Supporting Third Party Payment

Financial settlement is one of the key components of a business process. It is the final

step in completing the business transaction. In the Procure to Pay cycle, suppliers send

invoices to customers after delivering goods or rendering services. Once the invoices

are received, the accounts payables department of the customer validates the invoices

and approves them for payments.

The payments made to the suppliers during the settlement process are generally

dependent on the agreement entered into between the customers and suppliers for

carrying on the business transactions. Payments are generally made to the original

supplier providing the goods or services, however there can be specific arrangements

made wherein the suppliers can specify a different party to be paid on their behalf. The

payments made to other parties on behalf of the suppliers are termed as Third Party

payments.

Third Party payments help parties involved in business to set off their liabilities without

directly paying them. This reduces the direct funds movements and transactions are

settled easily.

When customers make payments from their Payables system, there might be

instructions from the supplier to make the payment to a different party, that is the Third

Party. In that case, the remittance of the payment goes to the Third Party. For all legal

purpose including 1099, it is treated as a payment to the original supplier.

The Payables department maintains the Supplier information. Establishing Third Party

Payment relationship is part of the supplier maintenance activity.

The Payables clerk may also have information of the Third Party at the time of entering

the invoices. The Payables clerk can have the right to override the Third Party defaulted

at the time of invoice entry.

The Payments clerk processes the payment for the invoices that are due for payment.

Generally the payments clerk is aware of the Third Party suppliers to whom the

payments can be released on behalf of the supplier. The Payment's department have the

right to override the actual party to whom the payment can be made at the time of

making payments.

This functionality lets you do the following:

• Establish Third Party relationship

• Default Third Party supplier information when creating invoice and processing

payments

• Override Third Party supplier information on the Invoice and Payments windows

• Default Remit To Bank Account for the Third Party supplier on Invoice and

Payment windows

• While processing payments to Third Party Supplier:

• Uses the address of the Third Party supplier, when the Payment Process Type is

Printed

• Uses the Bank and Bank Account information of the Third Party supplier, when

the Payment Process Type is Electronic to transfer funds