Understanding the Settlement Mechanism in Microsoft Dynamics AX

Settlement is an accounting transaction that occurs on accounts payable, accounts receivables, and general ledger. This transaction is used mainly for settling vendor invoices against vendor payments or  advanced payment, and customer invoices against customer collections or advanced collection. Settlement could occur on general ledger transactions as well.

It is necessary to classify posting profiles of the vendor and customer in the opening balance since it will affect  the settlement process.

The settlement transaction affects vendor and customer balances, and it is reported in the vendor or customer statement report that identifies the following:

Vendor

• The open (unsettled) invoice and payments
• The closed (settled) invoiced and payments
• Vendor balance

Customer

• The open (unsettled) invoice and collections
• The closed (settled) invoiced and collections
• Customer balance

A settlement transaction could occur during a payment or collection transaction if the accountant marks the invoice which will be paid or collected. On other hand, the settlement could be performed on the vendor or customer level, and these transactions could be unsettled.

The settlement transaction should take into consideration the currency since it could be performed in the company home currency by equivalent amount which calculated based on currency exchange rate, or it could be settled in the same currency of invoice by identifying the currency in payment process. 

Customer settlement mechanism - Dynamics AX

Customer settlement in Microsoft Dynamics AX is a transaction used to settle customer ...