Direct Debit vs Direct Deposit on Payment Rule and Tender Type

[Chuck Boecking]

Hi Everyone,

I want to confirm my understanding of the system. Will someone please confirm the below statements are correct?

• Direct Debit is an AP transaction similar to a Check. If you have a Payment Selection with a Payment Rule of Direct Debit, you should get an AP Payment with a Tender Type of Direct Debit. (Wikipedia definition)
• Direct Deposit is an AR transaction. (Wikipedia definition).

If the above statements are correct, then I believe MPayment.setBankACH setIsReceipt() (line 286) should be negated. If everyone agrees, I am happy to make the ticket/patch.

Thanks for responding!

Chuck Boecking

[Alan Lescano]

Hi Chuck,

In my understanding, tender type is just the way the payment/receipt was done. So, both the direct debit and direct deposit may be used for AR/AP.

Direct debit: if AR, you do a direct debit in your customer`s bank account. If AP, the vendor do it in your account. This tender type, in some countries, is called automatic debit because the vendor can get the money many times from the customer`s account with just an unique previous autorization.

Direct deposit: just a simple bank account money deposit, where a customer do it to the vendor. If AR, your customer do it in your account. If AP, you do the deposit.

Alan

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[Chuck Boecking]

Hi Alan,

Are you saying that Direct Debit and Direct Deposit are two totally different money transfer vehicles like Check vs Wire or Oil vs Water? I was under the impression that Direct Debit and Direct Deposit where the same vehicle but different direction based on the ERP's perspective (AP vs AR).

Regards,


Chuck Boecking
512.850.6068 (office and cell)
ch...@chuboe.com
ChuckBoecking.com
chuck.boecking (skype)
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[Alan Lescano]

They are not different money transfer vehicles, but they are two ways to do a transfer between accounts. To understand, forget the ERP's perspective for now and consider this:

P1: person who need to pay an amount to a vendor. He/she is the payer.

P2: person who need to receive an amount from a customer. He/she is the payee.

In direct deposit, P1 starts the payment transaction doing an eletronic transfer or ATM deposit to P2 account.

In direct debit, P2 starts the transaction, requesting the bank a transfer from P1 account. P1 doesn't need to do anything. He/she just see the money leaving his account. In a first sight this may seems strange in countries where it is not applied, But P1 first need to authorize P2 to do this (only once). It's usually used for monthly bills like electricity, phone, credit cards, etc...

Depends on the transaction type (AR/AP) idempiere org is either P1 or P2.

Alan

2014-02-05 Chuck Boecking <ch...@chuboe.com>:

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[Chuck Boecking]

Thank you Alan! If I understand correctly, here are my revised definitions. Can someone else please confirm or correct?

• Payment Rule is the type of payment transaction that is planned to happen. This field appears on the Business Partner, Order and Invoice.
  
• Tender Type is the type of transaction that did happen. This field appears on the Payment (Receipt).
  

Direct Deposit and Direct Debit both describe an electronic transfer of funds. They differ in which party initiates the transfer. 

• With Direct Debit, the receiving party (payee) initiates the transaction, requesting the bank pull money from the sender (payer) to the receiver (payee).
  
• With Direct Deposit, the sending party (payer) initiates the transaction, requesting the bank push money from the sender (payer) to the receiver (payee).

From the ERP's perspective, both Direct Deposit and Direct Debit can exist in both AP (payable) and AR (receivable) transactions. Here are some examples:

• You are an AP Clerk for a wholesale distributor. Your utility company initiated a Direct Debit to pull funds from your account to pay an invoice. You will record an AP Payment with a Tender Type of Direct Debit.
• You are an AR Clerk for a utility company. You initiate a Direct Debit to pull funds from your customer to pay an invoice. You will record an AR Receipt with a Tender Type of Direct Debit.
• You are an AR Clerk for a subcontractor for a software development company. You send an invoice for services rendered. The software development company initiates a Direct Deposit to pay your invoice. You will record an AR Receipt with a Tender Type of Direct Deposit.
• You are an AP Clerk for the software development company. You initiate a Direct Deposit to pay your vendor's invoice. You will record an AP Payment with a Tender Type of Direct Deposit.

Based on the above discussion, I would argue that the system cannot set the payment's isReceipt flag based on the Tender type as is what happens in MPayment.setBankACH setIsReceipt() (line 286). I discovered this scenario while trying to pay invoices through a Payment Selection process. I would argue that Payment Selection would always be an AP Payment. I will spend time thinking about what that means from a code perspective after we gain consensus on the above.

Thanks for reading!

[Alan Lescano]

For some reason, source code seems to treat direct debit as AR only. Maybe it has been written for a specific business logic. I don't use pay selection but it doesn't seems right to define AR/AP based on tender type. 

2014-02-05 Chuck Boecking <ch...@chuboe.com>:

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[Carlos Antonio Ruiz Gomez]

Hi, it can make sense if you consider where is that code called from.

Such setting is done from the window "Payment_Selection_(manual)"
http://wiki.idempiere.org/en/Payment_Selection_(manual)_(Form_ID-107)

And such window is to initiate bulk payments.

So, it makes sense on this window that to initiate payments "Direct Deposit" must be used.

And to initiate receipts "Direct Debit" must be used - BUT this use case is not actually supported.
Thomas Bayen has a patch for peer review (feedback of others is welcome) at IDEMPIERE-1562 "payment selection usable for customer documents"
https://idempiere.atlassian.net/browse/IDEMPIERE-1562

Regards,

Carlos Ruiz

On 06/02/14 08:32, Alan Lescano wrote:

[Thomas Bayen]

Hi,

Carlos is right that I work in this area. The JIRA issue is up to know
not a solution but only something to think about.

I am using the Payment Selection window for transfers of cost invoices
to my vendors and to pull money from my customers bank accounts. (I
think this possibility is unusual in other parts of the world). Up to
know I found no reason why the "Payment Selection" process should not
work for AR and AP.

I am still fighting with the code and the possibilities. Also I fight
with the words. Sometimes it is *very* difficult to translate not only
the words but also the concepts behind the words. The german way of
doing payments via bank account batches seems very different to the
"american" way to work with credit cards or checks.

So I want to confirm that I read your discussion very interested but was
not brave enough to declare own knowledge. ;-) Perhaps we collect your
wisdom on a wikipage that I and others can extend later?

Thomas

Am 06.02.2014 17:59, schrieb Carlos Antonio Ruiz Gomez:
> Hi, it can make sense if you consider where is that code called from.
>
> Such setting is done from the window "Payment_Selection_(manual)"
> http://wiki.idempiere.org/en/Payment_Selection_(manual)_(Form_ID-107)
>
> And such window is to initiate bulk payments.
>
> So, it makes sense on this window that to initiate payments "Direct
> Deposit" must be used.
>
> And to initiate receipts "Direct Debit" must be used - BUT this use case
> is not actually supported.
> Thomas Bayen has a patch for peer review (feedback of others is welcome)
> at IDEMPIERE-1562 "payment selection usable for customer documents"
> https://idempiere.atlassian.net/browse/IDEMPIERE-1562
>
> Regards,
>
> Carlos Ruiz
>
>
>
> On 06/02/14 08:32, Alan Lescano wrote:
>> For some reason, source code seems to treat direct debit as AR only.
>> Maybe it has been written for a specific business logic. I don't use
>> pay selection but it doesn't seems right to define AR/AP based on
>> tender type.
>>
>>

>> 2014-02-05 Chuck Boecking <ch...@chuboe.com <mailto:ch...@chuboe.com>>:

>>
>> Thank you Alan! If I understand correctly, here are my revised
>> definitions. Can someone else please confirm or correct?
>>

>> * Payment Rule is the type of payment transaction that is

>> planned to happen. This field appears on the Business Partner,
>> Order and Invoice.

>> * Tender Type is the type of transaction that did happen. This

>> field appears on the Payment (Receipt).
>>
>> Direct Deposit and Direct Debit both describe an electronic
>> transfer of funds. They differ in which party initiates the transfer.
>>

>> * With Direct Debit, the receiving party (payee) initiates the

>> transaction, requesting the bank pull money from the sender
>> (payer) to the receiver (payee).

>> * With Direct Deposit, the sending party (payer) initiates the

>> transaction, requesting the bank push money from the sender
>> (payer) to the receiver (payee).
>>
>> From the ERP's perspective, both Direct Deposit and Direct Debit
>> can exist in both AP (payable) and AR (receivable) transactions.
>> Here are some examples:
>>

>> * You are an AP Clerk for a wholesale distributor. Your utility

>> company initiated a Direct Debit to pull funds from your
>> account to pay an invoice. You will record an AP Payment with
>> a Tender Type of Direct Debit.

>> * You are an AR Clerk for a utility company. You initiate a

>> Direct Debit to pull funds from your customer to pay an
>> invoice. You will record an AR Receipt with a Tender Type of
>> Direct Debit.

>> * You are an AR Clerk for a subcontractor for a software

>> development company. You send an invoice for services
>> rendered. The software development company initiates a Direct
>> Deposit to pay your invoice. You will record an AR Receipt
>> with a Tender Type of Direct Deposit.

>> * You are an AP Clerk for the software development company. You

>> initiate a Direct Deposit to pay your vendor's invoice. You
>> will record an AP Payment with a Tender Type of Direct Deposit.
>>
>> Based on the above discussion, I would argue that the system
>> cannot set the payment's isReceipt flag based on the Tender type
>> as is what happens in MPayment.setBankACH setIsReceipt() (line
>> 286). I discovered this scenario while trying to pay invoices
>> through a Payment Selection process. I would argue that Payment
>> Selection would always be an AP Payment. I will spend time
>> thinking about what that means from a code perspective after we
>> gain consensus on the above.
>>
>> Thanks for reading!
>>
>> Regards,
>>
>>
>> Chuck Boecking

>> 512.850.6068 <tel:512.850.6068> (office and cell)
>> ch...@chuboe.com <mailto:ch...@chuboe.com>

>> ChuckBoecking.com
>> chuck.boecking (skype)
>> http://www.linkedin.com/pub/chuck-boecking/10/970/17b
>>
>

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mit freundlichen Grüßen,

Thomas Bayen
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AG Krefeld HRA 416 Tel +49/2151/65 80 9-0

[Chuck Boecking]

Thank you Carlos and Thomas,

You may use my contributions in this post as you wish. 

Regards,

Chuck Boecking

512.850.6068 (office and cell)
ch...@chuboe.com

ChuckBoecking.com
chuck.boecking (skype)
http://www.linkedin.com/pub/chuck-boecking/10/970/17b

an email to idempiere+unsubscribe@googlegroups.com.

To view this discussion on the web visit
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For more options, visit https://groups.google.com/groups/opt_out.

mit freundlichen Grüßen,

Thomas Bayen
--
Jakob Bayen KG, Bleichpfad 20-22, 47799 Krefeld
AG Krefeld HRA 416       Tel +49/2151/65 80 9-0

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[anton....@fildan.com]

Hallo Everyone,

I agree completely with the final definition.

I just want to add that in payment rule the choices

• Direct Deposit (without payment term) and
  
• on Credit (with payment term) 
  

are confusing because they are not excluding each other.

usually a Direct Deposit payment rule would involve an invoice on Credit.

If  a Direct Deposit option exists,  there should be a Direct Debit option as well to define how the Customer or Vendor will pay.

It would be logically consistent to remove Direct Deposit and select in a different field Deposit and Debit in combination with on Credit

or to remove on Credit and add Direct Debit and add the payment term option for both Direct Debit and Direct Deposit.

KR

Anton Fildan