Open ERP lets you adapt and reconfigure many functions to ease the task of data entry:
adding controls for data entry,
customizing the screens,
filling fields automatically during data entry with data that is already known to the system.

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.

4.1  Chart of Accounts

You view active charts of accounts using the menu Accounting → Charts → Charts of Accounts, and Open
Charts for the selected year and account moves.

The structure of the chart of accounts is hierarchical, with account subtotals called account views. You can
develop a set of account views to contain only those elements that interest you.

To get the detail of the account entries that are important to you, all you need to do is click the account’s Code (if
you have no codes, you can select the line, then click Switch to get the acount definition, then click the Entries in
the LINKS part of the toolbar).

Displaying the chart of accounts can take several seconds because Open ERP calculates the debits, credits and
balance for each account in real time.

4.1.1  Using a Preconfigured Chart of Accounts

On installation, the software is given a default chart of accounts that is the same regardless of your country. To
install the chart of accounts and tax definitions for your own country install the module l10n_XX where XX
represents your country code in two letters. For example to get the chart of accounts for France install the module
l10n_fr.

Some of these pre-built modules are comprehensive and accurate, others have rather more tentative status and are
simply indicators of the possibilities. You can modify these, or build your own accounts onto the default chart, or
replace it entirely with a custom chart.

4.1.2  Creating a Chart of Accounts

To add, modify or delete existing accounts, use the menu Accounting → Configuration → Financial Accounting
→ Accounts → Accounts.

Definition of an account

The main account fields are:

• Name : Gives the account a name.
• Account Type : account types determine an account’s use in each journal. By default the following types
  are available View, Receivable, Payable, Income, Expense, Tax, Cash, Asset, Equity. You can add new
  types through the menu Accounting → Configuration → Financial Accounting → Accounts → Account
  Types. Use the View type for accounts that make up the structure of the charts and have no account data
  inputs of their own.
• Internal Type : internal types has special effects in OpenERP. By default the following types are available
  View, Regular, Receivable, Payable, Liquidity, Consolidation, Closed.

• Code : the code length is not limited to a specific number of digits. Use code 0 for all root accounts.
• Secondary Currency : forces all the moves for this account to have this secondary currency.
• Reconcile : determines if you can reconcile the entries in this account. Activate this field for partner
  accounts and for chequing (checking) accounts.
• Parents : determines which account is the parent of this one, to create the tree structure of the chart of
  accounts.
• Default Taxes : this is the default tax applied to purchases or sales using this account. It enables the system
  to generate tax entries automatically when entering data in a journal manually.

The tree structure of the accounts can be altered as often and as much as you wish without recalculating any of
the individual entries. So you can easily restructure your account during the year to reflect the reality of the
company better.

4.1.3  Virtual Charts of Accounts

The structure of a chart of accounts is imposed by the legislation in effect in the country of concern.
Unfortunately that structure does not always correspond to the view that a company’s CEO needs.

In Open ERP you can use the concept of virtual charts of accounts to manage several different representations of
the same accounts simultaneously. These representations can be shown in real time with no additional data entry.

So your general chart of accounts can be the one imposed by the statutes of your country, and your CEO can then
have other virtual charts as necessary, based on the accounts in the general chart. For example the CEO can
create a view per department, a cash-flow and liquidity view, or consolidated accounts for different companies.

The most interesting thing about virtual charts of accounts is that they can be used in the same way as the default
chart of accounts for the whole organization. For example you can establish budgets from your consolidated
accounts or from the accounts from one of your companies.

To create a new chart of accounts you should create a root account using the menu Accounting → Configuration
→ Financial Accounting → Accounts → Accounts. Your top level account should have Code 0 and Type View .
Then you can choose your structure by creating other accounts of Type View as necessary. Check your virtual
structure using the menu Financial Management → Charts → Charts of Accounts.

You have to set Internal Type = Consolidation and set Consolidated Children Accounts to make Account
Consolidate.

Finally, when you have got your structure, you must make the general accounts and virtual accounts match. For
that search the general accounts and ensure that each non-View account there also has a virtual account in the
field Parents.

You can then check through your general chart of accounts as well as your virtual charts which give you another
representation of the company. All the actions and states in your general account are also available in the virtual
accounts.

Finally you can also make virtual charts of accounts from other virtual charts. That can give an additional
dimension for financial analysis.

4.2  Journals

All your accounting entries must appear in an accounting journal. So you must, at a minimum, create a Sales
Journal for customer invoices, a Purchase Journal for supplier invoices and a Cash Journal for cash and bank
transactions.

4.2.1  Configuring a Journal

To view, edit or create new journals use the menu Accounting → Configuration → Financial Accounting →
Journals → Journals.

Definition of an accounting journal

You have to associate a view with each journal. The journal view indicates the fields that must be visible and
required to enter accounting data in that journal. The view determines both the order of the fields and the
properties of each field. For example the field Account Number must appear when entering data in the bank
journal but not in the other journals.

Before creating a new view for a journal check that there is nothing similar already defined for another journal.
You should only create a new view for new types of journal.

You can create a sequence for each journal. This sequence gives the automatic numbering for accounting entries.
Or several journals can use the same sequence if you want to define one for them all.

The credit and debit account by default permit the automatic generation of counterpart entries when you are
entering data in the journal quickly. For example, in a bank journal you should put an associated bank account for
default matching credits and debits, so that you do not have to create counterparts for each transaction manually.

A journal can be marked as being centralized. When you do this, the counterpart entries will not be owned by
each entry but globally for the given journal and period. You will then have a credit line and a debit line
centralized for each entry in one of these journals, meaning that both credit and debit appear on the same line.

4.2.2  Controls and tips for Data Entry

You can carry out two types of control on Journals in Open ERP – controls over the financial accounts and access
controls for groups of users. In addition to these controls you can also apply all of the rights management
detailed in Configuration & Administration.

To avoid mistakes while entering accounts data, you can place conditions in the general accounts about who can
use a given account. To do this, you must list all the accounts or valid account types in the second tab, Entry
Controls. If you have not added any accounts there, Open ERP applies no restriction on data entry in the accounts
or journals. If you list accounts and the types of account that can be used in a journal, Open ERP prevents you
from using any account not in that list. This verification step starts from the moment you save the entry.

This functionality is useful for limiting possible data entry errors. Also, in a bank journal it is possible to restrict
the accounts that can be linked to a bank to classes 1 to 5. Using this you would help prevent the user from
making any false entries in the journal.

4.3 Periods and Finacial Years

Open ERP’s management of the fiscal year is flexible enough to enable you to work on several years at the same
time. This gives you several advantages, such as creating three-year budgets, and statements straddling several
calendar years.

4.3.1  Defining a Period or a Financial Year

To define your fiscal year use the menu Accounting → Configuration → Financial Accounting → Periods →
Fiscal Year. You can create several years in advance to define long-term budgets.

Defining a financial year and periods

First enter the date of the first day of your fiscal year and the last day. Then to create the periods click one of the
two buttons at the bottom depending on whether you want to create twelve 1-month or four 3-month periods:

• Create monthly periods ,
• Create 3-monthly periods .

4.3.2  Closing a Financial Year

To close the end the year, use the menu Accounting → Periodical Processing → End of Period → Close a Fiscal
Year. A wizard opens asking you for the essential information it needs to close the following year.

When the year is closed you can no longer create or modify any financial transactions in that year. So you should
always make a backup of the database before closing the fiscal year. Closing a year is not obligatory and you
could easily do that sometime in the following year when your accounts are finally sent to the statutory
authorities, and no further modifications are permitted.

Closing a financial year

It is also possible to close an accounting period. You could for example close a monthly period when a tax
declaration has been made. When a period is closed you can not modify any of the entries in that period. To close
an accounting period use the menu Accounting → Periodical Processing → End of Period → Close a Period.

4.4  Payment Terms
You can define whatever payment terms you need in Open ERP. Payment terms determine the due dates for
paying an invoice.

To define new payment terms, use the menu Accounting → Configuration → Miscellaneous → Payment Terms
and then click New.

The figure below represents the following payment term: 5000 within 5 days, 50% payment at the last day of
current month, Remaining on 15th of next month.

Configuring payment terms

To configure new conditions start by giving a name to the Payment Term field. Text that you put in the field
Description is used on invoices, so enter a clear description of the payment terms there.

Then create individual lines for calculating the terms in the section Payment Term. You must give each line a
name (Line Name). These give an informative title and do not affect the actual calculation of terms. The
Sequence field lets you define the order in which the rules are evaluated.

The Valuation field enables you to calculate the amount to pay for each line:

• Percent : the line corresponds to a percentage of the total amount, the factor being given in Value Amount.
  The number indicated in the Amount must take a value between 0 and 1.
• Fixed Amount : this is a fixed value given by the Value Amount box.
• Balance : indicates the balance remaining after accounting for the other lines.

Think carefully about setting the last line of the calculation to Balance to avoid rounding errors. The highest
sequence number is evaluated last.

The two last fields, Number of Days and Day of the Month, enable the calculation of the delay in payment for
each line, The delay Day of the Month can be set to -1,0or Any  Positive  Number . For example today is
20 December 2010, if you want to set payment terms like this.

• 5000 within 5 days then set Valuation is Fixed Amount, Number of Days 5 and Day of the Month is 0 that
  creates journal entry for date 25th December 2010.
• 50% payment at the last day of current month then set Valuation Percent, Number of Days 0 and Day of the
  Month is -1 that creates journal entry for date 31th December 2010.
• Remaining on 15th of next month then set Valuation Balance, Number of Days 0 and Day of the Month is
  15 that creates journal entry for date 15th January 2011.

You can then add payment terms to a Partner through the tab Accounting on the partner form.

4.5  Opening Entries

To upgrade your various accounts, create a Journal of type Opening/Closing Situation in Centralized counterpart
mode to avoid a counterpart on each line.

For each account that needs upgrading, enter account data in the journal. For this operation use the menu
Accounting → Journal Entries → Journal Items.

You can also use Open ERP’s generic import tool if you load the balance of each of your accounts from other
accounting software.

Example Steps:
1.  Accounting → Configuration → Financial Accounting → Periods → Fiscal Year : Create a fiscal Year
     with monthly periods
2.  Accounting → Configuration → Financial Accounting → Accounts → Accounts : Create an account
    ‘Opening Balance Account’ (Account Type: ‘Equity’ (not sure about that, but it is working),Reconcile:
    ‘No’)
3.  Accountingt → Configuration → Financial Accounting → Journals → Journals : Create a new Journal
    ‘Opening Bal Journal’ (Type: ‘Opening/Closing Situation’, View: ‘Journal View’, Entry Sequence:
    ‘Account Journal’, Default Debit Account: ‘Opening Balance Account’, Default Credit Account: ‘Opening
    Balance Account’, Centralized Counterpart: ‘Yes’)
4.  Best to create a csv-file with the first line:  “Account”,”Effective
    date”,”Journal”,”Name”,”Period”,”Debit”,”Credit”
    And the data-lines like this:  “1000”,”2008-01-16”,”Opening Bal Journal”,”Opening Balance Entry”,”01/01 -
    31/01”,0,53828
5.  Accountingt → Configuration → Financial Accounting → Journals → Journals : Choose ‘Opening Bal
    Journal’
6.  Menu Form -> Import data: Choose the file to import, ‘Auto Detect’, ‘Ok’