Cash and bank, payables, receivables and settlement
Money in and out is the heart of Finance. The exam asks which module owns each process and how settlement and matching work.
Modules and what they own
| Module | Main purpose |
|---|---|
| Accounts payable | Vendors, purchase invoices, vendor payments |
| Accounts receivable | Customers, sales invoices, collections, credit |
| Cash and bank management | Bank accounts, deposits, reconciliation, checks, letters of credit and guarantee |
| General ledger | Journals, posting, closing the books |
Three-way matching
In Accounts payable, three-way matching compares three documents before an invoice is approved:
- The purchase order (what you ordered and the price).
- The product receipt (what arrived).
- The vendor invoice (what you are asked to pay).
If quantity or price differs beyond the tolerance you set, the invoice is flagged on the invoice matching page and cannot be posted until it is resolved. This is how you stop paying for goods you did not receive. It belongs to Accounts payable, not Accounts receivable.
Settlement
Settlement links a payment to the invoice or credit note it pays.
- Applies to customer and vendor transactions.
- The payment must be posted first. You settle posted transactions.
- It can be done in the same legal entity or across legal entities in some cases.
- It closes the open transaction, but does not change the original posting amounts.
Bank reconciliation
In Cash and bank management, you import a bank statement and match its lines to bank transactions. Matched lines are marked reconciled, which proves the ledger agrees with the bank. Related tasks are bank deposits (grouping received checks or cash into one deposit) and checks.
Letters of credit and guarantee
A letter of credit is a bank guarantee that a buyer will pay an exporter, often used in international trade. A letter of guarantee protects against failure to meet a contract. Both are set up and tracked in Cash and bank management, and a letter of credit can be linked to an import order.
Exam traps
- Three-way matching is on payables (purchase order, receipt, invoice). Two-way matching drops the receipt.
- Settlement needs posted transactions and works for both customers and vendors.
- Bank reconciliation matches bank statement lines, not vendor invoices.
- Letters of credit are not a Project or Supply Chain feature. They live in Cash and bank management.
Practice questions
Choose an answer, then review the explanation to check your understanding.
1. A company paid for goods it never received. Which Finance capability helps prevent this?
Show answer
Answer: A.Three-way matching in Accounts payable compares the purchase order, the product receipt and the vendor invoice before payment.
2. Which Finance module and process do you use to compare bank statement lines to ledger transactions?
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Answer: A.Cash and bank management includes bank reconciliation, where statement lines are matched to bank transactions.
3. Which statement about settlement is correct?
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Answer: B.Settlement links posted payments to posted invoices or credit notes. It applies to both customers and vendors.
4. A company wants to manage letters of credit that it uses when importing goods. Which Finance area do you configure?
Show answer
Answer: A.Letters of credit and letters of guarantee are managed in Cash and bank management, and the credit can be tied to purchase orders for imports.