How to Transfer Funds Between Financial Accounts

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Objective

There are many situations in which a Company needs to transfer funds to modify or adjust bank and/or cash accounts balance:

• a check deposited in the wrong bank account
• a bank account out of funds...etc.

In Openbravo bank and cash accounts are represented as Financial Accounts.

There are several kinds of funds transfers depending on the financial account type used and the organization for which the transfer of funds takes place:

• From a bank account to another bank account within the same organization.
• From an organization bank account to another organization bank account.
• same applies to cash accounts.

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Transferring funds between financial accounts requires a clear understanding on how to create a G/L Item.

It is highly recommended as well to understand how Financial Accounts and Account Combination work in Openbravo.

Execution Steps

In Openbravo, the company in the example will have to withdraw money from one bank or cash account and get it deposited into another bank or cash account.
In other words, the company needs to alter either bank or cash accounts balance whenever it is required. That action could or could not have fees.
Anyway, the steps to follow are:

• GL item creation
  • as it is necessary to keep somewhere the funds in-transit balance from the time it is withdrawn from one financial account until the time it is deposited in another financial account.
• Creation of a withdrawal transaction
  • in the bank account where funds are taken from.
• Creation of a deposit transaction
  • in the bank account where funds are going to be deposited.

G/L Item creation

A GL Item is the accounting item to use for accounting "in-transit" funds. It is key to configure the GL item with the right debit and credit accounts in the Accounting tab. The way to to that is:

• Once the GL item has been created, click on the Accounting tab of the G/L Item window.
• Create a new record for each organization's general ledger and assign the same account combination for debit and credit.

For instance, the sample account combinations which could be used are:

• US General Ledger configuration:
  • 1140 Checking In-Transfer
• Spanish General Ledger configuration:
  • 55500 - "Partidas pendientes de aplicación"

Creation of the "Withdrawal" transaction

A withdrawal transaction needs to be created in the Financial Account where the funds are going to be taken from. This step in the process could or could not have fees.

The company in this example needs to:

• navigate to the Financial Account window
• select the bank to take the money from, for instance Bank A
• press the process button Add Transaction
• once in that new window select the Transaction Type GL Item
• enter a Transaction Date
• select the GL Item previously created
• and finally indicate the Paid Out amount, for instance 100,00 USD.

This new transaction is then shown in the Transaction tab of the Financial Account window. Openbravo clearly shows the "Withdrawal Amount" recorded.

The next step is to post the withdrawal transaction. It is possible to manually post it by using the process button Post or it could be automatically posted if the Accounting Server Process is enabled in the Process Request window.

The posting will look like:

Account	Debit	Credit
GL Item Debit	Paid Out Amount
Bank A - Withdrawal account		Paid Out Amount

Creation of the bank fee

The company in this example needs to create the withdrawal transaction as described previously and an additional transaction to reflect the bank fee. The way to do that is:

• press once more the process button Add Transaction
• select the Transaction Type Fee
• enter a Transaction Date
• and finally indicate the Paid Out amount, for instance 1,00 USD.

A bank fee can also be registered in a financial account by using a previously created G/L Item named "Bank Interest". Bank Interest accounting could be configured as '7010 Interest income' for credit and '7020 Interest expense' for debit.

In this example, there will be two transactions created in the Transaction tab of the Financial Account, one for the withdrawal and one for the fee.

Fee transaction can also be posted same way as the withdrawal transaction.
Fee posting will look like:

Account	Debit	Credit
Bank A - Bank Fee Account	Paid Out Amount
Payment Out - Withdrawal		Paid Out Amount

Creation of the "Deposit" transaction

The final step is to create a deposit transaction in the Financial Account where the funds must be deposited.

The company in this example needs to:

• navigate to the Financial Account window
• select the bank to deposit the money, for instance Bank B
• press the process button Add Transaction
• once in that new window select the Transaction Type GL Item
• enter a Transaction Date
• select the GL Item previously created
• and finally indicate the Received In amount, in this example 100,00 USD.

This new transaction is then shown in the Transaction tab of the Financial Account window. Openbravo clearly shows the "Deposit Amount" recorded.

The next step is to post the deposit transaction. It is possible to manually post it by using the process button Post or it could be automatically posted if the Accounting Server Process is enabled in the Process Request window.

The posting will look like:

Account	Debit	Credit
Bank B - Deposit Account	Received In Amount
GL Item Credit		Received In Amount

Transfer of funds between "Cash" accounts

The company in this example needs to follow exactly the same execution steps. The only difference is the Financial Account Type to use. This time a "Cash" financial account type will be used while creating the withdrawal transaction and the deposit transaction.

Transfer of funds between different organizations

The company in this example needs to follow exactly the same execution steps. The only difference is the Organization to be used. This time:

• the GL Item for the in-transit amount to be withdrawn needs to be created in the Organization A
• the withdrawal transaction needs to be created in a Financial Account of the Organization A.
• the GL item for the in-transit amount to be deposited needs to be created in the Organization B
• and finally, the deposit transaction needs to be created in a Financial Account of the Organization B.

Withdrawal transaction posting in Organization A will look like:

Account	Debit	Credit
GL Item Debit	Paid Out Amount
Bank A - Withdrawal account		Paid Out Amount

Deposit transaction posting in Organization B will look like:

Account	Debit	Credit
Bank B - Deposit Account	Received In Amount
GL Item Credit		Received In Amount

Result

This completes the transfer of funds between financial accounts. As a result:

• Bank A balance is reduced in 101,00 USD
• Bank B balance is increased in 100,00 USD

Above scenario is just a transfer of funds between financial accounts of the same organization.

In the case of transfer of funds between financial accounts of different organizations:

• Bank A balance of the organization A is reduced in 101,00 USD
• Bank B balance of the organization B is increased in 100,00 USD

Above scenario would somehow mean an expense in the Organization A and a revenue in the Organization B.