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 has 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 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
=> Uses the address of the Third Party supplier, when 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
Oracle Payables introduced third party payments functionality in release 12.1.1.
Setup Supplier Third Party
Third Party supplier needs to be setup in Oracle prior to using the third party payments functionality. In addition to the regular setup of supplier third party supplier needs to be setup, add a relationship between the first party supplier and third party supplier has to be setup.
Supplier relationship is established between suppliers at the site (address) level.
Ex: ASG Shoes Inc is a supplier who requests the payments be made to Fashion Domestic.
In order to establish a third party relationship, ASG Shoes supplier record will need to be related to Fashion Domestic supplier record. Fashion Domestic supplier record needs to be setup in oracle for the purpose of establishing a relationship with the primary supplier.
Supplier can have relationships with multiple third parties, but at any point of time only one third parties can have a relationship that is classified as Primary. During invoice entry and payment entry the third party suppliers that have an established relationship with the main supplier are available to be keyed in the field Remit-To Supplier Name. Remit-To supplier name field is the key field in the functionality of third party payments.
Manage Supplier Third Party
Third parties (Remit-To suppliers) that have been setup for a given supplier can be managed from the Relationship menu option on the supplier’s page. New relationships can be setup, existing relationships inactivated from this page.
Payables Invoice options useful for Third Party Payments
Third Party supplier functionality has been introduced by providing additional fields on the Invoice and Payment entry screens. These fields are “Remit To Supplier Name”, “Remit To Supplier Site”.
Remit To Supplier information is defaulted to the Invoice entry screen based on the setup of the supplier, if there is a primary relationship that exists the third party supplier is used as remit to supplier. The ability to change the Remit to Supplier information during invoice entry is controlled by the payables system option for invoices. Allow Remit-To Supplier override has to be checked if during invoice entry the Remit To Supplier information can be allowed to change.
Payable Options -
Allow Remit To Supplier Override. If this option is enabled, then you can override the default Remit To Supplier Name and Site values at the Invoice windows
Payables Payment options useful for Third Party Payments
Using Third Party Payments Functionality in AP
Third party payment functionality is useful in many situations, but a few common situations are as below:
Supplier’s who do not collect their receivables themselves but Factor to another party.
Supplier has gone Bankrupt and as per the court order the payment needs to be made to a different party.
The key to making third party payments is by establishing a relationship in the supplier screen, making sure the payable options for Remit to supplier are setup in the system as desired to provide the ability to change the Remit information in Invoice Entry and Payment Entry.
Paying close attention to the field’s Remit to Supplier, Remit to Supplier Site and in case of electronic payment Remit to Bank Account during invoicing and payments is very important.
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