Cash Management in Dynamics NAV 2013 R2 – What is it and why now?

As I wrote in my last blog post then Microsoft Dynamics NAV 2013 R2 has lots of new functionality. One of the new features I’ve been looking forward to the most is the improved Cash Management module.

But what does that mean? Well it’s not really about managing cash in the old way, like managing the cash you have laying around in your company. It’s all about managing your bank accounts, and the improvements are in the area of bank reconciliation and electronic payments.

Vendor Payments

The functionality in NAV allows you to use your familiar Payment Journal – Suggest Payments and export the payments in a file format that you can import into our online bank system, so that you don’t have to re-enter all your payments. This greatly improves both productivity and quality, as the bank account information, amounts and payment identification (vendor invoice numbers etc.) are taken directly from NAV. You just have to go online and approve/sign the payments electronically.

Customer Payments

When it comes to importing customer payments NAV 2013 R2 initially will support the SEPA Direct Debit format. This can be used if you have a signed agreement with your customers to automatically receive payments from them. This is really usable for customers with whom you have a recurring contract or subscription. It could be property management companies charging for rent, insurance etc., but also companies who otherwise would have been using credit cards for automatic recurring charges. But Microsoft has also created a “framework” to allow for easy development of additional debit payment imports. These are not yet within the SEPA setup, but are typically different from bank to bank. When NAV 2013 R2 is released in October 2013 it will support multiple Danish banks, but it is to be expected that more European countries will follow soon there after. Especially in countries who in the current NAV 2013 already supports this as part of the localized version. Microsoft says that it will only require minor configuration to support other banks, similar to the Danish formats included.

Bank Reconciliations – Bank Statements

The current Bank Reconciliation functionality is another improvement in NAV 2013 R2. The current functionality allow you to suggest lines from the bank account ledger entry table. Then you can manually enter any differences in the amount or missing lines. When the statement is in balance then you can transfer the differences to your General Journal to be posted from here. After posting the differences you can once again have NAV suggest the lines, this time including the corrections, and hopefully now you statement is in balance in you can post it. There is no functionality today which really allows you to match your bank account/check ledger entries against the bank statement, which in my mind is the “real” reconciliation functionality. You cannot manually match/apply a manually entered line against the bank ledger entries!

That’s changed in NAV 2013 R2! The basics are the same. You can use the same functionality to have your system suggest and insert lines. But now there’s no need to suggest more than once. After you have transferred the differences to the General Journal and posted them, then they show up in the the bank account ledger entry view next to the statement lines. And you can now either match them automatically or manually.

But that’s not all. You now also have functionality to import your bank statement directly if your bank provides this in a file format. With the first release in here October 2013, again this only includes build-in support for Danish banks.

But why now?

Why is Microsoft doing this now, then they previously always have said that this type of functionality would be something local ISV partners should provide? Well I think that there are two reason for this. Primary because they need it for the new Microsoft Dynamics C5 2014 sub-product. The current Dynamics C5 2012 already has support for electronic payment, and in Denmark where this is used by almost every company, then this is a very important feature. And if the C5 customers would have to buy an add-on to get this functionality, then C5 would too expensive for small companies. But in reality they could just have done it as a Danish only localization, like they have done in several other countries. So the second reason for why I think that this is coming as new standard functionality is that we now have the SEPA standard, which means the same format for a lot of it all over Europe.

SEPA background information

The new electronic payment setup is developed around the so-called SEPA formats. SEPA or Single European Payments Area is a file exchange standard created by the European Union managed by the European Payments Council (EPC), the European Central Bank (ECB) and European Commission. The SEPA formats are backed by 32 European Countries, the 27 EU member states and Switzerland, Norway, Iceland, Liechtenstein and Monaco. In all countries the SEPA formats is going to replace the current national formats. For countries using the Euro this will be no later than January 1st. 2014. The non-Euro countries like Denmark, Sweden, GB and the non-EU members, each have their own deadline.

Until now SEPA has developed two formats supported by NAV 2013 R2. One for vendor payments - SEPA Credit Transfer (SCT) and one for customer payments/direct debits: SEPA Direct Debit (SDD). They also have a format for cards – the SEPA Cards Framework – but this is not jet supported by NAV.

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